According to a recent economic report released Wednesday, President Joe Biden’s American Families Initiative, which promises hundreds of billions of dollars for schooling and child investment, will cost $700 billion more over ten years than the plan estimates.
According to the White House, the initiative would cost $1.8 trillion over the next decade. According to the Penn Wharton Budget Model report, the sweeping initiative would cost about $2.5 trillion during the time period.
The Penn Wharton Budget Model is a nonpartisan, research-based economic initiative at the University of Pennsylvania.
The scheme will fund benefits such as mandatory prekindergarten, two years of tuition-free community college, extended parental and medical leave, and grants of at least $250 a month to low-income parents.
The budget also includes $800 billion in additional tax breaks for lower- and middle-income jobs and families. Many of the plan’s cost will be borne by tax hikes on the wealthiest, including a rise in the capital gains tax threshold, expanded IRS auditing of affluent Americans and corporations, 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.
According to the report, the economic damage from increased debt will overshadow the benefits of new initiatives.
According to the report, the disparity is mostly due to disparities in the financing needed for the tax incentives, compulsory pre-K, and free community college requirements. Researchers expected that the plans would last longer than the 10-year budget window.
The measure raises the highest individual tax limit among the top 1% of taxpayers from 37% to 39.6 percent. The capital gains tax threshold on families with more than $1 million will also be increased to 39.6 percent.
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.
The report detailed how much money the plan’s revenue-raising provisions would raise.
It estimated that extra taxes from more aggressive IRS tax revenues from wealthy Americans would total $480 billion, with the income premium hike for the richest Americans worth $111 billion. Another $376 billion will be raised by charging death losses, long-term capital gains, and carried interest at ordinary rates.
Extending the ban on economic losses for non-corporate taxpayers would generate an additional $162 billion, while the Medicare levy would generate an additional $139 billion.