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Penn Wharton Budget Model enjoys public lashings from both the Biden and Trump administrations

Erin Arvedlund, The Philadelphia Inquirer on

Published in Business News

The bill would raise the federal tax deduction for state and local taxes from $10,000 to $80,000, helping more affluent taxpayers in New Jersey and Pennsylvania. At the same time, the measure would raise taxes on high earners and create a 15% minimum tax on profits from companies that report over $1 billion in profits to shareholders. Companies would also pay a 1% tax on stock buyouts.

Republicans quickly castigated the bill, which could be revised in the senate.

"This analysis from the Congressional Budget Office is a clear indictment of the Democrats' tax and spending agenda and the false promises that have gone along with it," said Rep. Jason Smith of Missouri, the top Republican on the House Budget Committee.

In the Senate, Democrats control the 50-50 chamber with Vice President Kamala Harris's tiebreaking vote.

Economy expected to grow

Despite its far reaching social effects, the bill will not have much of an economic impact in the short term. And that kind of quick growth isn't the main point of the measure, said FS Investments chief economist Lara Rhames.

 

"The goal is really to have a long run impact through jobs, direct spending and productivity through investments in, for example, broadband access. That could really help with other things like education that boost GDP in the long run," Rhames said.

"This bill is peanuts compared to the amount of money Trump was spending," added Kotlikoff. "But is it making the deficit a lot worse or a lot better? Neither."

Finally, the White House can argue Build Back Better is revenue neutral all day long.

"But the CBO hasn't said that. Penn didn't say that," said Tony Roth, chief investment officer at Wilmington Trust. "The White House can say whatever it wants, but no one believes it."

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