A new study evaluating the Biden administration’s proposed 2022 budget found the plan would significantly lower GDP and cost 165,000 U.S. jobs.
President Joe Biden has proposed about $6 trillion in federal spending for the 2022 budget, which includes his flagship American Families Plan and American Jobs Plan, two spending proposals that would doll out roughly $2 trillion each in federal taxpayer dollars.
According to a new report from the Tax Foundation, the heightened taxes to offset federal spending would have a long-term detrimental effect on the U.S. economy. The foundation said Biden’s budget spending would have some benefits but overall would decrease the size of the economy.
“We estimate that Biden’s spending proposals would increase long-run GDP by 0.3 percent, due to enhanced public infrastructure,” the report says. “However, this positive economic effect is entirely offset by the increase in corporate and individual taxation, resulting in less work and investment, which in combination with the spending reduces GDP by 0.9 percent in the long run, reduces wages by 0.8 percent, and eliminates 165,000 full-time equivalent jobs.”
According to the report, Biden’s corporate tax hikes do the most long-term damage to economic growth.
“Increasing the corporate income tax from 21 percent to 28 percent has the largest negative impact on long-run GDP, followed by imposing a 15 percent minimum corporate book tax, raising capital gains tax rates, and increasing taxes on pass-through business income,” the report adds.
Biden’s jobs plan focuses on infrastructure and innovation and increases corporate taxes to pay for it, a controversial element of the proposal that has held up its progress through Congress.
“The American Jobs Plan is an investment in America that will create millions of good jobs, rebuild our country’s infrastructure, and position the United States to out-compete China,” the White House said in a statement. “Public domestic investment as a share of the economy has fallen by more than 40 percent since the 1960s. The American Jobs Plan will invest in America in a way we have not invested since we built the interstate highways and won the Space Race.”
The AFP focuses on education and family programs, including tax credit payments for children, free universal pre-kindergarten, and two years of free community college.
“The American Jobs Plan and the American Families Plan are once-in-a-generation investments in our nation’s future,” the White House said in a statement. “The plan also will ensure that Americans who have endured systemic discrimination and exclusion for generations finally have a fair shot at obtaining good paying jobs and being part of a union.”
The White House has insisted the high spending is a necessary investment into the country’s future and that taxes on the wealthy can go a long way to cover the costs.
Despite the promises of those plans, the Tax Foundation report says it would come at a significant cost. The report says American incomes would drop in the coming years if the plans are implemented. “Gross national product (GNP), a measure of American incomes, falls by 1 percent in the long run – somewhat larger than the drop in GDP – due to deficit spending and increased taxation of U.S. savers, which reduces U.S. saving and increases payments to foreign owners of U.S. assets,” the report reads.
