Senator Patty Murray’s 2014 budget calls for tax increases of $975 billion over ten years, with most of the increase likely hitting capital gains and dividend income. That means the cost of capital investment will go up. Rea Hederman Jr. and John Ligon estimate the consequences:
The Murray tax proposal would slow private business investment substantially over the 10-year forecast period. Increasing taxes on capital and corporate income would slow business investment by $82 billion annually over the 10-year forecast.
The slowdown in business investment and capital in the U.S. economy contributes to a slowdown of $1.4 trillion in real economic output and an average 853,000 U.S. jobs over the 10-year forecast period. […]
The tax increases would likely slow the S&P 500 Index of Common Stocks by an average 17 percent from baseline levels over the first five years and an average 14 percent relative to baseline levels over the 10-year period.
Declining asset values and lower income (after-tax personal income would decline an average $180 billion annually) would leave households with an average $1.8 trillion less net wealth annually. […]
The Murray tax proposal would generate less federal revenue as the economy slows. Dynamically, when accounting for the economic feedbacks of the increased taxes on personal and corporate incomes, the Murray proposal would achieve about 57 percent ($878 billion) of the $1.55 trillion static revenue estimate. [Internal citations omitted.] [The Heritage Foundation, March 19]