(Bloomberg) Hillary Clinton’s proposed tax increases on people with high incomes and on businesses would constrain economic growth, leading to lower wages and about 697,000 fewer jobs, according to a policy group’s analysis.

The Democratic presidential nominee’s tax plan, which includes proposals to raise taxes on multimillionaires and impose a “financial risk fee” on banks, would change economic behavior enough to reduce U.S. gross domestic product by 2.6 percent over the long run, according to a study prepared by the Washington-based Tax Foundation. In that slightly smaller economy, wages would be 2.1 percent lower, the report said.

By itself, “the plan would reduce the after-tax incomes of the top 1 percent of taxpayers by 6.6 percent but increase the after-tax income of all other income groups by at least 0.1 percent,” the analysis said. Still, after accounting for smaller economic growth that would result, “all after-tax incomes would fall by at least 0.1 percent in the long run,” it said.

After accounting for that reduced tax base, Clinton’s plan would increase federal revenue by $663 billion over 10 years, the Tax Foundation determined -- a number that’s less than half of some previous estimates.

Dynamic Scoring

The lower number stems from the group’s use of a method called “dynamic scoring,” which seeks to account for changes in economic behavior that would result from changes to the tax code. In the case of Clinton’s plan, higher marginal rates on both capital and labor income would mean that the economy wouldn’t grow as much as it would without the effects of those changes, according to the analysis. Dynamic scoring can be controversial among economists, who disagree on the best way to construct the models they use.

Because dynamic-scoring models anticipate that people will work, buy and invest more when their taxes are lower -- generating economic growth -- the models typically find that tax cuts cost less than other models predict.

On a “static” basis -- that is, without considering such economic changes -- Clinton’s plan would raise $1.4 trillion in new federal revenue over a decade, the study found. That amount matches the overall estimate for Clinton’s plan that another group, the Tax Policy Center, released this week.

Analysts have moved quickly to reassess the tax plans of both Clinton and Donald Trump, the Republican nominee, over the past six weeks as both candidates announced major revisions to their plans.

Economists at the Tax Foundation have previously worked with Trump’s campaign to help evaluate his tax plan -- though last month, that working relationship was strained publicly after campaign officials made conflicting statements regarding one of Trump’s signature proposals: cutting taxes on the income of businesses organized as “pass-through” entities. The campaign has yet to publish full details of how that plan would work.

Citing that uncertainty, the Tax Foundation published an analysis of Trump’s latest plans that provided a range of amounts for its effects. On a static basis, Trump’s proposals would reduce federal revenue by $4.4 trillion to $5.9 trillion over 10 years, the group found, while on a dynamic basis, the reduction would range from $2.6 trillion to $3.9 trillion.

The group’s analysis of Trump’s plan also found that it would increase economic growth by at least 6.9 percent, increase wages by at least 5.4 percent and result in at least 1.8 million more jobs.

Estate Tax

One of Clinton’s most recent proposals -- overhauling the estate tax to require much higher payments from the largest estates -- would raise $309 billion over 10 years on a static basis, but just $7 billion under dynamic scoring, according to the analysis.

“Clinton’s new estate tax proposal has the single largest economic impact of all her policies,” wrote Kyle Pomerleau, the Tax Foundation’s director of federal projects and the study’s author. Its effect alone accounts for about 40 percent of the economic impact of Clinton’s plan, he wrote.

“This is because the much higher marginal estate tax rates would greatly reduce the incentive to save and invest,” Pomerleau wrote. As a consequence, collections of individual and payroll taxes would decrease, he said -- and that’s what explains the decline from $309 billion to $7 billion.

Under current law, the estate tax applies a 40 percent rate to estates worth more than $5.45 million. Clinton wants to raise that rate to 45 percent and apply it to estates worth more than $3.5 million. Then, she wants progressive rates on higher-value estates: 50 percent on those worth more than $10 million; 55 percent for those worth more than $50 million and 65 percent for those worth more than $500 million. (Those dollar values are doubled for married couples.)

Clinton’s plan to overhaul the taxation of capital gains by creating a six-year scale of graduated tax rates would raise $35 billion over 10 years on a static basis, but would actually reduce revenue by $47 billion under the Tax Foundation’s scoring. Her plan for capital-gains taxes, which is designed to reward long-term investors, would apply a 20 percent rate to gains on assets held more than six years. The rate would gradually increase for gains on assets held for shorter time periods, topping out at 39.6 percent for assets held less than two years.

Another new Clinton proposal would double to $2,000 per child the amount of the child tax credit that’s available to families with children under the age of four. She’d also increase the amount of that credit that can be paid as a refund to families who owe no federal income tax. That boon for middle-class taxpayers would cost about $199 billion over 10 years on a static basis, and $220 billion under dynamic scoring, the report said.

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