CBO: President Obama’s 2017 Budget Would Discourage Work, Savings

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Free Beacon:

President Obama’s proposed 2017 budget would discourage work and hamper savings, according to an analysis by the Congressional Budget Office.

 

According to the report, Obama’s budget plan would increase marginal tax rates on labor income from 0.7 percentage points to 0.9 percentage points between 2017 and 2026, which would ultimately increase the rate to 31.8 percent in 2026.

 

This move would discourage work by reducing the supply of labor and lowering economic output.

 

“The type of tax rate that most directly affects decisions about whether to engage in more of an activity is the effective marginal tax rate—the percentage of an additional dollar of income that will have to be paid in taxes,” explains the budget office. “Higher marginal rates tend to cause more behavioral changes than lower rates do, leading to larger inefficiencies.”

 

The president’s budget also proposes raising marginal tax rates on taxpayer income from capital, including stock dividends, realized capital gains, and owners’ profits from business, which would hamper savings and investment.

 

According to the report, the marginal tax rate on capital income would increase by 3.0 percentage points in 2017 and would increase from 3.1 percentage points to 3.5 percentage points in the years thereafter.