Joe Biden’s tax plan would result in millions fewer employed and a drastic reduction in economic output, according to a new report by President Trump’s former chief economist.
The Democratic nominee’s tax plan would increase average tax rates on both labor and capital income that would in the long run result in 3 million fewer full-time equivalent employees and 4% to 5% less gross domestic product and national income, according to a soon-to-be-published report by Casey Mulligan, former chief economist of President Trump’s Council of Economic Advisers. This would translate to inflation-adjusted GDP being about $8,000 per household per year less in the long run.
“Although Biden asserts that his plan ‘rewards work,’ economic analysis of the plan belies that claim,” Mulligan, an economist at the University of Chicago, said in a white paper shared with the Washington Examiner.
Other economists said Mulligan was right to project that Biden’s plans would lower economic growth but argued that his estimates of the size of the effects were off.
“Mulligan’s predictions are directionally right, but the magnitude is not right compared to other analysis of Biden’s tax plans,” said Kyle Pomerleau, a tax specialist at the right-leaning American Enterprise Institute. “His topline numbers on the GDP seem very much on the high side compared to what I’ve seen.”
Pomerleau’s own analysis of Biden’s tax proposals is that there would be a much smaller reduction in GDP in the long run, 0.2%, compared to Mulligan’s prediction of a 4-5% reduction.
Thus far, most mainstream analyses of Biden’s tax plan have shown that it would decrease real GDP between a range of 0.2% to 1.5%, said Marc Goldwein, the senior policy director for the Committee for a Responsible Federal Budget, a group that advocates for deficit reduction.
“Mulligan’s predictions are considerably worse and higher than other estimates, in part because he just analyzes Biden’s tax and healthcare policies, not Biden’s economic agenda overall,” said Goldwein.
Mulligan only analyzed Biden’s tax agenda, which would: increase the payroll taxes on employers and employees with salaries above $400,000, increase the top personal income tax rate to 39.6% from 37%, impose higher tax rates on labor income due to the expansion of health insurance coverage, and an increase in the corporate tax rate to 28% from 21%.
Mulligan’s analysis does not consider the non-tax aspects of Biden’s economic agenda, namely his expansive proposals to increase investment in infrastructure, education, healthcare, and various social programs, from housing to elder care.
“The economic benefits of Biden’s investments are substantially greater than the economic negatives from the higher taxes on corporations and high-income and wealthy households he proposes,” said Mark Zandi, Moody’s Analytics chief economist who also provided economic analysis for the late Republican Sen. John McCain’s 2008 presidential campaign.
Zandi said he arrived at opposite conclusions in his estimates of Biden’s economic agenda.
“I came to very different conclusions, and so I’m perplexed by Mulligan’s analysis,” Zandi said.
Zandi estimated there would be a substantially larger, stronger economy under Biden than under current economic policies, including more full-time jobs and higher homeownership rates.