Warren tax plan seen as slowing economic growth
WASHINGTON — Sen. 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, unveiled 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 Warren’s campaign for the Democratic presidential nomination.
The assessment found that if the tax raised as much new federal revenue as Warren intends, and if the proceeds went toward reducing the federal debt, annual economic growth would slow from an average of 1.5% to an average of just over 1.3% over a decade.
To put the finding in context: Penn Wharton estimated in 2017 that President Trump’s tax cut would increase economic growth by roughly 0.06 percentage points per year over a decade, an effect that was much smaller than White House officials predicted. Its estimate of Warren’s policy implies the wealth tax would have an effect that is three times as large as the Trump tax cuts — but in the opposite direction.
Economists who favor Warren’s plan say the analysis does not accurately account for the benefits to economic growth from the new government spending programs she would fund with the tax revenue, including universal child care, increased education funding and student loan forgiveness, because it does not evaluate the economic effects of those spending programs. Such an evaluation would likely have produced an even larger drag on growth for the wealth tax, because it would not have been reducing the federal debt, which the Penn Wharton model finds increases growth.
Warren’s plan would impose an annual tax of 2% on assets held by Americans, including stocks and real estate, that total more than $50 million. It would add an additional 1% tax on assets of more than $1 billion. Warren has said her plan would raise nearly $3 trillion over a decade.
The proposal has drawn fierce criticism from wealthy Americans, including several titans of Wall Street. Warren has delighted in those complaints, splicing some of them into a campaign commercial that she is set to air on the financial news network CNBC this week.