Hillary Clinton's proposed tax increases on people with high incomes and on businesses would constrain economic growth, leading to lower wages and about 697,000 fewer jobs, according to a right-leaning policy group's analysis.
The Democratic presidential nominee's tax plan, which includes proposals to raise taxes on multimillionaires and impose a "financial risk fee" on banks, would change economic behavior enough to reduce U.S. gross domestic product by 2.6 percent over the long run, according to a study prepared by the Washington-based Tax Foundation. In that slightly smaller economy, wages would be 2.1 percent lower, the report said.
By itself, "the plan would reduce the after-tax incomes of the top 1 percent of taxpayers by 6.6 percent but increase the after-tax income of all other income groups by at least 0.1 percent," the analysis said. Still, after accounting for smaller economic growth that would result, "all after-tax incomes would fall by at least 0.1 percent in the long run," it said.
After accounting for that reduced tax base, Clinton's plan would increase federal revenue by $663 billion over 10 years, the Tax Foundation determined -- a number that's less than half of some previous estimates.
The lower number stems from the group's use of a method called "dynamic scoring," which seeks to account for changes in economic behavior that would result from changes to the tax code. In the case of Clinton's plan, higher marginal rates on both capital and labor income would mean that the economy wouldn't grow as much as it would without the effects of those changes, according to the analysis. Dynamic scoring can be controversial among economists, who disagree on the best way to construct the models they use.
Because dynamic-scoring models anticipate that people will work, buy and invest more when their taxes are lower -- generating economic growth -- the models typically find that tax cuts cost less than other models predict.
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