- The Washington Times - Wednesday, October 21, 2020

Former Vice President Joseph R. Biden has vowed to raise taxes only on individuals earning more than $400,000 annually, but critics contend that his economic plan would wind up draining the wallets of middle-class families as well.

report from Stanford University’s Hoover Institution found that Mr. Biden’s taxation, insurance, regulatory and energy proposals would, in the long run, reduce full-time equivalent employment by about 3%, or 4.9 million jobs.

The Biden program also would shrink real gross domestic product per capita by 8% and the capital stock per person by 15%, resulting in a $6,500 hit by 2030 in median income per household.

“He hits the economy from three directions at the same time. He punishes work, he punishes investment and he makes us less productive,” said University of Chicago economics professor Casey Mulligan, a former economic adviser to President Trump who co-authored the report, which was released Monday. “And people understand from living through the Obama years that Obama just kind of hit you in a bunch of different ways, and it started to add up in the end.”

Not everyone agrees. Mr. Biden’s economic plan has plenty of defenders, including Harvard professor Jason Furman, who recently told Fox News that Mr. Biden’s near-term stimulus package would supercharge economic growth.

“The most unambiguously positive [impact] for the economy is that Biden would do a lot of fiscal stimulus upfront,” said Mr. Furman, an Obama administration economic adviser. “That’s why you tend to see when his odds improve for the election, the stock market goes up. That’s why you’ve seen a lot of nonpartisan sources like most of the investment banks predict that his winning would help growth certainly over the next couple of years.”

By contrast, Mr. Trump’s economic plan would stay the course set by his aggressive deregulation efforts and the 2017 Tax Cuts and Jobs Act. He promises to add another stimulus package and more reductions in middle-class taxes, although details are few.

The president “is talking about lowering middle-class tax rates, and his message of deregulation and lower taxes and good trade deals? You’re talking about prosperity, optimism, economic growth,” said Larry Kudlow, a Trump economic adviser and director of the National Economic Council.

Mr. Mulligan cited the Trump administration’s deregulation push as a key factor in reducing costs on internet service and prescription drugs.

“We stayed with Trump, and we watched all the things he did, and we saw prescription drug prices came down in the real world for the first time in 46 years from deregulation,” Mr. Mulligan said. “Internet prices, they crashed.”

Mr. Mulligan served as chief economist to the White House Council of Economic Advisers under Mr. Trump. Mr. Furman was the council’s chairman from 2013 to 2017 under President Barack Obama.

The Hoover study’s other authors are Kevin Hassett, who also served on the council in the Trump administration, and economists Cody Kallen and Timothy Fitzgerald.

American Action Forum President Douglas Holtz-Eakin said Mr. Trump has a “fantastic record on controlling regulations,” the costs of which are often hidden.

“With all these spending programs come regulations to implement them,” Mr. Holtz-Eakin said on Fox. “Last time we saw Joe Biden in office, there was $100 billion in regulatory costs added every year for eight straight years. That’s nearly a trillion-dollar disguised tax increase that comes along with these spending programs.”

Mr. Holtz-Eakin, director of the Congressional Budget Office from 2003 to 2005, added, “That’s why they aren’t as stimulative as you might think.”

‘You won’t pay a penny more’

As the public’s focus on the COVID-19 pandemic recedes and concern about the economic rebound rises, the Biden economic plan has drawn scrutiny over its many moving parts, which include raising corporate taxes from 21% to 28% and adding a 12.4% Social Security payroll tax on top earners.

Mr. Biden has deflected attention from his tax hike proposals by emphasizing that they would hit top earners only. He also stresses plans for expanded tax credits on earned income and dependent and child care and a $15,000 tax credit to help first-time homebuyers.

“I’m not going to raise taxes on a single solitary American making less than $400,000 a year,” Mr. Biden told a Florida audience last week. “You won’t pay a penny more. It’s a guarantee.”

Signs are that the rich would indeed be soaked. A CNBC analysis of high-tax states found that top earners under the Biden plan could pay a combined state and federal rate of 62.6% in California and 62% in New York. After hearing that, rapper 50 Cent declared his support on Instagram for Mr. Trump on Monday.

“What the f—-! (Vote for Trump),” wrote 50 Cent, whose real name is Curtis Jackson.

Other detractors argue that Mr. Biden’s ambitious green energy and health care expansions would reduce prosperity by contracting the economy. In addition, the payroll tax increase on those earning more than $400,000 includes no index for inflation, which means more workers will be subject to the tax each year.

In the near term, reinstating the Affordable Care Act’s charge on those who don’t sign up for health insurance would represent a tax on the uninsured.

“If you don’t have company insurance and you don’t sign up for a health insurance policy, you will be taxed by Joe Biden,” Peter Morici, University of Maryland professor emeritus of international business, said on Fox News.

In addition, Mr. Biden’s proposed changes to retirement accounts aimed at encouraging lower earners to save has “drawbacks” that would violate his pledge not to increase taxes, said Tax Foundation senior policy analyst Garrett Watson.

Mr. Biden’s plan would “reduce the tax benefit of traditional retirement accounts for those earning above $80,250 but under $400,000, violating Biden’s tax pledge to not raise taxes on earners below the $400,000 threshold,” Mr. Watson said in an Aug. 26 post.

The Hoover report found that the Biden agenda would result in a 7% drop in real consumption per household and a $2.6 trillion drop in GDP, factoring in his plan to expand Obamacare and aim for net-zero carbon emissions by 2050.

Mr. Biden has said his clean energy plan would create millions of good-paying union jobs. Indeed, the Hoover study found that another 1.3 million net energy jobs would be needed to create the same amount of electricity as fossil fuels are phased out.

That isn’t necessarily a good thing. “Is that a feature or a bug?” asked Mr. Mulligan. “We’re going to need the same energy we have right now, so that’s a loss of productivity.”

Economists Mark Zandi and Bernard Yaros of Moody’s Analytics painted a far rosier picture of the Biden plan last month. They found that 18.6 million jobs would be created with a Democratic sweep of the White House and Congress, 7 million more than with a Republican sweep.

The analysis also predicted that real GDP would grow annually by $2.9 trillion from 2020 to 2030 under a Democratic sweep, fueled by Mr. Biden’s “aggressive government spending plans” and “stronger anticipated global trade” and immigration.

“While Biden’s spending plans are financed in part by higher taxes on corporations and the well-to-do that comes to $4.1 trillion over the decade on a static basis, the net of these crosscurrents is to boost economic activity,” said the Moody’s report.

Virtually everyone agrees that Mr. Biden’s proposals would increase tax revenue, but predictions of a growing U.S. economy under the “Bidenomics” tax plan are thin on the ground.

A Tax Foundation study released last month found that Mr. Biden’s plan would lead to a 6.5% reduction in after-tax income for the top 1% and a 1.7% decline for all taxpayers on average.

The Penn Wharton Budget Model predicted that the Biden tax plan would reduce GDP by 0.6% in 2030 and 0.7% in 2050 while raising $3.1 trillion to $3.7 trillion in additional revenue from 2021 to 2030.

The right-tilting American Enterprise Institute found that Mr. Biden’s proposals would increase taxes “for households at every level” by 2030, with most of the burden on top earners, to raise $2.8 trillion by 2030 and “result in a small reduction in GDP in the long run (0.18%).”

• Valerie Richardson can be reached at vrichardson@washingtontimes.com.

Copyright © 2022 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.

Click to Read More and View Comments

Click to Hide