President Barack Obama's proposed 2017 budget would boost the size of the economy and raise marginal tax rates on both labor and capital income, according to the Congressional Budget Office
The reports concludes that the president's proposal to increase the number of legal immigrants to the US would have the largest influence on the economy, since the number of US residents would grow by about 3 percent. This would then increase the labor force, employment, productivity and economic output.
Obama's budget plan, however, has no chance of passing in the Republican-controlled Congress.
The Washington Free Beacon
points out that the increase in tax rates would both discourage work and hamper savings.
Marginal tax rates on labor income would go up from 0.7 percentage points to 0.9 between 2017 and 2026, eventually increasing the rate to 31.8 percent in 2026. This move would discourage work by reducing the supply of labor and lowering economic output.
Savings would also be harmed, The Beacon reports, because the president's budget proposes raising marginal tax rates on taxpayer income from capital, including stock dividends, realized capital gains, and owners' profits from business.
The paper also emphasizes that the increase in legal immigration would lower average wages.
The plan would also reduce federal deficits by $2.4 trillion over the next decade, relative to current baseline projections for $9.2 trillion deficits in total, The Washington Examiner
report describes how this year's budget analysis by the CBO is significant as the inaugural run of what is known as dynamic scoring, an advanced method to track how legislation affects the overall budget. For example, the influence of a boost in infrastructure or more precise formulas for determining how changes in taxes could affect economic growth.
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