Bernie Sanders Plans to Raise Taxes by A Lot!

I ran across this Vox article titled: Here's what the tax code would look like if Bernie Sanders got everything he wanted.  Now Vox isn't exactly Breitbart.  So, its interesting that they are calling out the true costs of Bernie's plan. 

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.

These are some pretty high tax hikes.  See the table below.  I mean let's say you make $75K.  you are working 6 months to support the Federal Government.  And you haven't paid any state income tax, property tax, etc yet.  

I've got to think the decidedly blue Maplewood has many making in the neighborhood of $250K.   You are going to be paying 62% of your income to the Federal Government?  That means you are going to be working until mid-July every year, for just the Federal Government.  Then you have to pay Maplewood property taxes, Jersey Income taxes, garbage, water, etc?   

And this does not even talk about the unintended consequences of his ideas.  These are the intended consequences!

It seems as though if Bernie gets his way many will be feeling the Bern alright.  Are people really going to ask for this? 

"You are going to be paying 62% of your income to the Federal Government?"

These are marginal brackets, so you'd only be paying 62% on the amount above $250,000. It's pretty common to see articles where this isn't really clearly stated. There's too much math to sort out the effective tax rate, etc.

Also, taxes come out before your income is calculated. So if you're a property owner in South Orange/Maplewood and you make $250,000 you're probably getting at least $15,000-$20,000 spent on taxes.

Also, with a single payer system you have to account for the fact that health care costs are no longer being paid, so it's only the difference in costs that matters.

Too much math to do for me to want to bother (I'm not an accountant) but it's pretty clear from the way this stuff is presented that they have an agenda.

(And it's not like the President actually makes the laws that would do these things anyway.)

Interesting stuff. It's worth bearing in mind the upside to a lot of this. 

Social Security will be made sound, for good. 

Medical insurance premiums, which off the top of my head are probably 1/5 to 1/4 of my take-home pay, will go away. 

A college education will be much more within reach for more people (not that it matters to me personally, I just think it's a good thing). 

I just want to say first, that I don't personally support Sanders for president. But I do take issue with complaints about taxes in relation to his plans for a single-payer health care system. Sanders is asking for a 2.2% health care tax hike to cover health care costs. If your household is earning $70k a year, that’s $540 a year in extra taxes.

There will also be a payroll tax levied on employers of 6.7%. Assuming the entire cost is passed on to workers (and I guarantee you it won’t be - customers will also pick up part of the tab), that’s an extra $4,690, bringing the total to $6,230 a year.

Obamacare average household premiums were about $6,800 in 2015, and are still rising. That’s at least 2.7 times higher than the tax hike (a highly conservative estimate), and will probably be higher as health care costs continue to rise. In a single payer system, you will not pay for premiums. You’re literally saving over thousands of dollars a year if you’re a middle class citizen, and even more if you’re a working class citizen.

There are plenty of other examples of nations that have implemented a single payer system, and their citizens are paying significantly less than Americans.

My sources...

http://www.ncsl.org/research/health/health-insurance-premiums.aspx

http://time.com/4183856/bernie-sanders-middle-class-taxes-health-care/

qrysdonnell said:

"You are going to be paying 62% of your income to the Federal Government?"

These are marginal brackets, so you'd only be paying 62% on the amount above $250,000. It's pretty common to see articles where this isn't really clearly stated. There's too much math to sort out the effective tax rate, etc.

This isn't true.  You should follow the link in the article where the author shows his math. 

terp said:

qrysdonnell said:

"You are going to be paying 62% of your income to the Federal Government?"

These are marginal brackets, so you'd only be paying 62% on the amount above $250,000. It's pretty common to see articles where this isn't really clearly stated. There's too much math to sort out the effective tax rate, etc.

This isn't true.  You should follow the link in the article where the author shows his math. 

I did. The first column is "Income above." That's the marginal rate.

Actually, looking at that again you are right.  

tom said:

Interesting stuff. It's worth bearing in mind the upside to a lot of this. 

Social Security will be made sound, for good. 

Medical insurance premiums, which off the top of my head are probably 1/5 to 1/4 of my take-home pay, will go away. 

A college education will be much more within reach for more people (not that it matters to me personally, I just think it's a good thing). 

the amount that my employer and I pay for health insurance for a family of 4 is insane.  Especially if you include the deductibles and out-of-pocket.  

terp said:

qrysdonnell said:

"You are going to be paying 62% of your income to the Federal Government?"

These are marginal brackets, so you'd only be paying 62% on the amount above $250,000. It's pretty common to see articles where this isn't really clearly stated. There's too much math to sort out the effective tax rate, etc.

This isn't true.  You should follow the link in the article where the author shows his math. 

As Tom pointed out the 'math' portion isn't really any different. It's just some numbers explaining what was added together. It's not anywhere near the math needed to work out the effective tax rate (which isn't anything amazing, but I'm not going to do it).

The fact that it's saying that if you make 10 million you'd only be taking home 2.3 million should be a pretty major red flag that you're looking at marginal numbers. It's really saying that if you're making 20 million you're only taking home 2.3 million of the top 10 million of your income.

it should be noted that this would NEVER get through Congress in the next 10 years.  But it's valuable for someone to put real numbers against these ideas.  People want universal health care, affordable college, more generous Social Security?  OK, here's what it will cost.

ml1 said:

it should be noted that this would NEVER get through Congress in the next 10 years.  But it's valuable for someone to put real numbers against these ideas.  People want universal health care, affordable college, more generous Social Security?  OK, here's what it will cost.

Agreed. If nothing else, people can look at the tax implications and say "hmmmm, pricey. Maybe we'll go for steeply discounted college instead of free."

I like the way this looks, though I agree with the criticism of payroll taxes. 2.2% for medical insurance? Who wouldn't want that?!

People whose premiums are currently less than 2.2% of their income. 

tom said:

People whose premiums are currently less than 2.2% off their income. 

I'm completely on board with his plan, and I'm pleased that he actually has one, unlike every republican.

I'm not sure I'd be very excited about a single payer system.  I mean I've got a bridge to sell to anyone who thinks we can give everyone top quality healthcare, with little waiting time, by simply raising taxes 2.2%.  Would someone please explain to me exactly how that is going to work?

It wasn't that long ago that people were cheering the ACA.  2 years later and we're looking for another solution?  Of course, its a solution that includes even more government.  Super.  

the ACA is working.  Any plan, however, can be improved. 

The beauty of income tax is that it taxes money you have (current income) rather than money you don't have (such as the value of your house) and if your income goes down, your taxes go down with it.

It would probably increase my total costs, but I would welcome the Bernie plan because I would know that I would have that coverage, even if my income was drastically reduced or eliminated.

And, terp, I thought you were pretty well read and educated, so you should know about the difference between marginal and effective income tax rates!

sac said:

The beauty of income tax is that it taxes money you have (current income) rather than money you don't have (such as the value of your house) and if your income goes down, your taxes go down with it.

It would probably increase my total costs, but I would welcome the Bernie plan because I would know that I would have that coverage, even if my income was drastically reduced or eliminated.

And, terp, I thought you were pretty well read and educated, so you should know about the difference between marginal and effective income tax rates!

I do.  And I acknowledged my error earlier.  I was confused as the author switched between Income tax and the total wage tax.  Jeez.  Even turtles make mistakes you know!

BTW: I really disagree about the income tax.  It really prevents you from saving.  It's great that you have a house.  You were able to save.  But with High taxes, very low interest rates, and the high asset(read house) prices that come with it, how difficult are we making it on new families?  What's that about the disappearing middle class?

Sanders, if he were to be elected, would not be able to enact his program in its entirety. But even if he is not directed he nudges the conversation in the direction which I support.

Now, on MOL we can have an intelligent discussion of things like this, but in the society at large it gets mired in misinformation, much of which is purposeful, political posturing, partisanship and rhetoric. Yes it happens on MOL but less so. 

My problem with the article is when he says "I'm treating all payroll taxes as paid by employees".  This will not be coming out of the employees paychecks and the argument that it is an expense that will be passed on doesn't really ring true for me since the employer will have far more savings from not paying premiums for their employees.  And if the employee was so cheap as to not be providing some support for health insurance then it is unlikely that there is much wiggle room in the employees pay to reduce it.

Honestly, looking at his plan, if you could convince most Americans to look at it from a cost to benefits perspective, I think that most would be on board.  Trouble is most will not do the analysis and they will just have a kneejerk reaction to the tax increase.

terp said:

It wasn't that long ago that people were cheering the ACA.  2 years later and we're looking for another solution?  Of course, its a solution that includes even more government.  Super.  

I'm pretty sure you follow politics closely enough to know that that's not what's going on here.

I have a couple of questions regarding this plan.  It seems many think that a payroll tax levied on an employer doesn't really matter.  But, doesn't this make it more expensive to have employees?  Will this have any effect on the labor market at all?  For example, let's say you are making minimum wage ($15 per hour).  That means you have to be produce more than $15 an hour or your employer is not likely to hire you.   But wait.  There are more expenses.  There are taxes, training, insurance, etc.  Raising these costs mean you have to produce more than $15 an hour plus those additional costs or you will lose your job.  Am I missing something?

Also, if we provide health care for everyone without the price mechanism how will these services be rationed?  Do we have enough doctors or too many?  Do we have enough equipment?   Are we producing the right drugs in the correct quantities?  How will we know without prices?  Who decides?  Do we get to go to the doctor of our choice?  Will we pay doctors the right prices for the right procedures?  If not, will many start to resign?

dave23 said:

terp said:

It wasn't that long ago that people were cheering the ACA.  2 years later and we're looking for another solution?  Of course, its a solution that includes even more government.  Super.  

I'm pretty sure you follow politics closely enough to know that that's not what's going on here.

Then what's going on? 

Many of those 12 questions can be answered--at least in part--through a bit of research. 

terp said:

dave23 said:

terp said:

It wasn't that long ago that people were cheering the ACA.  2 years later and we're looking for another solution?  Of course, its a solution that includes even more government.  Super.  

I'm pretty sure you follow politics closely enough to know that that's not what's going on here.

Then what's going on? 

That Sanders' proposal isn't the result of the ACA's failure or the search for "another solution." It's what he's advocated for for many years.

And many who favor single payer accepted the ACA knowing that it was the best step forward at the time--and the best in decades.

I get it.  You can't always jump right into a utopia.  You have to ease yourself into perfection.  You know.  With guns.  ;-)

However his response was still a little too facile. He claimed people would benefit by his plan because, yes, he would raise taxes, but the raise would be compensated for by the savings of not paying for insurance coverage. People might actually benefit financially.

He left out that they would still be responsible for 20% that would require private insurance coverage and of course he couldn't go into all the complexities.

I am a long time supporter of medicare and for that length of time have wondered if a way could be found to make it financially sound. I'm still wondering. I know single payer works in other countries but that doesn't mean it will work here.

I am still voting for Bernie because I think he is one of the most honest politicians running and even if he
cannot get everything he is is calling for, he will at least move us in the right direction.

I agree, Sanders is nothing but honest with us.  If you want universal healthcare - this is the cost.  He puts it on the table.  And you are right, he won't get what he is calling for but he will shift the discussion and it could lead to some long term change.

just a quick perusal suggests the proposal is at least in the ballpark of what it would cost.  It's on top of Medicare taxes, not replacing.  And it looks like it would raise about the same amount of funding as Medicare.  So the question would be -- is it reasonable to expect that it would cost the same to insure the younger and healthier (and less costly) 75% of the population as it does to ensure the older, less healthy and presumably much more costly 25% of the population.  We'd have to see a more detailed analysis, but it doesn't look like it's a tremendously low-balled cost.