President Biden’s signature social spending and climate bill promises to offset nearly $2 trillion in spending with higher taxes on corporations and the wealthiest Americans, but a new analysis shows how the U.S. economy would actually lose more in revenue than is generated in the long run.
The newest “Build Back Better” proposal – pared down from the original $3.5 trillion request – would expand Medicaid, establish universal preschool, provide new funding for child care and offer green energy tax credits, though it notably omits progressive priorities like free community college and Medicare coverage of dental and vision. It relies on $1.95 trillion in new taxes, including a 15% corporate minimum and a 5% surcharge aimed at incomes above $10 million and an additional 3% on incomes above $25 million.
The White House has billed the measure as a “once-in-a-lifetime” investment that will spur economic growth and create millions of new, good-paying jobs.
But findings from the Tax Foundation, a nonpartisan group, suggest Democrats’ tax plan could actually slash long-term GDP, the broadest measure of goods and services produced in a country, by about 0.4%. At today’s current baseline, that represents about $129 billion of lost output annually.
That’s because the tax hikes and other offsets in the plan would raise about $124 billion annually in new revenue in the long run, or about $124 billion annually. Under that scenario, the economy would actually lose more than revenue gains.
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