While many proposed tax and budget plans prioritize deficit reduction over almost anything else, EPI’s “Budget for Shared Prosperity” aims to halt decades of rising inequality and provide an economy that works for the vast majority of Americans, rather than just the wealthy few. To do so, EPI’s model federal budget and tax plan would implement a single-payer health care system, strengthen safety nets, and increase investment in infrastructure, child care, education, and green energy. These large increases in government spending require correspondingly large increases in revenue.
In a new paper, EPI Budget Analyst Hunter Blair describes the proposals for raising revenue and the reasoning behind them.
The budget aims to raise revenue from the richest U.S. households by raising the top tax rate much closer to the revenue maximizing top rate, by taxing labor and capital income at roughly the same rate, implementing a new wealth tax, expanding the estate tax, and broadening the tax base.
Instituting a public Medicare for All plan is an outlier in terms of budgetary cost. When creating the “Budget for Shared Prosperity,” EPI recognized that this was one program that could not be achieved simply through tax policy targeted at the top 1, or even the top 5 or 10 percent. Therefore, EPI’s plan includes an employer-side health care payroll tax and an income-based health care premium paid by most working families.
One key principle of the “Budget for Shared Prosperity” is radical reform of tax expenditures—which include special exemptions, deductions from taxable income, tax credits, and lower tax rates for certain forms of income—that primarily benefit the top 20 percent of earners. EPI’s budget repeals all tax expenditures except for the earned income tax credit (EITC). Such a broad repeal of tax expenditures is typically viewed as political fantasy, but the virtues of such a policy are so large they are worth lingering on. Repealing tax expenditures creates further space for raising revenues from the top by closing off avenues for income-shifting, ensuring the rich are actually taxed at the new top rates. And abolishing all tax expenditures except the EITC provides enough revenue to essentially finance a single-payer plan by itself.
“The U.S. economy faces significant challenges, ranging from widening income inequality to an inadequate social safety net,” said Blair. “The Budget for a Shared Prosperity meets these challenges head on by considerably increasing the government’s fiscal footprint while maintaining good economic and tax policy.”