Biden’s Build Back Better agenda would impose the country’s highest tax hike since 1968
Evidence is clear that tax hikes, especially those on income, are very harmful to economic growth since they are more distortionary to productive economic activity than other taxes. Income taxes work by reducing the incentive for individuals to work and invest in building capital.
Tax hikes come in different shapes and sizes, however. Some factors like the structure and size of the tax hike also contribute to how the economy is affected. So, how does President Joe Biden’s Build Back Better proposal compare to other past tax proposals?
The Tax Foundation analyzed this question by comparing tax revenue as a percentage of GDP from the tax proposals to those of the past.
According to their analysis, “compared to previous tax changes, this House tax plan would impose the largest gross tax increase since President Lyndon Johnson’s tax hike to help fund the Vietnam War in 1968.”
According to a report from the Treasury Department, between 1940 and 2012, Congress enacted 21 major tax bills that increased federal tax revenues over at least one fiscal year. Of these 21 revenue-raising tax bills, the five largest tax increases since 1940 raised annual federal revenue in the range of 1.33 percent of GDP up to 5.04 percent of GDP (see accompanying table).
The Build Back Better Act tax proposals include about $2.06 trillion in corporate and individual tax increases on a conventional basis over the next 10 years, which is worth about 0.72 percent of GDP. Looking at the first year alone, it raises about $175.1 billion of gross revenue, or about 0.76 percent of GDP. Under both measures, the proposal would be the largest gross tax increase since the Revenue and Expenditure Control Act of 1968.
Revenue Effect as a Percentage of GDP (first fiscal year unless otherwise indicated)
Revenue Act of 1942
Revenue Act of 1941
Revenue and Expenditure Control Act of 1968
Revenue Act of 1951
Revenue Act of 1950
$3.5 Trillion in Gross Revenue Raisers (2022-2031)
Current Tax Payment Act of 1943
House BBBA Gross Revenue Raisers in 2022
House BBBA Gross Revenue Raisers (2022-2031)
Crude Oil Windfall Profit Tax Act of 1980
Tax Equity and Fiscal Responsibility Act of 1982
Tax Reform Act of 1986
Omnibus Budget Reconciliation Act of 1990
House BBBA Net Revenue Raised (2022-2031)
Contrary to what Biden claims, the Build Back Better plan does not cost Americans $0, it would be one of the costliest bills the country has seen in a long time.