Tag Archives: Deficity

Bernie Sanders says his spending proposals will tax everyone, not just the rich

Wall Street Journal calculates cost of Sanders spending plan
Wall Street Journal calculates the cost of Bernie Sanders’ spending plan

This story is from ABC News.


Sanders is perhaps best known in political life for his efforts to champion the middle class, saying that in order to bridge the widening wealth and income inequality gap in America, the country needs a revamped tax policy that forces Wall Street, big corporations, millionaires and billionaires –like Trump – to pay up – and doesn’t impose further taxes on the middle and working class.

However, when pressed by Stephanopoulos about whether the proposed Senate tax legislation he backs, which would use a payroll tax to fund a mandate for 12 weeks of paid family and medical leave from all U.S. employers, Sander confirmed that the bill would require taxing all citizens -– not just the top 1 percent.

“[The payroll tax] would hit everyone –- yeah, it would. But it would mean we would join the rest of the industrialized world and make sure that when a mom has a baby she can in fact stay home with that baby for three months, rather than going back to work at the end of one week,” Sanders said.

What most Democrats (all?) don’t understand, is that when you tax the rich, the costs filter down to consumers and employees. If a company is making a 5% profit (and Wal-mart makes a 3% profit), then slapping even a 5% tax increase on them will cause layoffs, outsourcing and other repercussions. We have a serious problem in this country with economic illiteracy – a widespread lack of familiarity with how the private sector works, and how jobs are created. For one thing, the public thinks that the average profit margin of companies is over 32%, when it fact it is much lower.

Public perceptions of corporate profit margins
Public perceptions of corporate profit margins

So the real question is, how much does Bernie Sanders want to spend, and pass on to “the rich”? Because if it’s more than a 1% or 2% increase in corporate taxes, we are all – all of us – going to feel the burn. And it’s not going to a slight increase to our payroll taxes, it’s going to be a huge number of people losing their jobs, and the prices of consumer goods and services rising to pay for the new taxes.

How much does all this Bernie Sanders spending cost? 

The Wall Street Journal – which knows something about business and economics – has done an analysis of how much the socialist agenda of Bernie Sanders will cost. The final price tag? $18 trillion dollars!

Read it:

Sen. Bernie Sanders, whose liberal call to action has propelled his long-shot presidential campaign, is proposing an array of new programs that would amount to the largest peacetime expansion of government in modern American history.

In all, he backs at least $18 trillion in new spending over a decade, according to a tally by The Wall Street Journal, a sum that alarms conservatives and gives even many Democrats pause. Mr. Sanders sees the money as going to essential government services at a time of increasing strain on the middle class.

[…]To pay for it, Mr. Sanders, a Vermont independent running for the Democratic nomination, has so far detailed tax increases that could bring in as much as $6.5 trillion over 10 years, according to his staff.

A campaign aide said additional tax proposals would be offered to offset the cost of some, and possibly all, of his health program. A Democratic proposal for such a “single-payer” health plan, now in Congress, would be funded in part through a new payroll tax on employers and workers, with the trade-off being that employers would no longer have to pay for or arrange their workers’ insurance.

Investors Business Daily has more to say about Sanders’ proposals:

His “Medicare for All” single-payer health plan alone would cost roughly $15 trillion over a decade.

He wants the government to provide “universal” child care and pre-kindergarten programs, along with free tuition at any public college, and proposes spending an additional $1 trillion on infrastructure and expanding Social Security by $1.2 trillion. Add up just these and a few other items on Sanders’ list, and price tag tops $18 trillion over a decade.

[…]And this doesn’t count the massive costs of mandates and regulations Sanders wants to impose on businesses, such as a $15 minimum wage, plus mandatory paid medical leave, vacations and sick days.

He’d also make it far easier for unions to organize.

Keep in mind that when Obama became president, the national debt was about $8 trillion. Now it’s $18.5 trillion, thanks to the Democrats. And if Bernie Sanders is elected, it will go to over $36.5 trillion. This is what Bernie Sanders expects to solve by “taxing the rich”. And Hillary Clinton expects to get the money for her spending from “taxing the wealthy”, as she said in the CNN debate. Do the rich have enough money lying around for the Democrats to confiscate?

Can we pay for it by “taxing the rich”?

A while back, the libertarian Cato Institute had an article talking about who would pay for Obama’s $1 trillion health care plan. They asked whether Obama could pay for it by “taxing the rich”.

The answer is no:

Funding the new health-care plan on the backs of households making $200,000 or more per year would require permanently increasing their annual total tax payments by about 50 percent. So, for example, a household that currently pays $50,000 in federal income taxes would need to pay another $25,000. Remember, however, that Social Security and Medicare already face enormous shortfalls. Shoring up these programs — another Obama campaign promise — would require collecting 328 percent more tax revenue from the rich. No, we didn’t forget a decimal point: That is three hundred and twenty-eight percent.

And what follows from taxing the rich?

[…]A major tax increase causes the tax capacity of the rich to shrink gradually as two factors kick in. First, many of the households falling into Obama’s “rich” definition are married couples in which both partners are working professionals. When tax rates rise, the lower-earning spouses in these couples tend to work less. Often, they quit work entirely. Second, many of the “rich” are budding entrepreneurs and small-business owners. They finance their operations using their own after-tax income, or with after-tax resources from family and friends. Small-business innovation is the fuel for long-term economic growth. In fact, many of the largest companies in the United States today were either small or nonexistent just 25 years ago. Killing small business kills the American economy.

The rich in France abandoned France in droves when the socialist Francois Hollande passed a 75% top income tax rate. Why do Democrat voters think that this would not happen here? We have to learn economics by watching what happens after the policies are enacted, in other times and places. Higher taxes on the rich cause them to produce less, lowering tax revenues.

I myself have been planning to stop working within the next 5 years, exactly because I can see that the Democrat voters are taking us in the direction of massive taxes on employment. I don’t intend to be working when that happens. If enough people respond to higher tax rates like me, the Democrats are going to have an even bigger problem paying for their spending promises.

Will raising taxes on the rich help the economy and create more jobs?

The presidents of my two favorite think tanks, Arthur Brooks (AEI) and Edwin Feulner (Heritage) explain in this USA Today editorial.

Excerpt: (links removed)

First, there is no evidence that tax increases will actually solve our troubles. On the contrary, years of data from around the world show that when nations try to solve a fiscal crisis primarily by raising tax revenues, they tend to fail. In contrast, fiscal approaches based on entitlement reform and spending cuts tend to succeed.

American Enterprise Institute economists Kevin Hassett, Andrew Biggs and Matthew Jensen examined the experiences of 21 Organization for Economic Cooperation and Development (OECD) countries between 1970 and 2007. They found that countries with successful fiscal reforms, on average, closed 85% of their budget gaps with spending cuts. The countries with failed reforms, on average, relied at least 50% on tax increases. President Obama’s strategy falls firmly in the latter camp. After discounting the accounting tricks that create fictitious spending cuts, the president’s plan would impose about $3 in tax hikes for every $1 in spending cuts.

That is, his approach would probably land America in the “failed attempt” column. Five years down the line, we would be in the same fiscal mess we are in today, just with higher taxes and a bigger government.

Second, tax hikes aimed at small segments of the population wouldn’t raise much in revenues. Consider the “Buffett Rule” that the president spent many months promoting. According to the Joint Committee on Taxation, it would raise about $47 billion over a decade. The federal government currently spends about $4 billion more per day than it takes in. The Buffett Rule, then, would raise about enough next year to cover 28 hours of government overspending. Heritage Foundation economist Curtis Dubay finds that closing the deficit solely by raising the two highest tax brackets would require hiking them to 159% and 166%, respectively.

Third, as economists and business executives have noted repeatedly, raising taxes on families earning over $250,000 per year is effectively a massive tax hike on small businesses. Most small businesses today organize as S-corporations or other pass-through entities; their income is taxed as personal income. A study by Ernst and Young shows that Obama’s proposed tax hike would force these small businesses to eliminate about 710,000 jobs. Moreover, these households already bear a great deal of tax liability. According to the most recent Internal Revenue Service data, those earning $250,000 and above — roughly 2% of all taxpayers — earn 22% of income, but pay 45% of all federal income taxes.

Simply put, increasing tax rates on the wealthy is not a serious approach to solving America’s fiscal woes. The problem is purely one of excessive spending, not inadequate taxing.

Revenues haven’t changed substantially over the last decade, but government spending is way, way up. That’s what’s causing us to go into debt – massive government spending on turtle tunnels and Solyndra. We can do better than socialism.

Mark Steyn: Americans must choose between low taxes and big government

I noticed that John Hawkins at Right Wing News had come up with his list of the top conservative commentators, and guess who is at the top of the list? Canadian writer Mark Steyn.

Here’s Mark Steyn writing in Investors Business Daily.


According to the most recent (2009) OECD statistics: Government expenditures per person in France, $18,866.00; in the U.S., $19,266.00. That’s adjusted for purchasing-power parity, and yes, no comparison is perfect, but did you ever think the difference between America and the cheese-eating surrender monkeys would come down to quibbling over the fine print?

In that sense, the federal debt might be better understood as an American Self-Delusion Index, measuring the ever-widening gap between the national mythology (a republic of limited government and self-reliant citizens) and the reality (a 21st century cradle-to-grave nanny state in which Democrats boast,  “Government is the only thing we do together”).

Generally speaking, functioning societies make good-faith efforts to raise what they spend, subject to fluctuations in economic fortune: Government spending in Australia is 33.1% of GDP, and tax revenues are 27.1%. Likewise, government spending in Norway is 46.4% and revenues are 41% — a shortfall, but in the ballpark. Government spending in the U.S. is 42.2%, but revenues are 24% — the widest spending/taxing gulf in any major economy.

So the agonizing over our annual trillion-plus deficits overlooks the obvious solution: Given that we’re spending like Norwegians, why don’t we just pay Norwegian tax rates? No danger of that. If Jews earn like Episcopalians but vote like Puerto Ricans, Americans are taxed like Puerto Ricans but vote like Scandinavians.

We already have a more severely redistributive taxation system than Europe in which the wealthiest 20% of Americans pay 70% of income tax while the poorest 20% shoulder just three-fifths of 1%. By comparison, the Norwegian tax burden is relatively equitably distributed.

Yet Obama now wishes “the rich” to pay their “fair share” — presumably 80% or 90%. After all, as Warren Buffett pointed out in the New York Times last week, the Forbes 400 richest Americans have a combined wealth of $1.7 trillion. That sounds a lot, and once upon a time it was. But today, if you confiscated every penny the Forbes 400 have, it would be enough to cover just over one year’s federal deficit. And after that you’re back to square one.

It’s not that “the rich” aren’t paying their “fair share,” it’s that America isn’t. A majority of the electorate has voted itself a size of government it’s not willing to pay for.

[…]So given that the ruling party will not permit spending cuts, what should Republicans do? If I were John Boehner, I’d say: “Clearly there’s no mandate for small government in the election results. So, if you milquetoast pantywaist sad-sack excuses for the sorriest bunch of so-called Americans who ever lived want to vote for Swede-sized statism, it’s time to pony up.”

And this view is shared by many conservative commentators.

Marc Thiessen wants the Republicans to let the Bush tax cuts expire for everyone:

During the campaign, President Obama repeatedly told us how he wants to “go back to the income tax rates we were paying under Bill Clinton — back when our economy created nearly 23 million new jobs, the biggest budget surplus in history, and plenty of millionaires to boot.” Well if the Clinton tax rates were so great, let’s go back to all of the Clinton rates and relive the booming ’90s.

At least going back to the Clinton rates would put more people on the tax rolls, and give more Americans a stake in constraining government spending. It would also force all Americans — including the middle class — to pay for growing government services, instead of borrowing the money from China and passing the costs on to the next generation.

Americans had a choice this November, and they voted for bigger government. Rather shielding voters from the consequences of their decisions, let them pay for it.

And now he’s being backed up by Charles Krauthammer:

Why are the Republicans playing along? Because it is assumed that Obama has the upper hand. Unless Republicans acquiesce and get the best deal they can right now, tax rates will rise across the board on Jan. 1, and the GOP will be left without any bargaining chips.

But what about Obama? If we all cliff-dive, he gets to preside over yet another recession. It will wreck his second term. Sure, Republicans will get blamed. But Obama is never running again. He cares about his legacy. You think he wants a second term with a double-dip recession, 9 percent unemployment and a totally gridlocked Congress? Republicans have to stop playing as if they have no cards.

Obama is claiming an electoral mandate to raise taxes on the top 2 percent. Perhaps, but remember those incessant campaign ads promising a return to the economic nirvana of the Clinton years? Well, George W. Bush cut rates across the board, not just for the top 2 percent. Going back to the Clinton rates means middle-class tax hikes that yield four times the revenue that you get from just the rich.

So give Obama the full Clinton. Let him live with that. And with what also lies on the other side of the cliff: 28 million Americans newly subject to the ruinous alternative minimum tax.

Republicans must stop acting like supplicants. If Obama so loves those Clinton rates, Republicans should say: Then go over the cliff and have them all.

That’s my view as well. Americans voted for big government, and now we must pay for it. Maybe next time, we will put the remote control down and pay attention to the issues.

Should Republicans let the Bush tax cuts expire?

In previous posts I noted how government revenues increased when the Bush tax cuts were passed, because more money was taken out of savings and invested on enterprises, resulting in more tax revenue from profits. I also noted that the deficit was shrinking after the tax cuts – down to $160 billion in 2007. Not growing, but shrinking even though we were fighting two wars. I also noted that unemployment decreased when those tax cuts were passed, because more entrepreneurial activity means more hiring.

Take a look at some of the facts about the Bush tax cuts from Investors Business Daily.

Here’s a snippet: (links removed)

The rich paid more. Despite endless claims by critics that Bush’s tax cuts favored the rich, the fact is the rich ended up paying more in taxes after they went into effect.

In fact, IRS data show that the richest 1% paid $84 billion more in taxes in 2007 than they had in 2000 — that’s a 23% increase — even though their average tax rate went down.

What’s more, their share of the overall income tax burden grew, climbing from 37% in 2000 to 40% in 2007.

At the other end of the spectrum, the bottom half of taxpayers paid $6 billion less in income taxes in 2007 than they had seven years earlier — a 16% drop — and their share of the total income tax burden dropped from 3.9% to 2.9%.

Millions dropped from the tax rolls entirely. Another unheralded feature of the Bush tax cuts is that they pushed nearly 8 million people off the tax rolls entirely because, among other things, Bush doubled the per-child tax credit to $1,000 and lowered the bottom rate to 10%.

The Tax Foundation estimated that these changes benefited modest-income married couples with children, who were the ones most likely to fall from the tax rolls.

The tax cuts didn’t cause the massive deficits. Critics routinely blame the Bush tax cuts for turning surpluses late in the Clinton administration to huge deficits under Bush. Not true.

In August 2001, after the first round of the Bush tax cuts were in place, the CBO projected a surplus of $176 billion in fiscal year 2002, with surpluses continuing to grow in the following years.

[…]And after Bush signed the second round of tax cuts into law in 2003, federal deficits started to shrink. By 2007, the federal deficit was just $160 billion, and the CBO was again forecasting annual surpluses starting in 2012.

[…]Over the next decade… the middle class tax cuts that Obama wants to keep will cost $3.7 trillion, according to the CBO .

But tax cuts for the “rich” that Obama wants to abandon add up to just $824 billion.

That’s $824 billion over 10 years – but Obama has run the national debt up by $6 trillion in only 4 years. $824 billion over 10 years is chicken feed compared to that $6 trillion in debt in only 4 years.

Should we let the Bush tax cuts expire?

Here’s is Marc Thiessen in the liberal Washington Post to make the case that the tax cuts should be allowed to expire.

While the Bush tax cuts expire on Dec. 31, so do a lot of tax policies the Democrats support. For example:

  • The 10 percent income tax bracket would disappear, so the lowest tax rate would be 15 percent.
  • The employee share of the Social Security payroll tax would rise from 4.2 percent to 6.2 percent.
  • An estimated 33 million taxpayers — many in high-tax blue states — would be required to pay the alternative minimum tax, up from 4 million who owed it in 2011.
  • The child tax credit would be cut in half, from $1,000 today to $500, and would no longer be refundable for most.
  • Tax preferences for alternative fuels, community development and other Democratic priorities would go away.
  • And the expansions of the earned income tax credit and the dependent care credit would disappear as well.

[…]Right now, Democrats are demanding that Republicans raise taxes while Republicans are demanding that Democrats agree to cut Social Security and Medicare spending. A grand bargain this fall, then, would mean that Republicans get to raise revenue from their own supporters (small-business job creators) in exchange for cutting spending for their own supporters (seniors). Genius! Much better to wipe the slate clean, and start over with more leverage for fundamental tax reform and structural entitlement reform.

[…]During the campaign, President Obama repeatedly told us how he wants to “go back to the income tax rates we were paying under Bill Clinton — back when our economy created nearly 23 million new jobs, the biggest budget surplus in history, and plenty of millionaires to boot.” Well if the Clinton tax rates were so great, let’s go back to all of the Clinton rates and relive the booming ’90s.

At least going back to the Clinton rates would put more people on the tax rolls, and give more Americans a stake in constraining government spending. It would also force all Americans — including the middle class — to pay for growing government services, instead of borrowing the money from China and passing the costs on to the next generation.

Americans had a choice this November, and they voted for bigger government. Rather shielding voters from the consequences of their decisions, let them pay for it.

His point is that if we do nothing, then the Democrats will be tarred with having to pay for the trillions of spending that they have incurred in the last 4 years. Obama complained and complained about them, and when we repeal them and it wrecks economy, he will take the blame.

The people who voted for them have been insulated from paying for all of his spending, because it is all been passed on to children, born and unborn. Taxes have not been raised enough to pay for all the spending, it’s just been added to the debt. Maybe we should make the beneficiaries of that spending foot the bill, so that they will understand how they need to vote next time. Republicans aren’t voting for tax increases. They are just letting them expire, exactly as Obama wants.  He will take the blame for this, and then people will have a real choice to make in 2016. Let the people who voted for bigger government pay the bill for bigger government.