Warren Wealth Tax Could Slow Economy, Early Analysis Finds [View all]

[brooklynite]

New York Times

WASHINGTON — Senator 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, which will be unveiled on 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 Ms. Warren’s campaign for the Democratic presidential nomination.

The assessment found that if the tax raised as much new federal revenue as Ms. Warren intends, and if the proceeds went toward reducing the federal debt, annual economic growth would slow from an average of 1.5 percent to an average of just over 1.3 percent 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 Ms. 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.