According to a chief economist for the U.S. Chamber, a $3.5 trillion reconciliation spending bill being considered in the halls of Congress would greatly weaken our economy, reduce job creation and slow wage growth for American families.
The spending bill is currently being considered by the Senate Finance and House Ways and Means Committees and was the subject of a recent blog post by U.S. Chamber Senior Economist Curtis Dubay titled “Don’t Lose the Forest Through the Trees: Tax Hikes Will Harm the Economy and American Workers.” According to Dubay, the following think tanks have conducted analyses that signals a significant hit on American businesses if the bill were to pass:
- The Tax Foundation scored several potential tax hikes, including a 28 percent corporate rate; higher taxes on businesses’ international income; a 15 percent tax on book income; higher capital gains taxes; and other increases. The Tax Foundation found that these taxes would reduce the size of the economy by 1.3 percent over time, reduce wages by 1 percent, and eliminate 233,000 jobs.
- The Penn Wharton Budget Model estimated the entire Biden FY2022 budgetwould result in an economy that is 1.1 percent smaller in 2050 than it is today, largely because the higher taxes would discourage savings and investment.
- Moody’s Analytics has a more favorable view, finding the economy would be 2 percent larger in 2031 due to extra spending and a shorter long-term analysis. However, if Moody’s separated the impact of the tax hikes from the increased spending, that would likely show a negative impact. Moody’s analysis includes the iterative effects of multiple proposals (the American Rescue Plan, the American Jobs Plan, and the American Family Plan). The respective impacts of these plans have to be teased out to find their specific effect on the economy.
“There is no doubt that higher taxes harm the economy. The open question is, depending on the policy, how much? The tax hikes Congress is now considering are large and are targeted directly at investment,” Dubay wrote. “As we’ve learned over the last 18 months, having a resilient economy is tremendously valuable. The U.S. economy is the envy of the world again as it bounces back strong from COVID-19. Should Congress go through with massive tax hikes, that may not be the case next go around.”
As to where the bill stands in the legislative process, once the committees release the text, the Joint Committee on Taxation and the Congressional Budget Office will dynamically score the measure – giving what is usually considered the most accurate assessment of the potential tax hikes’ impact on the economy.