A new study predicts Democratic presidential nominee Joe Biden’s tax and spending policies would add almost $2 trillion to the federal deficit in the next decade.
The analysis by the Penn Wharton Budget Model, a research project at the University of Pennsylvania, estimates Biden will raise almost $3.4 trillion in new revenue and increase spending by over $5 trillion within a 10-year window. Biden’s platform is also projected to decrease the federal debt by 6.1% by 2050 and increase the nation’s gross domestic product by 0.8%.
Almost 80% of the increase in taxes under the former vice president’s plan would fall on the top 1% of the country’s income distribution, according to the study. Households with adjusted gross incomes of $400,000 per year or less would not see their taxes increase directly but would see lower investment returns and wages as a result of corporate tax increases.
Those households are predicted to see an average decrease in after-tax income of 0.9% under the Biden tax plan compared to a decrease of 17.7% for those with an adjusted income higher than $400,000, which qualifies as the top 1.5%.
Biden’s $5.4 trillion spending plan is far less than what was proposed by Vermont Sen. Bernie Sanders, a former rival in the Democratic presidential primary, which included spending $16.3 trillion to battle climate change, according to Roll Call.
The Biden campaign told the Washington Examiner they felt there were several flaws within the study, which did not note the candidates’s proposal of tax breaks for middle-class families, and noted the model only looks at the economic effect of corporate tax increases, and not spending programs or middle-class tax cuts leading to a “biased and incomplete” methodology.
The campaign also said the study incorrectly stated that corporate tax increases would lead to higher taxes paid by workers, referring to it as a “flawed analysis.”
Biden’s proposed spending has come under attack by President Trump, who exaggerated his challenger’s numbers and painted his economic plan as a “radical, socialist” agenda.
In remarks at the White House earlier this month, Trump claimed Biden’s plan would deplete investments whether a person is in a high-, low-, or middle-income bracket.
“The Biden plan begins with a $4 trillion tax hike,” Trump said. “And that will end everything, including growth. There won’t be growth. There’ll be total contraction.”
Mike Gwin, a Biden campaign spokesperson, told the Washington Examiner that Biden’s goal is to reverse course on Trump’s handling of the coronavirus health crisis.
“Vice President Biden has made clear that our response to the economic turmoil caused by President Trump’s mismanagement of COVID-19 requires immediate stimulus spending and unprecedented investments in our middle class to rebuild our economy and ensure American competitiveness and growth in the long-term,” Gwin said. “Biden is committed to paying for the ongoing cost of his bold agenda in the long run by making sure big corporations and the wealthiest Americans pay their fair share — with no one making under $400,000 seeing an increase in their taxes.”
While speaking in Kenosha, Wisconsin, earlier this month, Biden joked that he would be shot if he spoke any more about his plan to increase taxes on the wealthy due to time restraints. But before he wrapped up his remarks, Biden pledged to the room that he would pay for everything he proposed without raising the taxes of anyone who makes $400,000 or less each year, which matches what he laid out in his budget.
“I don’t want to punish everybody, but everybody should pay a fair share,” Biden said.
The national debt surpassed $26 trillion in June.
Prior to the economic lockdowns prompted by the coronavirus pandemic, the Congressional Budget Office predicted the federal deficit under Trump would top $1 trillion in 2020 in its annual fiscal outlook report.
At the end of April, the CBO predicted the deficit will rise to about $3.7 trillion in fiscal year 2020 and $2.1 trillion in 2021. Federal debt held by the public would also grow to 108% of GDP by the end of fiscal year 2021, which would be the highest percentage in United States history.
The economic effect of the pandemic cost the federal government an estimated $1.76 trillion in the passage of the first relief package in March. If Congress reaches a deal on a new relief bill and it is signed by the president, the national debt and the federal deficit will likely increase even higher.
