It’s no secret Hillary Clinton wants to raise taxes on the rich.
And her plan, which also hikes taxes on businesses in certain industries, could raise a lot of money for the government: an estimated $1.4 trillion over a decade.
But that doesn’t count the effect her tax increases might have on economic growth, wages and investment.
Considering those factors, the haul could be notably less.
All told, the conservative Tax Foundation on Wednesday estimated the Clinton tax plan would raise a net $663 billion over a decade.
Here’s why: Thanks to a heavier tax burden on wages, investments and some business transactions, the Tax Foundation figures that the economy after 10 years would be 2.6% smaller under Clinton’s tax plan than it otherwise would be.
It also estimates that wages would fall by 2.1% and that her plan may create 697,000 fewer jobs than otherwise would be the case.
The Clinton campaign disputed the analysis.
Among the biggest changes Clinton has proposed are the so-called Buffett Rule, which would require that people with adjusted gross income over $1 million pay a minimum of 30% in federal income taxes, and a 4% tax surcharge on incomes over $5 million.
She would also limit the value of itemized deductions for top earners. And she would raise the estate tax to as high as 65% on estates of $1 billion or more.
Adding a few new tax breaks for low- and middle-income families, the Tax Foundation found that Clinton’s proposals would make the tax code more progressive than it is today.
A few caveats
There are a number of caveats to assessing the economic effects of Clinton’s tax plan.
For starters, the Tax Foundation wasn’t able to analyze some of her tax proposals for lack of adequate detail. Plus its revenue and growth estimates don’t take into account how the economy would be helped or hurt by her spending proposals, such as for infrastructure.
Lastly, the Tax Foundation uses a proprietary analysis model with its own set of assumptions. Next week, the nonpartisan Tax Policy Center is expected to offer its economic assessment of Clinton’s tax plan, based on a somewhat different model.
Clinton campaign spokeswoman Julie Wood cited liberal economists who have said the Tax Foundation “relies on assumptions that are inconsistent with the economic evidence or well outside mainstream economic thinking.”
She also cited a Moody’s Analytics report that found Clinton’s broader economic plan could create 3.2 million more jobs than expected under current policies.
What about Trump?
Several weeks ago, the Tax Foundation measured the economic effects of Donald Trump’s tax plan and found it would reduce revenue by up to $3.9 trillion. But it also estimated the economy would be 7% to 8% larger after a decade than it would be otherwise, with 1.8 million to 2.2 million more jobs.
That’s largely due to a lower tax burden on investments under Trump’s plan.
As with the Clinton analysis, however, the Tax Foundation analysis did not account for the economic effects of Trump’s other, non-tax-related policies, such as trade and immigration. Nor did it account for the economic effects of the measures that might be implemented to cure the big deficits caused by Trump’s tax plan — or, conversely, the effects of doing nothing to counteract the drop in revenue.
