Bernie Sanders's Plan Would Raise Taxes by 34%
By Richard Rubin
Democratic presidential candidate Bernie Sanders's tax plan is
just as revolutionary as he promises--raising federal taxes by 34%
and cutting the after-tax incomes of the wealthiest households
nearly in half, according to an analysis released Friday.
Mr. Sanders's plan, designed to pay for a significant expansion
of government spending, is the largest and most dramatic of all the
presidential candidates' and the least likely to find support from
either party in Congress. That is saying something in a year when
Republicans are proposing unprecedentedly large tax cuts and
Mr. Sanders's proposals would increase federal taxes by $15.3
trillion over the next decade, according to the Tax Policy Center.
Mr. Sanders concentrates his tax increases on high-income
households, which would face sharply higher levies on their wages,
business income, capital gains and estates, as well as more limits
on their deductions. The top 0.1%--those with incomes of $3.7
million under an expanded definition--would pay an average federal
tax rate of 63.7% in 2017, up from 34.2%.
The middle 20% of households would face an average tax increase
of $4,692 in 2017 and lose 8.5% of after-tax income. The
lowest-income households would lose, too, but they would come out
even by 2025.
"Sanders is clearly betting that people are willing to pay for
his expansive new welfare state," said Leonard Burman, director of
the Tax Policy Center, who was a Treasury Department official under
President Bill Clinton. "There's a giant tax increase, mostly on
the rich, but everyone would pay more."
The top effective marginal tax rate on wages would increase to
64.2% from 43.1%, and Mr. Sanders would raise the top rate on
capital gains to 62% from 24.1%, while making it harder for wealthy
individuals to defer or avoid capital gains taxes. He also would
limit U.S. companies' ability to defer U.S. taxes on their foreign
income, impose new taxes on financial transactions and create a new
tax on carbon, with a rebate for consumers.
New payroll taxes on employers and on all workers would pay for
what Mr. Sanders calls Medicare for all and for paid family leave.
The $15.3 trillion estimate appears to leave Mr. Sanders several
trillion dollars short of paying for his promises, and that is
assuming the tax increases don't inhibit economic growth.
The center said Mr. Sanders's tax plan "would substantially
reduce incentives to save and invest in the U.S." and would
discourage lower-earning spouses from entering the workforce.
The Sanders campaign didn't respond immediately to a request for
comment on Friday. The campaign has said many households would fare
better because they would be receiving expanded federal benefits,
such as free college tuition and government-provided health care.
The center's analysis doesn't include those benefits.
Mr. Sanders's plan stands in contrast with that of his
Democratic rival, Hillary Clinton. She proposes raising taxes on
high-income households to pay for new spending and is offering
targeted tax breaks and a forthcoming tax cut for middle-income
households. For every $1 she is proposing to raise in taxes, Mr.
Sanders wants to raise $14.24.
"Her experience in government and in politics for a long time
tells her that those are the kinds of things she could get done.
Bernie Sanders clearly wants to change things radically," Mr.
The center has now completed its estimates of the tax plans of
the five leading presidential candidates--the two Democrats, along
with Republicans Donald Trump, Ted Cruz and Marco Rubio. The center
hasn't analyzed Republican John Kasich's plans because it lacks
sufficient detail. In the general election, Mr. Burman said, the
center will attempt to analyze the economic effect of tax changes
along with the combined effect of tax and spending proposals.
The center is a joint project of the Brookings Institution and
the Urban Institute, and it used a bipartisan panel of reviewers to
examine the Sanders plan.
Its economists are generally skeptical of the idea that tax
changes can prompt major economic responses. But Mr. Sanders's plan
is so big that it might be different, the report said.
"The proposed tax changes on both labor and capital income are
very large compared with any tax policy changes since World War II,
so the empirical evidence of relatively small effects cited earlier
may not apply," the report said. "The lack of prior historical
experience for changes of this magnitude makes the macroeconomic
effects of Sanders's plan especially uncertain, but there is a risk
that the very large tax increases could significantly weaken the
Write to Richard Rubin at email@example.com
(END) Dow Jones Newswires
March 04, 2016 13:14 ET (18:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.