At a campaign rally last week in a union hall in Toledo, Ohio, Joseph R. Biden Jr. asked those present to sound the alarm if they earn more than $ 400,000 a year. “You’re going to get a tax increase,” he said when some cars blew their horns.
Mr. Biden, the Democratic presidential candidate, has proposed a significant tax increase for high-income earners and large corporations, which will result in about $ 2.5 trillion or more in ten years under the project of various independent forecasting models. On rare occasions, both Biden and his current opponent, President Trump, have tried to boost those tax plans in the final weeks of the campaign.
Competing strategies reflect different views on how voters respond to tax increases – and how those increases will affect the fragile economic recovery in the coming years.
Mr Biden and his advisers say raising taxes will now accelerate growth by funding a stream of proposals for spending that will help the economy, such as improving infrastructure and investing in clean energy. At least one independent study confirms these claims, finding that Mr Biden’s full package of plans will boost economic growth. Researchers at some conservative think tanks predict that its tax increase will only slightly curb the economy.
Mr. Trump and Republicans in Congress say otherwise, arguing that any tax increase threatens to move away from the recession. “If he comes and raises the stakes, all the companies that come in will leave the United States so quickly that you’ll be dizzy,” the president said Thursday during an NBC event. “We can’t allow that.”
Last week, a group of former Trump economic advisers released a study predicting significant losses in employment, wages and economic growth due to Mr. Biden’s agenda, including significant damage to the tax proposal, which caused relatively little control in the campaign: Mr. Plan Biden to lift wage restrictions, taking into account the payroll tax that finances social insurance. The move will make money on high-yields, but Mr. Trump’s two former economic advisers say it will punish small business owners and reduce mercenaries.
Polls show that Americans generally support raising taxes for the rich. But Mr Biden faces constant questions about whether, given the pandemic, he will postpone a tax increase, which also includes raising the corporate rate to 28 percent from 21 percent and raising the rate on investment and income for those who earn high.
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The questions came mostly from Republican critics, but they also arose during ABC City Hall on Thursday. Asked whether it would be wise to raise taxes for the rich and corporations now, in a weak economy, Mr Biden said: “Absolutely.”
Republicans have long argued that any democratic proposal to raise taxes will hurt the economy, whether it is booming or ill. In recent years, including at this year’s Democratic presidential primaries, Democrats and liberal economists have argued more strongly that raising taxes for the rich to finance government spending, boosting the productivity of the U.S. economy, will accelerate economic growth.
Economists who are advising Mr Biden’s campaign from the outside say they remain confident that his agenda will boost growth – and that Mr Biden should not expect, if elected, to raise taxes on corporations and the rich.
“It was an extremely unequal recession. And high-income people and large corporations, many of whom have not had a recession at all, “said Ostan D. Golsby, former head of the White House Council of Economic Advisers under President Barack Obama, who is now a professor at the Chicago Button School of Business and an outside adviser Biden.
If you raise taxes on these groups, as Mr. Biden, Mr. Gulsby suggested, said, “And using the money for the things Joe Biden is talking about will not reduce growth. It increases growth. “
Several independent tax models have analyzed Mr. Biden’s plans in recent weeks to assess how much tax revenue they can receive and whether they will help or harm the economy. Some analyze Mr. Biden’s proposals and tax costs together. Others focus only on taxes.
The most bullish of these analyzes for Mr. Biden comes from Moody’s Analytics, which recently reported that if Mr. Biden wins and Democrats control both the House and the Senate, the country’s gross domestic product by the end of his term will be $ 960 billion more than it was. would be at the end of Trump’s second term, when Republicans controlled both houses. The benefits of Mr. Biden’s spending programs will outweigh the burden of his tax increase, Moody’s said.
Others found a relatively small impact of taxes on growth. The tax fund, which typically forecasts large profits from tax cuts, predicts that Biden’s plan will reduce the size of the economy by almost 1.5 percent in about 30 years. Kyle Died and Grant M. Seiter of the American Institute of Entrepreneurs believe the tax plan will reduce the economy by 0.16 percent over ten years.
In an interview, Mr. Pomerlo said that the delay in supply was small because Mr. Biden mainly taxed the savings of the high-income, which are not the main drivers of economic growth, given that Americans are saving much of their wealth.
“Some tax increases have a greater impact on growth than others,” he said. “Biden has chosen taxes that have no significant effect.”
Kevin Hassett, former chairman of the Trump Economic Advisory Board, who now works at the Hoover Institution at Stanford University, and Casey B. Mulligan, a former council economist and professor at the University of Chicago, along with co-authors Timothy Fitzgerald and Cody Cullen an analysis that examines Mr. Biden’s proposals for taxes, health care, and regulation.
They predict that Mr. Biden’s plan to expand health insurance subsidies under the Affordable Care Act will deter Americans from working and earning more. And they predict that an increase in corporate tax will reduce investment, that new environmental regulations will increase energy costs, and increased taxes on social security wages will restrain the hiring of small business owners, whose profits are taxed as individual income. High-income owners of such enterprises will be subject to additional taxes by abolishing social security wages, which, according to the authors, will reduce the amount of money they can hire.
In an interview, Mr Hassett said the study was intended to demonstrate how “implausible” it would be for Biden to try to carry out his plans at a time when the economy was still struggling. “Raising corporate rates now seems like a disaster,” he said, “given how close so many firms are to the edge.”
Both Mr. Trump and Mr. Biden are seeking to make their tax plans an election issue. Mr. Trump often says that Mr. Biden’s plans will destroy the economy and drag the country into another Great Depression.
During the election campaign, Mr. Biden noted his promise not to raise taxes on people earning less than $ 400,000 a year. His campaign also emphasizes the promise of television commercials, including concluding ones: “Biden’s plan: corporations pay more. You benefit. “
Mr. Biden leaned toward the plan in the final days of the campaign. He also acknowledged potential political obstacles to its introduction. “So there will be no delays in increasing the tax?” ABC event moderator George Stefanopoulos asked Mr. Biden on Thursday.
“No, well, I have to get votes,” Mr. Biden said. “I have to get votes.”