Penn Wharton Budget Model

Foreign affiliates of US-domiciled firms are subject to taxation by the US government and the foreign jurisdictions in which they operate. In our new brief, we use our dynamic Overlapping Generation (OLG) model to analyze the impact of two illustrative policy experiments: 1. The foreign jurisdiction increases its tax rate. 2. The US reduces the tax exemption on foreign-earned income. How were foreign affiliates affected in each experiment? For affiliates in high-tax jurisdictions, US tax liability did not change in either experiment. Those affiliates already generate enough foreign tax credits to more than fully offset their US tax liabilities. As a result, small changes to foreign tax rates or domestic exemptions on foreign-earned income do not lead to any change in their US tax liabilities. By contrast, both experiments impact US tax liability for affiliates in low-tax jurisdictions. An increase in the foreign tax rate generates more tax revenues for foreign governments, but firms end up paying less business tax to the US government. Similarly, as the US decreases exemptions on foreign income, low-tax affiliates take advantage of a larger foreign tax credit, reducing their US tax liability. Check out our new brief here to dig into the precise magnitudes of our estimates: https://lnkd.in/eaXwGCx5 #CorporateTax #TaxPolicy #GlobalTaxation #InternationalTax #PolicyAnalysis

The CHIPS Act, enacted by lawmakers in 2022, provided federal funding to support the domestic production of semiconductors. Sector-specific tax incentives similar to those in the CHIPS Act have received very little attention in the economic literature through models that include fiscal effects and determine prices in general equilibrium. We used our dynamic OLG model to examine the economic and budgetary effects of two illustrative policies that target C-corporations in the computer and electronic product manufacturing sector: -a 10 percent production credit -a 10-percentage-point increase in business expense deductions Our analysis finds that while both proposals increase investment and output in the target sector, they nonetheless have very small effects on overall US economic output, even though production in the target sector generally benefits other sectors. Link to brief: https://lnkd.in/evHqrX28 #EconomicPolicy #CHIPSAct #OLGModel #CorporateTax

The COVID-19 pandemic caused major disruptions to US immigration patterns. Policymakers implemented travel restrictions, stopped visa processing, and made significant changes to border policy. Some elements of that policy response remained in effect for years after the onset of the pandemic in 2020 and have had a significant impact on the foreign-born population in the US. Our new brief measures the impact of those policies on: -Lawful Permanent Residents -Resident Nonimmigrants (such as students and temporary workers) -Refugees -Unauthorized Border Crossings Read more in our new brief: https://lnkd.in/e3fV_A2t #USImmigration #ImmigrationPolicy #COVID19 #ForeignBornPopulation

Reminder!?Join us at lunchtime today, October 23 live on LinkedIn, for "Policies That Work: Federal Debt, Trade Policies, and The Future of the U.S. Economy." Don’t miss expert insights from Wharton faculty?Kent Smetters,?Jeremy Siegel, and?Joao Gomes?on how the rising national debt impacts the economy and your finances. October 23 | 12:30 – 1:30 PM ET https://whr.tn/47Bq9ws

We have just released an analysis of the effects of Ireland’s decision to end the “Double Irish” tax strategy in 2020. Our analysis of financial statement data finds that US firms, especially those in certain sectors, have responded by taking advantage of another tax incentive called the Foreign Deemed Intangible Income (FDII) deduction, lowering their effective tax rate. In the tech sector, some large US multinationals take FDII deductions equivalent to more than one-fifth of their statutory tax burden. In the pharma sector, FDII deductions are much smaller. (see graphic below) Overall, the use of FDII accounts for 38% of the difference between the statutory and effective tax rates for those corporations. Read more about our findings here:? https://lnkd.in/eGuRSpg5 #TaxPolicy #CorporateTax #TaxStrategy #GlobalEconomy #PolicyResearch

Improvements in U.S. life expectancy have slowed since 2010, with sharp disparities by race, education, and age. The COVID-19 pandemic further exacerbated mortality, particularly among Hispanic and less-educated adults. Despite this, life expectancy is projected to rise to 82.2 years by 2060, though improvements will be uneven. Check out the full analysis, including projections for different socio-demographic groups: https://lnkd.in/erEate_7 #demographics #economicprojections

Join us live on October 23 for "Policies That Work: Federal Debt, Trade Policies, and The Future of the U.S. Economy," the first in a three-part series sponsored by the Wharton School on national policies shaping the United States. This hour-long lunchtime session will feature Kent Smetters, Director of the Penn Wharton Budget Model, along with Prof. Jeremy Siegel and Senior Vice Dean Joao Gomes. As the federal debt continues to reach unprecedented levels, it poses profound challenges to economic stability, government spending, and the financial security of future generations. The panelists will uncover how federal borrowing impacts interest rates, inflation, and future fiscal policies, and provide a clearer understanding of what rising debt means for the economy at large — and your personal finances. Don’t miss this in-depth analysis from Wharton faculty! October 23, 12:30 – 1:30 PM ET Register here: https://whr.tn/47Bq9ws #PWBM #PublicPolicy #NationalDebt #WhartonEvents #PoliciesThatWork

Melissa Kearney, author of "The Two Parent Privilege: How Americans Stopped Getting Married and Started Falling Behind" was our final "Hot Topics" guest speaker for this cohort of the Wharton Public Policy Certificate Program. Professor Kearney, in conversation with Kent Smetters last Friday, shared her compelling research on how family structure influences economic outcomes and social mobility for children. Professor Kearney is the Neil Moskowitz Professor of Economics at the University of Maryland, Director of the Aspen Economic Strategy Group, and a non-resident Senior Fellow at Brookings. Thank you again, Professor Kearney, for your expertise and your time. We hope you will join us again! #PublicPolicy #Economics #Wharton #PWBM #TheTwoParentPrivilege

On Friday we wrapped up the fourth "Hot Topics" session for the current cohort of the Wharton Public Policy Certificate Program. We are?extremely grateful to?economist Michael Clemens and PWBM’s Director of Business Tax and Economic Analysis, Alexander Arnon for providing an hour of illuminating conversation on?US?immigration policy and?the impact of immigration on the US economy. We appreciate Professor Clemens’ expertise and the engaging discussion that followed! Learn more about Professor Clemens’ research here:?https://www.mclem.org/ #ImmigrationPolicy #PublicPolicy #Wharton #PWBM?

In 2023, the Biden-Harris Administration launched the SAVE plan for student loan repayment. Since then, the program — which aims to make student loan repayment more affordable — has been challenged in court and is currently paused as a result. Our latest brief presents our estimates of the distributional impacts of the SAVE plan. Key takeaways include the fact that, among borrowers with outstanding student loan debt, 43 percent of subsidies under SAVE accrue to Black borrowers and 71 percent of subsidies accrue to female borrowers. Graduate borrowers also receive substantial subsidies due to their significantly larger debt amounts, with an average subsidy of $6,500 to $8,800 per beneficiary. Read the full brief for more interesting takeaways about the distributional effects of the SAVE plan: https://lnkd.in/eurKgCnd