“Read My Lips: No New Taxes” Redux

magnify-dollarBernie Sanders wants to convince you his tax plan will save you money. The Tax Foundation disagrees:

“On a static basis, the plan would lead to 10.56 percent lower after-tax income for all taxpayers and 17.91 percent lower after-tax income for the top 1 percent. When accounting for reduced GDP, after-tax incomes of all taxpayers would fall by at least 12.84 percent.

“This decrease in GDP would translate into an 18.6 percent smaller capital stock and 6.0 million fewer full-time equivalent jobs. After accounting for the economic effects of the tax changes, the plan would end up increasing federal tax revenues by $9.8 trillion over the next decade.” – far short of the $16 trillion plan to be initially enacted.

We’ll want to take these numbers with a grain of salt, given the Tax Foundation’s conservative leanings. Any criticism of their methodologies is welcome. Infrastructure spending might stimulate secondary employment more than expected. Cheap college might bring new minds and industry into the economy. There’s room for optimism in campaign season.

But let’s ignore the GDP for a moment and look at how this might go wrong for an average American.

60% of American households have health insurance through an employer. There is no guarantee that any cost savings that companies enjoy from ditching their health plans will be passed on to their current employees. Some unions are already preparing their renegotiation platforms, but the average worker doesn’t have that leverage.

Bernie likes to raise one hand and lower the other to visually demonstrate how the numbers balance out for taxpayers on average, but he ignores realities of the job market and the crunch on individual families; problems with ObamaCare have been similarly downplayed by the left. Although the health care rolls have been greatly expanded, a significant percentage of Americans found themselves in worse financial shape after the exchanges opened.

So a typical worker under the Sanders plan might face changing to a new and potentially lower quality health plan, finding new doctors for everyone in the family, and dealing with differences in medical coverage and availability, all while losing 2%+ (straight tax) to 12%+ (factoring in GDP) of each paycheck.

We still need Hope and Change. We still need universal health care and affordable education and infrastructure.

But let’s not hand-wave the hard parts of what we’re asking of our citizens.

It’s only fair to acknowledge the eggs we have to crack to make the omelettes.

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Jay is Editor In Chief of The Agonist, veteran and technologist.

4 CommentsLeave a comment

  • Economics is one of those things like law, botany & real estate, that I wish I understood better but always found incredibly boring to learn. (First time I tried to read an ‘Econ 101’ book, I fell asleep by page 3. Second time I got to page 5).

    I understand why higher taxes on consumers and higher taxes on companies being passed on to the consumer will affect demand. (Which should lead to lower prices if the market model were true, which is questionable).

    The way I see it:
    If taxes are high on unearned income, stockholders prefer the money stay in the corporations to grow instead of being paid out in heavily-taxed dividends. If corporate taxes are high, excess funds are reinvested in expansion, R&D, etc. instead of being heavily taxed.

    This should lead to growth in the economy. We had higher taxes in the ’50s and a booming economy. What am I missing?

    • In the 50’s we were the only world power still standing.

      At a certain tax point the money just moves overseas. It’s an unfortunate fact. The left dismisses the right’s cries of “we’re hostile to business” but Pfizer just corporate inverted to Ireland and others are planning it. Individuals of means can bypass the US tax system pretty easy these days with so many international markets to choose from.

      I have no idea what the appropriate tax rates should be. There’s not enough money to do Bernie’s full slate in any event.

  • “60% of American households have health insurance through an employer.” And you suggest that employers will not raise wages when they no longer have to provide that insurance, so the worker gets screwed.

    Perhaps, but the worker pays a portion of that insurance, a burden of which he would be relieved by Sanders, and the worker pays deductibles, copays, payment for items not covered and in many cases has an insurance payment cap. I have employer-provided health insurance, and my out-of-pocket health care expense last year was $13, 700. That is a great deal more than 2% of my gross income.

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