By Rick Newman
Nobody doubts that Bernie Sanders has guts.
The populist Democratic presidential candidate has based his campaign on a wholesale dismantling of the nation’s economic and political status quo. But the ramifications of such plans are sure to be unsettling, and now new details regarding his tax plan reveal just how much upheaval Sanders would cause.
The nonpartisan Tax Policy Center estimates that Sanders’ plan would amount to about $1.5 trillion in new tax revenue per year. Uncle Sam currently takes in about $3.4 trillion per year, so Sanders’s plan would boost the tax bite by about 46%. And by the second decade, new taxes would total about $2.5 trillion per year. Most of the tax hikes would be targeted at the wealthy, but “all income groups would pay some additional tax,” the center says in its new analysis.
Sanders says those new taxes would be worth it, because they’d cover the cost of healthcare for all, college education for anybody who wanted it, extended family leave, new infrastructure stimulus and a lot of other things. Maybe so. But his plan is so utopian as to be hopeless, given the reality of a sclerotic Congress that would have trouble voting to shovel the snow after a blizzard if it had to.
Congress, for instance, refuses to raise the national gasoline tax, even though gas prices are extremely low and the Highway Trust Fund, which is supposed to be funded by gas taxes, requires “offsets” from other programs every year. Despite years of griping about a mushrooming national debt that’s now $19 trillion, Congress steadfastly refuses to raise taxes (or cut spending) so the government spends within its means. Instead, it borrows, inevitably passing the bill onto future generations.
Into this block of granite Sanders charges, assuming, perhaps, that voters don’t care about the details of how he’d pay for the bag of goodies he promises. Or maybe he just wants to start a big civic discussion by offering a provocative alternative to business as usual, knowing full well he’ll never occupy the White House or have to turn his plan into plausible legislation.
If it’s discussion you’re after, then here are a few of the details to discuss:
—Sanders’ tax plan would enact a new 2.2% surtax on all taxable income and a new 6.2% payroll tax on employers. In theory, employers would pay the tax, but they’d almost certainly recoup it through workers through lower wages or reduced benefits.
—The top income tax rate would drop from 39.6% to 28%, but a slew of new surtaxes would raise the tax burden on those starting with incomes of $200,000. The surtaxes would get larger further up the income chain.
— Capital gains for the wealthy would be taxed as ordinary income, which means a bigger tax bite. Lower tax rates for capital gains would sill apply for lower earners.
—There would be new taxes on financial transactions.
There are a lot of other provisions, which brings up another element of Sanders’ plan: It would make the tax code more complicated rather than simpler. All in all, it’s a fanciful notion that would raise taxes on most Americans before they’d be able to assess what they’re getting for their money, front-loading the pain and back-loading the gain. It would be amazing if 20 members of Congress (out of 535) would vote for such a plan.
Every presidential candidate has some kind of tax plan, many of them no more credible than what Sanders has to offer. Republican Donald Trump, for instance, wants to cut individual and business taxes virtually across the board, which sounds great, except it would slash government revenue by nearly $1 trillion per year, according to TPC analysis. That, too, is a nonstarter, because it would necessitate either big cuts to cherished programs such as Medicare and Social Security, or the elimination of many government functions that go far beyond the “waste, fraud and abuse” Trump says will yield the majority of the savings.
Hillary Clinton may have the most pragmatic plan, and while it’s unlikely Congress would agree to the steep tax hikes she wants to impose on the wealthy, her plan is at least a starting point for possible legislation. The Tax Policy Center estimates her plan would increase government revenue by about $110 bill per year, though she wouldn’t use that to pay down the national debt. Instead, Clinton plans to call for tax cuts for lower earners, which would offset the new revenue, and perhaps more. No tax plan comes free, it seems.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.