Tax Policy Center confirms Sanders plan is expensive, flawed and unpassable

magnify-dollarThe Tax Policy Center, a non-partisan project from the Urban Institute and the Brookings Institution, has posted its analysis of the Sanders tax plan (PDF). Its hefty $15 trillion price tag, a load heavy enough to pay off the national debt by 2036, is just the first of many problems.

Bloomberg quotes the Center’s director: “This is a very ambitious proposal,” Burman said. “Changes of this magnitude are going into uncharted territory.” While Sanders’ proposals share some elements with those of Hillary Clinton, the Democratic presidential front-runner, the two are “radically different” in general. “Clinton’s plans are more incremental. Bernie Sanders clearly wants to change things radically. There’s a very, very clear choice.”

Ignoring resistance from fiscally conservative voters to his Robin Hood approach to managing America’s checkbook, market forces themselves are against him.

A new tax on financial transactions, for instance, could indeed serve to improve market stability, but not at the astronomical rate some Sanders adviser has dreamed up. FTT itself has been widely supported: “I’d recommend a three- to five-basis-points financial transaction tax, preferably introduced in tandem with the European Union’s. (I view Senator Sanders’s proposal for a 50-basis-point tax on stock trades to be too high.)”

What happens when the FTT rates are too high? Markets fail, as they did in Sweden, when more than 90% of bond and equities traders fled Stockholm for London.

From the report: “Supporters of an FTT argue that such a tax would curb speculative short-term and high frequency trading, both of which are activities of little or no social value, and that it could also reduce the price volatility of assets as well as asset bubbles. However, an FTT at the rates being proposed by Senator Sanders would discourage all trading, not just speculation and rent seeking. An FTT appears as likely to increase market volatility as to curb it, as it would create new distortions among asset classes and across industries.”

Opponents of Wall Street sometimes fail to acknowledge that those “asset classes” include all of America’s retirement funds. Stress on the market is stress on households. This doesn’t excuse the actual and famous dishonesty within the ranks of financial specialists, but we need to keep in mind we’re all in this boat together.

Speaking of households, “Lower-earning spouses [ed: mostly women, but changing] are sensitive to taxes. A person married to a high-earner might face a very high marginal tax rate on the first dollar of earnings, which, when combined with the costs of working (for example, paying for child care), can make working seem especially unappealing. By increasing marginal tax rates, the proposal would increase the disincentive for potential second earners to enter the workforce.” Lack of participation hurts that spouse’s future earning potential too. Even the best meaning proposals have undesired side effects.

More critiques, as well as a few nods, are laid out in the full 49 page report, and more meta-analyses are being published about it. CNN Money’s “Mega tax increases largest in peacetime history” touches on the carbon and payroll taxes.

Bottom line: Bernie Sanders domestic economics are no more sound than his anti-trade, isolationist, and sometimes xenophobic international positions.

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

6 CommentsLeave a comment

  • And Rome wasn’t built in a day. This org is just a mouthpiece (I did not say Shill) of the Brookings Institution which was also against the New Deal and we saw how that worked out.

    • “Sanders has a plan to make public colleges and universities tuition free that would save the typical middle class family $9,400 a year. Creating a workforce that is more educated and less bogged down in student debt would benefit the economy immensely. The Tax Policy Center did not look at that.”

      There are other costs as well. Half the money comes from individual states, which will need to find new revenues if they want to participate. And it’s misleading to suggest that every family is going to be able to take advantage of free college, since it’s a finite resource. Many families could be faced with an extra state tax burden paying for public college for other people’s kid as well as their own on a different education path.

  • Warren Gunnels, who serves as Sen. Sanders’ senior policy adviser, pointed out in a scathing press release that had the TPC bothered to do the comparative math, they would have found that an overwhelming majority would have more money in their pockets under Sanders’ proposals, not less. Gunnels pointed to a study by the nonpartisan think tank Citizens for Tax Justice (CTJ), which compared the new taxes to fund Sanders’ health care plan with the money families would save under a hypothetical single-payer health care system in the US.

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