Thursday, November 4, 2021

3rd release of Build Back Better: 7 million less employment

Last night a third release of BBB was shown to the public.  Both in pages and overall economics, it is in between the 1st and 2nd editions.

First-release items resurrected yesterday

  • Repeal of Trump's terrible rebate rule (Section 139301).  It is likely illegal so repealing it does nothing but CBO probably will credit Dems with cutting about spending by about $200B with this provision.
  • Drug "Price Negotiation Program" (Section 139001).
  • Rx "Drug Inflation Rebates" (Section 139101).
  • Favors to labor unions such as allowing union dues to be tax deductible (Section 138514) and giving the National Labor Relations Board new authority to levy hefty penalties on employers (Section 21006, which was also in previous releases).  
  • E-cigarette and tobacco taxes (Section 138520).
  • Federal family leave (Section 130001).
Important items maintained from the 2nd release
  • Affordable housing (still $150B across various sections such as 40001ff).
  • Expanded ACA premium tax credits (Sections 137301ff).
  • New federal childcare (Section 23001) and preK programs (Section 23002), including massive hidden taxes on marriage.
  • Child Tax Credit expansion (Section 137101ff).
  • Partial launch of the Green New Deal (various sections such as 136001ff).
  • Medicaid expansions (various sections).
  • Privacy regulation (Section 31501).
New item: Increase annual cap for deduction of State and Local Taxes (SALT) from $10K to $72.5K (Section 137601).  About 8 percent of filers are affected by this.  I guess that about 6 percent of filers are workers who would go from a binding cap to a nonbinding cap.   For such people, IF the federal and SALT rates remain constant, the overall marginal tax rate on labor income falls.  This is my assumption for the table below, but I note that lifting the SALT cap encourages states to increase SALT rates (for everyone, not just the 8 percent) and discourages states from cutting rates.  Moreover, the additional SALT revenues from those rate changes may well be spent on programs that pay people not to work.

This table shows 14 BBB provisions with significant hidden effects on incentives to work.  (My earlier post provides more detail on those incentives).  The final column of the table shows an estimated impact of these hidden incentives on FTE employment, allocated among the 14 provisions.  This does not include any employment effects of funding BBB with income taxes on households (Sections 138201ff) and businesses (Sections 138101ff).

1 comment:

John said...

What other economist has read the bill and has summarized the economic impact of BBB? Very few if any. Thank you!