Bernie Would Raise Taxes 11x More Than Trump Cut Them
The Bernie Sanders presidential tax plan it out, and contrary to his rhetoric that we can fund any social program so long as we tax “millionaires and billionaires,” it raises taxes across the board.
The Sanders plan increases the number of brackets from seven to nine, and increases the marginal tax rate on all levels of income:
And that’s just the individual tax brackets.
The rate on long-term capital gains (stock held longer than one year) and qualified dividends for those earning over $250,000 a year will be taxed as ordinary income, as opposed to the prior rate of 23.8%.
The Sanders plan lifts the payroll tax cap with a gap in income affected. Currently only the first $132,900 in income is subject to payroll tax (in 2019), and Sanders would re-introduce the tax for earnings above $250,000. He would also put a new 7.5% payroll tax on employers, which would likely be paid by the employer at the expense of employee wages.
Itemized deductions would be capped at 28%, rather than the tax rate on the last dollar of income the deduction applies to.
When it comes to corporate taxes, Bernie would subject S-corporations to self-employment tax (which are currently taxed as pass through entities similar to LLCs). C-corporations (of which Trump cut their tax rate from 35% to 21%) would have their tax rate raised back to 35%, among the highest in the world.
Lastly, Sanders would implement an estate tax of 45% on assets worth between $3.5 million and $10 million, 50% on assets worth $10M-$55M, 55% on assets worth between $50M-$500M, and 65% on all assets exceeding $500 million.
On aggregate, the Sanders plan would raise $16 trillion over ten years. For reference, the Trump tax cuts amounted to $1.5 trillion in cuts over 10 years. In other words, Sanders would raise taxes by nearly eleven times as much as Trump tax cut them.
And even with these hikes, Sanders still doesn’t come close to funding his agenda. With our current trillion dollar deficits, Sanders tax plan plugs the hole, but only leaves $500 billion left over each year to fund a wide array of social programs. A study by the Mercatus Center found that Bernie’s healthcare plan would cost at least $32 trillion to implement over ten years (and that’s just healthcare!). The study was extremely generous to Bernie, and granted numerous unrealistic assumptions he makes (such as the plan’s aim to save $384 billion a year by cutting reimbursements to healthcare providers by 40%).
Bernie will respond that it’s all a wash, because people will be paying the money they used to be paying in premiums in taxes towards government provided healthcare instead. That kind of logic is flawed for a number of reasons, the most obvious being that it’s impossible to design a tax that will tax people the exact dollar amount they currently pay in healthcare premiums. Secondly, even if he could, people would be paying more for an inferior service. And third, Bernie’s tax plan doesn’t even attempt to do this.
In reality, Bernie will have to raise taxes to levels that few Americans will accept to implement his dream. Sanders will often point to Scandinavia as an example of countries where his dreams are alive – offering universal healthcare, free college, generous paid maternity and maternity leave, a strong welfare state, among others.
It’s never the case that Bernie mentions that the lowest tax bracket in Sweden is 32%, and that all Scandinavian countries have a national VAT tax (sales tax) of 25%.
Unfortunately, if his vision becomes a reality, so will those sort of tax rates. And remember – that’s as low as they get.