Bernie Sanders Proposes $15 Trillion In Tax Increase by Tax Policy Center
By Frank Sammartino, Len Burman, Jim Nunns, Joseph Rosenberg, and Jeff Rohaly
Yes that is not a typo and its actually $15. trillion to be exact – if you earn $142k a year your taxes will go UP by an average of $45,000!! You feeling the Bern? But hey most of the people voting for Sanders are too lazy to eat cereal, and with Donald Trump at the other end of the lunatic spectrum, and all the other candidates all vowing to start a third world war with Russia, there is little choice. See the full study below
Presidential candidate Bernie Sanders proposes significant increases in federal income, payroll, business, and estate taxes, and new excise taxes on financial transactions and carbon. New revenues would pay for universal health care, education, family leave, rebuilding the nation’s infrastructure, and more. TPC estimates the tax proposals would raise $15.3 trillion over the next decade. All income groups would pay some additional tax, but most would come from high-income households, particularly those with the very highest income. His proposals would raise taxes on work, saving, and investment, in some cases to rates well beyond recent historical experience in the US.
Presidential candidate Bernie Sanders has proposed significant increases in federal income, payroll, business, and estate taxes, as well as two large new excise taxes. He would use the additional revenue to pay for sweeping new government programs, including a federally administered, single-payer health care program; paid family and medical leave; free tuition at public universities and colleges; investment in rebuilding the country’s infrastructure; and more.
The Tax Policy Center (TPC) estimates that the Sanders tax proposals would increase federal revenue by $15.3 trillion over their first decade (6.4 percent of cumulative gross domestic product [GDP] over that period) and by an additional $25.1 trillion over the subsequent 10 years (7.0 percent of cumulative GDP), before accounting for any changes in the cost of federal borrowing or macroeconomic feedback effects.1 Approximately two-fifths of the estimated revenue increase would come from a new employer payroll tax on all earnings and an across-the-board increase in income taxes, which would pay for a new, government-administered, health insurance program. Net increases in individual income, payroll, and estate taxes paid by high-income and high-wealth taxpayers would account for another quarter of the increase, as would the elimination of tax breaks for health care–related expenditures. Higher taxes paid by businesses, a new tax on financial transactions, and a new tax on carbon would account for the remainder.
The proposal would raise taxes at every income level, but high-income taxpayers would face the biggest increases, both in dollar amount and as a percentage of income. Overall, the plan would raise tax burdens by an average of nearly $9,000, thereby lowering average after-tax income by 12.4 percent. However, the highest-income taxpayers (the top 0.1 percent, or those with income over $3.7 million in 2015 dollars) would experience an average increase in tax burdens of more than $3 million in 2017, nearly 45 percent of their $6.9 million average after-tax income. Households in the middle quintile of the income distribution would see an average tax increase of almost $4,700, or 8.5 percent of their average after-tax income. Those in the bottom quintile would experience smaller tax increases, averaging $165, or 1.3 percent of their average after-tax income.
The increases in marginal tax rates under the plan would reduce incentives to work, save, and invest. The proposals would also raise the marginal effective tax rate (METR) on all new investments, thus significantly reducing incentives to invest and increasing tax distortions in the allocation of capital. Although the significant additional revenues would by themselves reduce government borrowing and lower interest rates, it is clear that Senator Bernie Sanders intends to use those revenues to expand government programs. If the revenues are insufficient to cover the new spending, the additional borrowing could increase interest rates, which would further raise investment costs. However, the additional spending could generate its own positive economic benefits to the extent that it would increase the nation’s investment in productive physical and human capital.
The main elements of the Bernie Sanders proposals, as we modeled them, are provided in the following list. In response to our questions, the Sanders campaign provided clarifications on a number of proposals. Appendix A shows our questions concerning certain proposals and the assumptions we made in our modeling, which were based on the campaign’s responses. Note that our estimates include the effects of the Protecting Americans from Tax Hikes Act of 2015 and the tax provisions in the Consolidated Appropriations Act of 2016 on both current law baseline revenues and the Bernie Sanders plan.
Individual Income Tax
- Cap regular income tax rates at 28 percent of taxable income, but create graduated surtaxes based on adjusted gross income (AGI) for higher-income households.
- Retain the bottom four income tax brackets up to the 28 percent bracket, which would become the highest regular income tax bracket.
- Add a surtax based on AGI at graduated rates for high-income households. The surtax would apply to taxpayers with AGI over $200,000 ($250,000 for married couples filing jointly and $125,000 for couples filing separately). Surtaxes would be the following:
- 9 percent on income between $200,000 ($250,000 for couples)2 and $500,000 (creating a marginal income tax rate of 37 percent for taxpayers in the 28 percent bracket),
- 15 percent on income between $500,000 and $2 million (43 percent marginal rate),
- 20 percent on income between $2 million and $10 million (48 percent marginal rate), and
- 24 percent on income above $10 million (52 percent marginal rate).
- Enact a new 2.2 percent surtax on all taxable income (in addition to the tax and surtax described earlier).
- Repeal the individual alternative minimum tax (AMT), the personal exemption phaseout (PEP), and the limitation on itemized deductions (the “Pease” limitation).
- Tax capital gains and dividends at the proposed tax rates (including surtaxes) for ordinary income for taxpayers with incomes above the end of the current 28 percent bracket, but retain current reduced rates for long-term gains and qualified dividends for taxpayers with income at or below the current 28 percent bracket threshold.
- Modify the rules for like-kind exchanges of appreciated property to broaden the categories of transactions that are treated as taxable realizations of capital gains.
- Require that derivatives be marked to market each year and that the resulting gains or losses be taxed as ordinary income.
- Tax capital gains on gifts and bequests of appreciated property with a lifetime exclusion for the first $250,000 of gains. The exclusion would be reduced dollar for dollar by the income of the donor or decedent.
- Repeal the exclusion from income and payroll taxes of health-related expenditures, including employer contributions for health insurance, the above-the-line deduction for health insurance premiums paid by self-employed individuals, the deduction for contributions to medical savings accounts (MSAs) or health savings accounts (HSAs), and the itemized deduction for medical expenses.
- Tax carried interest as employment income.
- Enact a new 6.2 percent payroll tax paid by employers on the same tax base as the current Medicare hospital insurance (HI) payroll tax.
- Extend the Social Security payroll tax (combined employee and employer rate of 12.4 percent) to earnings over $250,000.
- Enact a new 0.2 percent payroll tax paid by both employees and employers on the same tax base as the current Social Security payroll tax.
Estate and Gift Taxes
- Restore the 2009 exemption levels for the estate tax of $3.5 million (with an effective exemption of $7 million for the estate of a married couple). The exemption levels would not be indexed for inflation.
- Replace the current 40 percent tax rate with the following rate structure:
- 45 percent for the value of an estate between $3.5 million (or $7 million for couples) and $10 million,
- 50 percent of the value of an estate between $10 million and $50 million, and
- 55 percent of the value of an estate in excess of $50 million.
- Impose a new additional 10 percent surtax on estates valued in excess of $500 million ($1 billion for couples).
- Sharply limit the annual exclusion from the gift tax.
- End deferral of the current US tax on the earnings of controlled foreign subsidiaries.
- For tax purposes, treat foreign companies that are managed and controlled in the United States as US corporations.
- Restrict inversions by US corporations.
- Impose a per country limitation on the foreign tax credit.
- Limit the deduction of interest expense of a US corporation that is a member of a financial reporting group.
- Eliminate tax breaks for oil, gas, and coal companies.
- Limit or deny the foreign tax credit to large, integrated oil companies that are dual-capacity taxpayers.
- Eliminate some business tax preferences.
- Enact a new financial transaction tax (FTT) with rates of 0.500 percent on stock trades, 0.100 percent on bonds, and 0.005 percent on derivatives.
- Provide a tax credit to individuals making under $50,000 and to couples making under $75,000 for the FTT to the extent that investment houses pass the tax along to investors.
- Enact a new tax on “carbon polluting substances,” starting at $15 per ton of carbon dioxide or of carbon dioxide–equivalent content, phasing up to $73 per ton in 2035 and then rising by 5 percent plus the inflation rate in subsequent years.
- Rebate the revenues collected from the carbon tax on a per capita basis, but phase out the rebate for individuals with AGI over $100,000.
Affordable Care Act Taxes
- Increase the surtax on net investment income enacted as part of the Affordable Care Act (ACA) by 6.2 percentage points (from 3.8 percent to 10.0 percent).
- Repeal excises and penalties included in the ACA that become obsolete because of other tax and health reform proposals, such as the “Cadillac tax” on high-premium employer plans, the penalties from the employer and employee mandates, and the excise on health insurers.
Major Elements Of The Proposal
Senator Bernie Sanders has proposed ambitious plans (1) to expand social insurance programs (Medicare for All, Strengthen and Expand Social Security, Keep Our Pension Promises, and Paid Family and Medical Leave); (2) to increase government investment in physical and human capital (Creating Jobs Rebuilding America , College for All, and Youth Job Programs); and (3) to address climate change (Combating Climate Change to Save the Planet). He would pay for those and other programs through a combination of tax increases for individuals and businesses.
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