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Analysis says American Families Plan would cost $700B more than projected

By
Don Johnson
President Joe Biden details his American Families Plan during his first address to a joint session of Congress at the U.S. Capitol in Washington, D.C., on April 28. Pool Photo by Melina Mara/UPI 
President Joe Biden details his American Families Plan during his first address to a joint session of Congress at the U.S. Capitol in Washington, D.C., on April 28. Pool Photo by Melina Mara/UPI  | License Photo

May 5 (UPI) -- A new economic analysis said Wednesday that President Joe Biden's American Families Plan, which proposes to earmark hundreds of billions for education and child investment, would cost about $700 billion more over 10 years than the plan projects.

The White House has said the plan will cost $1.8 trillion over the next decade. According to the study by the Penn Wharton Budget Model, about $2.5 trillion would be spent over that time for the sweeping proposal.

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The Penn Wharton Budget Model is a nonpartisan, research-based economic initiative at the University of Pennsylvania.

The plan would pay for programs like universal prekindergarten, two years of tuition-free community college, expanded family and medical leave and provide monthly payments of at least $250 to low-income parents.

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The proposal also would provide $800 billion in new tax cuts that benefit lower- and middle-income workers and families. Much of the plan would be paid for by tax increases for the wealthy -- including a hike to the capital gains tax rate, increased IRS auditing enforcement on richer Americans and businesses and a higher top income tax rate.

The Penn Wharton Budget Model also said Biden's plan would increase government debt by almost 5% and decrease gross domestic product by 0.4% by 2050. It would raise $1.3 trillion in new tax revenue over the 10-year period, from 2022 to 2031, which would fall short of paying for the entire package.

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The study said the economic loss would result from the larger debt outweighing the gains from new programs.

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The gap, the study says, is found mainly in differences concerning the funding required for the tax credits and the universal pre-K and free community college provisions. Researchers assumed the proposals would extend beyond the 10-year budget window.

The proposal hikes the top individual tax rate from 37% to 39.6% for the top 1% of earners. The capital gains tax rate for households making over $1 million would also rise to 39.6%.

Americans earning more than $400,000 per year would pay a 3.8% Medicare tax and the plan would tax unrealized capital gains above $1 million at death.

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The study provided a breakdown of how much the revenue-raising provisions in the plan would generate.

It said additional revenue raised from more aggressive IRS tax collections from richer Americans would amount to $480 billion, and the income rate hike for the wealthiest Americans would be worth $111 billion. Another $376 billion would come from taxing gains at death, long-term capital gains and carried interest at ordinary rates.

Extending the limitation on business losses for non-corporate taxpayers would net another $162 billion and the Medicare tax about $139 billion.

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President Joe Biden's first speech to Congress

President Joe Biden delivers his first address to a joint session of Congress, televised across the nation, as he approached his 100th day in office at the U.S. Capitol in Washington, D.C. House Speaker Nancy Pelosi, D-Calif., and Vice President Kamala Harris are behind Biden, the first time in history that two women are sitting on the dais behind the president. Pool Photo by Chip Somodevilla/UPI | License Photo

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