High income earners would suffer the biggest financial setbacks of $1.1 trillion in tax increases proposed by Hillary Clinton on the campaign trail, an analysis released Thursday finds.
The Tax Policy Center, a Washington think tank, published a paper Thursday afternoon finding that the Democratic presidential front-runner has promised a selection of major tax increases that, taken together, would eclipse the trillion-dollar mark in the next 10 years and fall mostly on top earners.
Thanks to a number of changes targeted at the wealthy, including a 4 percent “surcharge” on incomes over $5 million, a “Buffett Rule” minimum tax, a limit on tax breaks, a higher estate tax and more, the vast bulk of Clinton’s tax hikes would fall on the highest income earners. The top 0.1 percent of income earners, people making more than $3.8 million annually, would see a $500,000-plus increase in their tax bills starting next year, growing to more than $750,000 within a decade.
Although Clinton has promised that middle-class families would not face tax increases if she is elected, the Tax Policy Center concludes that they would see nominal increases in the taxes they owe, because the business, investment and other tax hikes Clinton favors would affect them indirectly. For example, taxpayers in the bottom fifth would se a minimal $4 tax increase in 2017, while those in the fourth quintile would pay an extra $143. Clinton, however, has said that she intends to roll out tax-cut plans for lower income earners.
Unlike the sweeping, revenue-losing tax reform proposals set forth by Republican candidates, Clinton’s plan is not meant to spur economic growth by lowering tax rates and simplifying the tax code. Instead, Clinton has justified her plans on the grounds of raising revenue for spending proposals, tackling inequality, removing the opportunities for evading taxes currently available, and removing incentives for risky behavior among banks.
“This is a very incremental proposal,” said Len Burman, the director of the Tax Policy Center.
“It’s not a major reform,” he added, noting that many parts of Clinton’s tax platform are taken from recent proposals in President Obama’s budgets.
Also, unlike the tax cut plans sketched out by Republicans such as Donald Trump, Marco Rubio, and Ted Cruz, Clinton’s tax changes would raise tax rates on work and business, as well as on savings and investment, possibly slowing economic growth.
The Tax Policy Center study’s conclusions were ambiguous about the effect of Clinton’s tax hikes on economic growth. While the higher marginal tax rates on work and investment would slow growth, that effect could be counteracted by lower federal debt if the taxes raised revenue.
Taken apart from Clinton’s other tax and spending plans, the tax increases would reduce the federal debt by $1.2 trillion over 10 years, according to the think tank. That could entail lower interest rates, making it easier for businesses to borrow to grow. Yet it’s possible that Clinton’s tax and spending plans wouldn’t cut deficits overall.
A separate analysis released by the Tax Foundation, another Washington nonprofit, in January found that, based on the disincentives for work and saving taken apart from other considerations, Clinton’s tax plans would stunt growth enough that ultimately they would raise only about $200 billion in taxes.
Burman said his group was working on developing a full model to gauge the macroeconomic effects of tax plans and that it planned to have it ready to analyze the candidates’ tax proposals in the general election.
The Tax Policy Center is planning to release Friday an analysis for the tax plans of Bernie Sanders, the Vermont senator challenging Clinton.
