In The Lego Movie, Benny wants to build a spaceship. It’s his answer to everything. Escape from Bad Cop? Spaceship. Break into Lord Business’s evil lair? Spaceship! Destroy the Micromanagers? SPACESHIP!
Like that 1980-Something Space Guy, Bernie Sanders has one main obsession: raising taxes on the wealthy. Social Security in trouble? Tax the rich. National security need help? Tax the rich! College too expensive? Tax The Rich! Economy in the dumps? TAX THE RICH!
Even without getting into the numbers, “the rich” can’t possibly pay for it all. Sure, they have nice yachts and fancy houses and ridiculous taste in clothing, but when you consider that if you take away every single one of Bill Gates many pennies it adds up to less than 3% of what the IRS rakes in EVERY YEAR, common sense has to speak up at some point that maybe The Rich can’t pay for it all.
But maybe, like Benny, the Bernie Sanders tax plan might get it right every now and then. Let’s look at some of the major points Bernie Sanders has suggested over the past few months.
90% Tax Rate
The Bernie Sanders Tax Plan hints at wanting to raise the top marginal tax rate to 90%. Since this was presented as an off-the-cuff response to journalist John Harwood, we don’t have specific details about how that’d be drawn up, but we can speculate.
As Bernie Sanders put in the interview, “when radical socialist Dwight D. Eisenhower was president, I think the highest marginal tax rate was something like 90%.” The “radical socialist” part is a joke, of course, but he’s absolutely right about the top marginal rate. The Tax Foundation has documented the marginal tax rate throughout US history, including the inflation adjusted break down. If you feel like taking a look, the rates top out at 91% for people making, in today’s dollars, about $3.5 million a year.
The high rates were a relic of World War II spending that continued on after the boys and girls came home. The economy was booming at the time, at least compared to the pre-war Depression, so those tax rates didn’t hurt, right?
Just like we can’t know what would have happened if Darth Vader hadn’t chosen the Dark Side, we can’t know for sure what would happen with different tax rates. Our best guess is speculative fan fiction made by economists throwing numbers at digital dartboards (I’m talking about the economy, but the same method could be applied to Star Wars conjectures).
What we do know is that today’s economy is not like the 1950’s. Not even remotely. If we want to convince some country to tear through all of our economic competition before allowing us to wipe them out, leaving our country as the only economic powerhouse able to help the rest of the world rebuild, then yes, we might be able to point to the 1950’s as a good approximation for what would happen to a 90% tax rate today. Unless that happens, though, pointing to the 1950’s as an example is dumb.
For economists who don’t use lazy rhetoric, what do they say about the tax rate?
In other words, there’s just enough contention that you can believe whatever you want to believe, pointing to your chosen economist, then covering your ears and babbling if anyone tries to bring up conflicting argument.
Keep in mind, though, that the information I’ve found from the liberal leaning economists typically want to raise taxes only on the very rich (some debate on what that means, but usually the top .5% or less), and it’s generally argued for fairness purposes, not for revenue purposes. So don’t expect these amounts to bring in that much revenue.
Just ask Socialist French President Francois Hollande, whose estimated revenues from his huge tax increases were so wildly off (and did nothing to help the economy) that he’s now actually pushing for tax cuts.
Back to Bernie Sanders, the question that the journalist forgot to ask is why we cut the tax rates from 90% in the first place if they were so magical. His answer would have to be that reactionary conservative John F. Kennedy sharply cut them to “get this country moving again.”
My conclusion: Bernie Sander’s 90% tax rate proposal might help you feel better about making things more “fair,” but the chances it’ll help the economy are slim to none.
Social Security Tax
If you haven’t been paying attention, Social Security is in trouble. Those high taxed 1950’s kiddos had plenty of kiddos of their own, who in turn didn’t have enough kiddos. So now my generation is going to have to figure out how to pay for a much bigger generation as they retire.
The Bernie Sanders Tax Plan wants to tax the rich more, of course. In this case, the Social Security Tax taken out of your paycheck is currently capped at $118,500, meaning if you make more than that you don’t have to pay any additional Social Security Tax. Remove that cap, and Bernie Sanders claims Social Security would be extended until the can is kicked sufficiently far out that someone else running for president.
I mean, until 2060.
The cap is there for a reason: Social Security was sold as an investment plan, even though it was designed more like a Pyramid Scheme. The argument was that since you can only get a certain amount out of it, you shouldn’t have to pay more than a certain amount into it. That’s not saying we can’t change our mind, I just wanted to add some historical rationale for the cap.
Something has to be changed with Social Security. The Congressional Budget Office is projecting that entitlement spending and interest will eventually consume all of our tax revenue (Heritage Foundation has a nice chart based on the CBO’s information). While we may ultimately have to remove that payroll tax cap, and it may help keep Social Security solvent for a bit longer, it’s not going to solve the underlying problem.
My conclusion: I’m just looking at taxes here, but unless Bernie Sanders proposes something other than tax increases to cover Social Security, it’s just delaying the inevitable. If Bernie Sander’s estimates are right, he’ll kick that Social Security Meltdown can until after he’s dead and doesn’t care about it anymore. Right about to when I’ll be in retirement.
Thanks, Bernie. I’m glad you care so much about me and my generation.
Financial Transaction Tax to Pay For College
The next piece of the Bernie Sanders Tax Plan is to pay for undergraduate college tuition through the use of a “Robin Hood tax,” which imposes a 50-cent tax for every $100 of stock trades.
Ignoring the fact that Robin Hood stole from an overtaxing government, not “the rich,” to give to the poor, this is a really bad idea for two reasons.
Issue #1: Turns out college is really, really expensive.
Issue #2: the Financial Transaction Tax doesn’t work. The link to the Daily Beast in Issue #1 claims that the FTT is the good part of a bad idea, but it isn’t. They claim that an all-star team supports the Financial Transaction Tax, which is great and all, but I count very few economists among the political cabal advocating it.
Many on the left are presenting the FTT as a brand new idea to regulate Wall Street, but the Financial Transaction Tax has actually been done before in Sweden. In what should have been a completely foreseeable consequence, a huge amount of the Swedish stock trading moved to London to avoid the tax. Furthermore, fewer people were selling stocks to avoid the tax, so capital gains revenue went down, so capital gains tax went down.
The ultimate effect was that net tax revenue went DOWN, not up.
The EU is also currently considering a Financial Transaction Tax. Their own analysis predicts a decrease in tax revenue.
My conclusion: The more I look into the FTT, the more is sounds like a terrible idea. That Bernie Sanders wants to add it to pay for all undergraduate college points to how clueless he is on both how much revenue the FTT will generate, and the cost of college.
War Tax on Millionaires
Come on, Bernie, how much money do you really think these millionaires have? Considering how much the Fighter Jets alone cost, its going to have to be well more than millionaires to fund any war operation.
If your against war, just be against war. Don’t dance around it with taxes that can’t possibly cover the cost.
My conclusion: Whatever, Bernie. Just…whatever.