Bernie Sanders Tax Code

[Theinquisition]

http://www.vox.com/2016/1/22/1081479...ders-tax-rates

The above chart, by Vox's Javier Zarracina, shows my estimates of how Sanders would change marginal tax rates on wages, both from payroll taxes and from income taxes. You can see my full calculations here.

Several of Sanders's plans change income and payroll tax rates. His single-payer plan probably does the most here. It adds:

A 2.2 percent "income-based premium" paid by all Americans on their taxable income, including capital gains. This is meant to replace the premiums employees already pay for private health insurance today.
A 6.2 percent income-based premium paid by employers on wage income. This is basically a payroll tax, and most economists agree that the cost of "employer-paid" payroll taxes are passed on entirely to workers in the form of lower wages in the long run. For that reason, I'm treating all payroll taxes as paid by employees, regardless of their ostensible target.
New 37 percent, 43 percent, 48 percent, and 52 percent income tax brackets.
The single-payer plan also subjects capital gains above $250,000 to regular income tax rates.

Also important is Sanders's Social Security plan, which adds:

Social Security payroll taxes for wages above $250,000, which are currently exempt. The total rate here is 12.4 percent.
A 6.2 percent tax on investment income above $250,000.
Finally, there's the FAMILY Act, which adds a 0.4 percent payroll tax on all income: 0.2 percent ostensibly paid by the employer, 0.2 percent by the employee.

If you add these taxes to the existing US tax code — including the income tax, Social Security payroll taxes, Medicare payroll taxes, and additional Medicare taxes added by Obamacare — you get the rates in the chart above. Most taxpayers would see a single-digit increase in their marginal tax rate. People with taxable income below $250,000 would see an 8.8 percentage point increase.

But the very rich would see eye-popping increases in marginal rates: from 36.8 percent to 62 percent for people with taxable income between $250,000 and $413,350. The big change here is applying the Social Security payroll tax, which adds another 12.4 points.

For the very richest Americans, with more than $10 million in taxable income, Sanders's proposal would produce a 77 percent marginal rate. That's not unprecedented — under Dwight Eisenhower, the top income tax rate was 91 percent — but it's higher than the top rate at any point since 1964.

Now, marginal rates aren't everything. Most people wouldn't see an actual tax increase of 8.8 percent, even if their marginal rate goes up that much. Effective tax rates — the amount you're actually paying as a percentage of income — also depend on deductions and credits.

A chart sent to me by the Sanders campaign estimates that, excluding the premium taxes and payroll tax increases, people making less than $500,000 wouldn't see their effective tax rate change at all. But after adding in the premium taxes and payroll taxes, they'll see a real increase.

Whether that increase is worth it is a totally different question. Single-payer health care would make life easier for a lot of desperately sick people — and as the Sanders campaign notes, it's quite possible that the employee and employer "income-based premiums" in his plan will be less than premiums people are already paying.

The Social Security tax increases, likewise, finance more generous benefits for seniors at a time when defined benefit pensions are becoming less and less common.

But the normative question of whether these rates are good policy is very different from the question of what the rates Sanders is proposing actually are. And if you add them up, they're considerably higher across the board than under existing policy. Even more dramatic are Sanders's proposed increases to capital gains taxes. Currently, including a 3.8 percent surtax imposed by Obamacare, rates top out at 23.8 percent. Bernie would hike the top rate to 64.2 percent and the rate for many making upper six figures to 49.2 percent.

This is a result of a) applying his much-higher regular income tax rates to capital gains, and b) the new Social Security investment tax. It leads to top marginal rates that are genuinely without precedent in peacetime.

While income taxes on wages have topped 91 percent in the past, the highest capital gains taxes have ever gone (outside of a brief period during World War I) was 39.875 percent, the rate for 1977-'78.

The Sanders campaign estimates they'll earn $92 billion a year from taxing capital gains the same as wages. But there's reason to think they'll actually lose revenue.

One thing that happens when you increase the capital gains rate is that people stop selling assets — and thus realizing gains on capital that can be taxed — as frequently. That means there's a point beyond which raising the capital gains tax would reduce sales so much that revenue actually falls.

Note that this is a very different question from whether taxing capital gains at a high rate hurts economic growth. Many economists think it does, but that effect would reduce revenue by lowering the price at which assets are sold, not making them less likely to be sold in the first place. The latter is a different effect whose existence is much less controversial.

David Kamin, a professor of tax law at NYU and a former economic adviser to President Obama, notes in a recent paper, "The Joint Committee on Taxation and Treasury both assume that the revenue-maximizing rate for capital gains revenue ranges from 28 to 32 percent."

That's much, much lower than the 64.2 percent top rate Sanders would enact, and much lower than the 49.2 percent rate he'd impose on many who are currently in the top 23.8 percent bracket.

It seems quite possible, then, that Sanders's plans would spur people owning stocks and other investments to sell them less regularly, reducing tax revenue by enough to offset any gain from the increase in the rate.

One caveat here is that Sanders supports ending "step-up basis," a loophole that means inherited goods that heirs then sell are taxed on the value they gained since the point of inheritance, rather than since the point at which the deceased bought it.

For example, imagine Jane Smith buys a Basquiat painting for $100 in the early 1980s, and then dies in 2010, when the painting is worth $10 million. Her daughter Joan inherits it in 2010 and then sells it in 2016, when it's worth $12 million. Under the current law, Joan would only pay tax on the $2 million in value gained since she inherited it, not the nearly $12 million in value it gained since Jane bought it.

That's not just a big windfall for rich heirs, it's a powerful incentive for people with valuable assets to not sell them and instead give them to their heirs. Repealing this loophole would on the margins make people more willing to sell valuable assets, partially counteracting the effect of Sanders's rate hikes.












So after reading this....wow, that's a lot of tax increases, and not just for the top 1% or billionaire class Bernie likes to whine about. This hits everyone. Futhermore, some of the tax increases, such as proposed capital gains tax increases, may only see a marginal benefit to actual income from those taxes.

Right, wrong, or indifferent, thats a lot of tax increases.

[Ripster42]

Has payroll tax as added tax and then doesn't deduct the amount employers are currently paying for medical insurance. So dishonest from the outset sounds like.

[Theinquisition]

Has payroll tax as added tax and then doesn't deduct the amount employers are currently paying for medical insurance. So dishonest from the outset sounds like.

source? 10char

[TZucchini]

Not bad. My health insurance premiums and deductibles disappear, and I'd only owe an additional 8% in taxes. Plus I get the benefit of knowing that medical bills will no longer bankrupt Americans.

I do feel bad for the rich though. Being taxed at 62% on income over $250,000 is tough. Hopefully they'll be able to survive such a hardship.

[Theinquisition]

Not bad. My health insurance premiums and deductibles disappear, and I'd only owe an additional 8% in taxes. Plus I get the benefit of knowing that medical bills will no longer bankrupt Americans.

I do feel bad for the rich though. Being taxed at 62% on income over $250,000 is tough. Hopefully they'll be able to survive such a hardship.

You think it's fair to ask someone to pay over 50% of what they earn in taxes? Whats to stop someone from reaching that 250k mark and saying screw this im going on a long vacation?

Hell im not even against the single payer system IN THEORY, I just don't trust the govt to run it.

[breadisfunny]

You think it's fair to ask someone to pay over 50% of what they earn in taxes? Whats to stop someone from reaching that 250k mark and saying screw this im going on a long vacation?

yes i do deal with it.

[Ripster42]

source? 10char

The story you linked.

[lordsphinx]

I work for a privately owned business, and we employ just over 500 people. I’m have access to our annual reports, and I can promise you that these changes would put us out of business. 100% guaranteed, without a doubt, we would go out of business. Nice to see he’s working hard for the middle class. At least once I’m on the street I’ll have access to healthcare.

[Xeones]

You think it's fair to ask someone to pay over 50% of what they earn in taxes? Whats to stop someone from reaching that 250k mark and saying screw this im going on a long vacation?

Laughable. The people who make that much money aren't struggling.

[Theinquisition]

The story you linked.

Fair enough, had to go back and re-read.

[Rixis]

source? 10char

Isn't the source that there will be single payer implemented, thus eliminating the need for insurance?

You think it's fair to ask someone to pay over 50% of what they earn in taxes? Whats to stop someone from reaching that 250k mark and saying screw this im going on a long vacation?

Incremental taxes. You only pay the increased rate on any earnings OVER 250k, they don't tax you 62% of your total earnings once you step over the 250k mark. It's not like many people need more than 250k anyway /shrug

[TZucchini]

You think it's fair to ask someone to pay over 50% of what they earn in taxes? Whats to stop someone from reaching that 250k mark and saying screw this im going on a long vacation?

No, that would be unfair.

However, I do find it fair to ask people to pay over 50% on income exceeding $250,000.

Hell im not even against the single payer system IN THEORY, I just don't trust the govt to run it.

Would you trust private corporations to run it?

[Theinquisition]

Laughable. The people who make that much money aren't struggling.

It's not about struggling or not, it's the moral principle of telling someone that that have to pay over half of what they make in taxes. Whats the point of working?

[Roostercogburn]

You think it's fair to ask someone to pay over 50% of what they earn in taxes? Whats to stop someone from reaching that 250k mark and saying screw this im going on a long vacation?

My friends do that. They won't take raises, a higher position, or work past a certain set of hours unless it will result in an actual "in pocket" profit for them. I don't blame them.

And the sad this is that people are being played. Look at the current tax situation. The rich already pay way more. But if you think rich people get paid millions in cash, you are retarded. A rich Bank CEO will get a few mil, but like 70% of that huge ass bonus and pay in the contract is Stocks and shit. Stocks and shit that is exempt from your typical tax code.


ANY POLITICIAN TALKING ABOUT CHANGING INCOME TAX TO GET RICH TO PAY HIGHER TAXES IS PLAYING YOU.

[TZucchini]

I work for a privately owned business, and we employ just over 500 people. I’m have access to our annual reports, and I can promise you that these changes would put us out of business. 100% guaranteed, without a doubt, we would go out of business. Nice to see he’s working hard for the middle class. At least once I’m on the street I’ll have access to healthcare.

Why, specifically, would it cause you to go out of business?

[Theinquisition]

No, that would be unfair.

However, I do find it fair to ask people to pay over 50% on income exceeding $250,000.



Would you trust private corporations to run it?

I disagree, I think in principle its immoral to demand someone pay over half of what they earn in taxes., secondly, no not nessesarily I don't trust corporations either, im just on the fence on who I distrust more, the gov't or corporations.

[Deleted]

Looks close to our taxes actually

Which I would suspect actually would hurt the US, we have our entire system of tax paid infrastructure, healthcare etc. set up, but it took decades to get it to the point where we are now and it still to this day needs upgrading (which can't be done by more tax increases).

Overall, idealistic and probably not going to be effective in the time that people would need it to be, to accept it.

[Theinquisition]

yes i do deal with it.

sure you do.

I'm also a space cowboy engineer.

[GodlyBob]

I am not opposed to tax increases in and of themselves. I also take what economists say with a big grain of salt. The biggest thing I'd be worried about though, would be mismanagement of revenue. I would gladly give an additional 5% of my earnings for a single-payer healthcare system. The problem is that there's absolutely no guarantee that we get anything meaningful out of these increased taxes, if they get discussed by the senate at all. Our government is notoriously bad at getting anything good done, and the things that actually are in the best interest of the majority of the country have to be changed, trimmed, and compromised so that whichever party is currently in the minority can still get their stab at relevancy in.

The taxes themselves, I could care less about, I'm just worried if we'll actually get anything out of them.

[Kujako]

I disagree, I think in principle its immoral to demand someone pay over half of what they earn in taxes.

Going to tell us why you think it's immoral? We could use that tax money to fund schools, where they can teach the next generation how taxes actually work so we wont get people claiming a 50% tax rate on earnings above 250,000 dollars is "taking half of what they earn".