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Upside of Inequality Oxford Unintended Consequences

AI Summary. An analysis projects a set of tax proposals aimed at high-income households would raise $3.8tn over a decade and reduce GDP by 0.06%. The top 1% of earners would see the largest increase, with after-tax income falling 17.8% and an average tax increase of $118,674.

Kyle Pomerleau, Jason DeBacker and Richard Evans American Enterprise Institute
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Biden tax proposals would raise $3.8tn from 2021 to 2030, primarily targeting high-income households. This plan would increase tax rates, leading to a 0.06% reduction in GDP over the next decade.

How much would taxing high-income households raise, and at what economic cost?

Core argument: Biden's tax proposals are projected to raise $3.8tn from 2021 to 2030, primarily targeting high-income households to make the tax code more progressive.

Biden's tax proposals are projected to raise $3.8tn from 2021 to 2030, primarily targeting high-income households to make the tax code more progressive. This plan would increase effective tax rates on individuals and businesses, leading to a 0.06% reduction in GDP over the next decade. The top 1% of earners would experience the largest tax increase, with their after-tax income decreasing by 17.8%, contributing 72% of new tax revenue in 2021. Despite reducing the debt-to-GDP ratio in the second decade, the plan would not stabilize it long-term, resulting in a 0.2% smaller economy. The average tax increase for the top 1% would be $118,674, and they would continue to face significant tax hikes through 2030.

Takeaways by Macro Roundup® AI

  1. Biden's tax proposals are projected to raise $3.8tn from 2021 to 2030, primarily targeting high-income households to make the tax code more progressive.
  2. The top 1% of earners would face the largest tax increase under Biden's plan, with after-tax income falling 17.8%, an average increase of $118,674, and 72% of new tax revenue in 2021.
  3. Biden's plan is projected to reduce GDP by 0.06% over the next decade and leave the economy 0.2% smaller, and while it lowers the debt-to-GDP ratio in the second decade, it would not stabilize it long-term.

AEI analysis of Biden’s tax proposal“…Biden’s tax proposals would raise roughly $3.8 trillion between 2021 and 2030. His proposals would primarily raise taxes on high-income households and make the tax code more progressive. Biden’s proposals would raise effective tax rates on both individuals and businesses, resulting in lower output in the first decade. His plan would reduce debt-to-GDP in the second decade, leading to slightly higher GDP. However, in the long term, his plan would not raise enough to stabilize debt-toGDP and would lead to a 0.2 percent smaller economy…. Under Biden’s tax proposals, the top 1 percent would face the largest tax increase. That group’s after-tax income would fall by 17.8 percent. Overall, 72 percent of new tax revenue in 2021 would come from the top 1 percent of tax filers. This group would face an average tax increase of $118,674. This group would continue to face the largest tax increase in 2030….”

Kyle Pomerleau, Jason DeBacker and Richard Evans, “An Analysis Of Joe Biden’s Tax Proposals,” American Enterprise Institute, June 2020, https://www.aei.org/wp-content/uploads/2020/06/An-Analysis-of-Joe-Bidens-Tax-Proposals.pdf

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