If you find your wallet is a little too fat these days, Hillary Clinton has a tax plan for you. It doesn’t even matter how much money you make; Hillary’s plan would take some of it away.
You might not see that from looking at the outlines of the plan, which calls for increasing tax rates only on those who earn at least $1 million, with an extra 4 percent “surcharge” on those who earn at least $5 million a year. But the number crunchers at the Tax Foundation also looked at her plan on a dynamic basis, taking account of the way her plan would affect the economy and the resulting, additional effects on tax revenues. You may be used to seeing such analyses for Republicans’ plans, pointing out that if a tax change stimulates growth by cutting tax rates, the reduction in revenue won’t be quite as large as predicted on a “static” basis. (This is not the same thing as saying taxes totally “pay for themselves,” as is often incorrectly claimed by proponents and, especially, opponents of tax cuts.)
Well, the reverse is true, too: If a plan would hurt economic growth by raising tax rates, then that will ultimately make for a smaller revenue boost than a static analysis would show.
The upshot: Rather than raising $498 billion over a decade, the Tax Foundation estimates Hillary’s plan would put only an extra $191 billion in federal coffers over 10 years. Normally, I’m all for smaller tax increases rather than bigger ones. There are just two problems here: First, her plans to grow government in virtually every facet come with an estimated price tag of $1 trillion over 10 years. That’d blow an even larger hole in an already growing deficit.
The second problem is that the tax increase would be smaller than expected because it would reduce economic growth an estimated 1 percent a year. Capital investment would fall by 2.8 percent a year. The job market would get a real double whammy: Not only would the plan kill some 311,000 full-time jobs, but it would reduce wages by about 0.8 percent.
In short, raising taxes only on “the rich” doesn’t harm only them.
Now, back to what I said at the top about your own wallet. No matter where you fall on the wage scale, you’d take about the same hit:
Stagnation in wages is one of the biggest problems this country faces. And that stagnation owes in large part to the sub-par economic growth we’ve experienced for more than a decade. After real GDP grew an average of 3.5 percent during the Eisenhower through Clinton administrations, that rate fell to 2.1 percent under George W. Bush and 1.2 percent during the first six years of Barack Obama’s presidency (full-year 2015 data are not yet available, but growth in the first three quarters of the year was right around the average for those same months in the previous five years).
Taking another percentage point off a trajectory already well below our historical average would be crippling to our future. Whatever economic problem you want to identify, the best antidote is faster growth in a healthier economy. Hillary Clinton’s tax plan would bring us the opposite.