Here’s How Biden Budget Would Damage U.S. Economy
President Joe Biden proposed a budget that calls for several major tax increases aimed at businesses and high-income earners that amount to nearly $4.8 trillion, but , if passed into law, would damage the U.S. economy.
This is according to a new analysis from the Washington, D.C.-based Tax Foundation, which is nonprofit.
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Biden’s tax increases, the Tax Foundation analysis went on to say, would “bring income tax rates far out of step with international norms and add to the existing issues of complexity and double taxation in the U.S. tax code.”
“While the tax increases are intended to be targeted, the economic effects would be more widespread,” according to the report.
“According to our new analysis using our General Equilibrium Model, we estimate the budget would reduce long-run economic output by about 1.3 percent and eliminate 335,000 Full-Time Equivalent (FTE) jobs.”
The budget would include the following major changes, beginning in 2024:
• Increase the corporate income tax rate from 21 percent to 28 percent (effective 2023)
• Quadruple the stock buyback tax implemented in the Inflation Reduction Act from 1 percent to 4 percent (effective 2023)
• Make permanent the excess business loss limitation for pass-through businesses
• Increase the global intangible low-taxed income (GILTI) tax rate from 10.5 percent to 21 percent, calculate the tax on a jurisdiction-by-jurisdiction basis, and revise related rules (effective 2023)
• Repeal the reduced tax rate on foreign-derived intangible income (FDII)
The Tax Foundation estimates the proposed budget would reduce the debt-to-GDP ratio on a dynamic basis by about 4.5 percentage points from its baseline estimate of 117 percent by 2033. The proposed budget would expand spending, leading to a $2.5 trillion reduction in the deficit through the end of 2033.
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“The actual deficit reduction and negative economic impact are both likely understated due to untested revenue sources (e.g., the billionaire minimum tax and UTPR),” members of the nonprofit wrote.
“Further, if certain policies discussed in the budget were extended, such as the larger Child Tax Credit and tax changes from the 2017 Tax Cuts and Jobs Act for people making below $400,000, it could wipe out all of the projected deficit reduction, while still harming long-run economic output.”
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