Top 2020 Dems would raise $1 trillion less through tax plans than campaigns claim, new study finds

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Mike Blake/Reuters

  • Tax plans from leading Democratic presidential candidates would not generate as much revenue as their campaigns have claimed, said a series of studies published on Thursday.
  • The campaigns’ revenue estimates were higher by as much as $1 trillion, the studies found.
  • The Penn Wharton Budget Model has not yet evaluated all the tax plans in the crowded Democratic field.
  • Visit Business Insider’s homepage for more stories.

Tax plans from leading Democratic presidential candidates would not generate as much revenue as their campaigns have claimed, a new analysis from an outside budget-research group found.

In a series of studies released on Thursday, researchers at the Penn Wharton Budget Model said signature tax proposals championed by Sen. Bernie Sanders and former Vice President Joe Biden could fall short of the campaigns’ revenue estimates by as much as $1 trillion.

Neither campaign responded to emails requesting comment. The University of Pennsylvania research group has not yet evaluated all the tax plans in the crowded Democratic field. In December, it drew similar conclusions for Sen. Elizabeth Warren’s tax proposal.

Sanders’ plan includes aggressive reforms aimed at the wealthiest Americans, like wealth taxes that start at 1% for income over $32 million and increase in brackets to as high as 8% for wealth over $10 billion.

Wharton estimated that those tax increases, which Sanders has said could be put toward universal healthcare and expanded government programs, would bring in between $2.8 trillion and $3.3 trillion, depending on whether outside effects are included.

That’s a stark contrast from the campaign’s claim that the plan would raise $4.3 trillion in revenue, partly because of assumptions each side made for tax compliance. Some argue that the wealthy would be likely to find ways to circumvent such a large increase in tax rates, a factor Wharton relied on more heavily than Sanders’ campaign.

“There is a lot of dispute within the economics profession about this, and I know that the Sanders campaign is relying on the most optimistic assumptions about how much wealth there is to tax,” said Alan J. Auerbach, an economist at the University of California, Berkeley.

While more modest than those of his more liberal rivals, Biden’s tax plan would also target some of the highest earners and corporations. Wharton said that more than half of revenue would come from the top 0.1% of households under his tax proposal.

Biden’s campaign said that would raise $3.2 trillion over the next decade, funding more moderate domestic spending proposals. That is also far above Wharton’s estimate of $2.3 trillion to $2.6 trillion, a gap that could stem from the method the campaign used to make its estimates.

The campaign estimated each provision in isolation relative to existing law rather than as a combined and internally consistent plan, said Kent Smetters, the faculty director of the Wharton project who was a Treasury official under President George W. Bush.

“For example, their provision to ‘impose a minimum tax on corporate book income’ raises less money relative to their proposed new corporate rate of 28% than relative to the current law rate of 21%,” Smetters said in an interview.

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