United States President Joe Biden speaks about updated CDC guidelines on masks for people fully vaccinated during an event held outside the White House on April 27, 2021 in Washington, DC.
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According to a study released Wednesday, President Joe Biden’s American family plan would cost far more than the White House estimates, and it would increase national debt while lowering GDP.
The government’s latest stimulus plan, priced at $ 1.8 trillion, would cost American taxpayers $ 2.5 trillion over the 10-year budget window, about $ 700 billion more than the White House’s estimate , the Penn Wharton Budget Model.
The school stated that the significant difference in projections of total costs is due to disagreement over how much the plan’s tax credits, as well as the universal rules for pre-K and free community colleges, would require.
Meanwhile, the study said that Biden’s proposed revenue-increasing practices would fail to raise funds to cover the cost of the expansive incentive. Wharton said the total of the current revenue-generating proposals for paying the bill would be $ 1.3 trillion.
The study breaks down how much each of Biden’s proposals to increase revenue over a 10-year period would add to base revenue:
- Additional funding proposed for the Internal Revenue Service to improve its ability to screen and combat tax evaders would generate an additional $ 480 billion.
- Raising the maximum ordinary income rate to 39.6% would add $ 111 billion.
- Taxation of unrealized gains over $ 1 million on death, taxation of long-term capital gains and preferential dividends at normal rates for applicants earning more than $ 1 million, and taxation of interest income at normal rates would total $ 376 billion Bring in dollars.
The Wharton study found that the American family plan would increase national debt by nearly 5% and decrease GDP by 0.4% by 2050, as the impact of higher debt on the economy would outweigh the productivity gains associated with the new spending programs.
The White House declined to comment, but referred CNBC to a study published Monday by Moody’s Analytics and economist Mark Zandi.
Zandi, who advised progressive Senator Elizabeth Warren, D-Mass., During her presidential campaign, wrote for Moody’s that while the short-term impact of the family plan is small, it offers “significant longer-term economic benefits” with more Americans returning to work and a higher one Achieve educational level.
There are a number of differences between the Wharton study and Zandi’s, including how far into the future each one looks to gauge how the Biden plan would affect the US economy. Zandi focuses his report on the next 10 years, while the Wharton report tries to measure how continued spending would affect economic growth over the long term.
While Zandi heralds the benefits of an economy unrestrained by childcare ties and the potential to get more women back into work, Wharton argues that spending on education, childcare, and pay will increase public debt by 11 in 2050 , 6% increase and become a net burden on GDP.
While Wharton found that better tax compliance measures would generate an additional $ 480 billion over a decade, Zandi estimates that figure at around $ 700 billion.
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The results could complicate the president’s offer to pass a comprehensive bill that, if passed, will pour hundreds of billions of dollars into childcare, education and health care.
The Biden proposal includes funding for universal preschool, a federal paid vacation program, efforts to make childcare more affordable, and a free community college for all. The White House said the $ 1.8 trillion would be split between $ 1 trillion in spending and $ 800 billion in tax credits.
Another bill worth billions of dollars is the government’s plan to pay for the American Family Plan with new taxes for high-income households and increased enforcement by the IRS.
He wants to raise the maximum income tax rate from 37% to 39.6%. In addition, Biden suggests increasing the long-term capital gain rate to 39.6%. Currently the maximum rate for these gains is 20%. The increase would apply to households earning more than $ 1 million.
Even before the Wharton study, the package faced far more hurdles than Biden’s American employment plan, a $ 2.2 trillion physical infrastructure proposal.
While Republicans have a litany of problems with Biden’s infrastructure plan, they have shown far less interest in additional spending on education, childcare, and paid vacations than they have in building roads and bridges.
The GOP has also protested several tax proposals included in Biden’s family and employment plans, including increases in tax rates on businesses, income and capital gains.
