Economic ImpactPayroll taxes are used to fund Social Security and Medicare. Hillary's tax plan, through lower wages and fewer full-time equivalent jobs, will lower tax revenues to fund these two programs. Her plan will exacerbate the funding problem that Medicare and Social Security already have.
According to the Tax Foundation’s Taxes and Growth Model, Secretary Clinton’s tax plan would reduce the economy’s size by 2.6 percent in the long run (Table 2). The slightly smaller economy would lead to 2.1 percent lower wages, a 6.9 percent smaller capital stock, and 697,000 fewer full-time equivalent jobs. The smaller economy results from somewhat higher marginal tax rates on capital and labor income.
These projections are what we estimate would happen at the end of a ten-year period and are compared to the underlying baseline of what would occur absent any policy change. For example, the U.S. real GDP will grow by 19.2% from 2016-2025, according to the Congressional Budget Office (CBO), if policy remains unchanged. We predict that the reduced incentives to work, save, and invest would reduce the end-of-period GDP by 2.6 percent below the level it would have been without the policy change.
***On a dynamic basis, the plan would increase federal revenues by $663 billion over the next decade. The slightly smaller economy would reduce wages, which would narrow both the individual income and payroll tax bases. As a result, the individual income tax proposals would raise less than half as much revenue as they do under the static analysis, while payroll tax revenues would decline.
Thursday, October 13, 2016
Hillary's Tax Plan Will Lower GDP, Capital Investment, Jobs, Wages: Hillary's Tax Plan Will Lower Payroll Tax Revenue That Funds Social Security And Medicare
Posted By Milton Recht
From Tax Foundation, "Details and Analysis of Hillary Clinton’s Tax Proposals, October 2016" by Kyle Pomerleau:
Posted 10/13/2016 01:53:00 PM