An analysis of Democrat presidential hopeful Joe Biden’s tax and spending plans show that he would likely be $2 trillion short in covering his planned spending increases with planned tax increases on households earning more than $400,000.
Penn Wharton Budget Model (PWBM)’s analysis predicted that Biden’s tax increases would put $3.375 trillion into federal coffers, but would spend $5.37 trillion over the same 10-year period.
The biggest areas of increased spending in the budget were education at $1.9 trillion and R&D at $1.6 trillion.
The modelers seemed to think that Biden’s plan would actually decrease federal debt by the year 2050, but during the first 10 years it would increase the debt by .1% somehow, despite the $2 trillion discrepancy.
What about Social Security?
One of the ways Biden’s plan raises more money is by assessing payroll taxes on earnings above $400,000, which isn’t done now. The idea is to shore up Social Security by providing money that would cover projected shortfalls.
The trouble is that it would be easy for wealthy people who would be affected by the increase to avoid it. In fact, the Bidens have already set up their finances in such a way that they would not pay more on most of their income under his own tax plan.
It turns out that the Bidens have the bulk of their recent income in S-Corporations, taking a salary each year but distributing the rest of the income as distributions that are not subject to payroll taxes like salaries are. Under this organizational structure, the Bidens would not pay an extra dime of payroll taxes on $13.3 million of their recent income.
Does Biden really think other wealthy people haven’t figured out how to do the same thing with their money? The projected additional $993 million in payroll tax revenue the PWBM model projects may be only a fraction of that number in reality if everyone else with high incomes does the same thing the Bidens have done.
Raising taxes doesn’t work
It turns out that the wealthy have all kinds of ways of getting around tax rules (ever heard of the Laffer Curve?), and it doesn’t seem like this model has accounted for those efforts in making its projections. Most don’t.
Forbes started talking back in June about what a Biden presidency would do to the economy, and none of it is good.
Just like the stock market surged when President Donald Trump got elected, it will dive if Biden does. After all, Biden’s plans to increase corporate taxes would cut into corporate profits and could end the economic and jobs growth we have seen since Trump cut that rate in 2017.
While Biden likes to boast about not raising anyone’s taxes who makes less than $400,000, his corporate tax increases will amount to higher taxes for anyone who has investments. All in all, the net effect of Biden’s plans will be negative for the U.S. economy, just as tax increases always are.