Paul L. Caron

Sunday, November 17, 2019

NY Times: Warren Wealth Tax Would Slow Economic Growth By 13% According To Penn Wharton Budget Model

New York Times, Warren Wealth Tax Could Slow Economy, Early Analysis Finds:

Penn Wharton Budget ModelSenator Elizabeth Warren’s proposed wealth tax would slow the United States economy, reducing growth by nearly 0.2 percentage points a year over the course of a decade, an outside analysis of the plan estimates.

The preliminary projection from the Penn Wharton Budget Model, which was unveiled on Thursday in Philadelphia, is the first attempt by an independent budget group to forecast the economic effects of the tax that has become a centerpiece of Ms. Warren’s campaign for the Democratic presidential nomination.

The assessment found that if the tax raised as much new federal revenue as Ms. Warren intends, and if the proceeds went toward reducing the federal debt, annual economic growth would slow from an average of 1.5 percent to an average of just over 1.3 percent over a decade.

The model did not assess growth effects from Ms. Warren’s spending plans, which critics said undercut its findings. Economists who favor Ms. Warren’s plan said the analysis did not accurately account for the economic boost from programs she would fund with the tax revenue, including universal child care, increased education funding and student loan forgiveness.

Instead, it assumed that the tax revenue would be used to reduce the national debt, a move that encourages growth in the Penn Wharton simulation. Had the Penn Wharton model factored in the money’s going into programs rather than paying down debt, it most likely would have produced an even larger drag on growth from the wealth tax. ...

Thursday’s release is essentially a rough cut of Penn Wharton’s attempt to track the overall economic impact; a fuller version will come in December. For the preliminary analysis, researchers assumed that Mr. Saez and Mr. Zucman’s $3 trillion revenue forecast was correct.

Penn Wharton Budget Model, The Wealth Tax Debate:

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