Anyone who follows me at all here or reads my comments knows that I am an unashamed supporter of Hillary who loves Bernie Sanders’ visions but cannot see how in the world he can enact them practically.
Just to flesh that out a little more, I wanted to delve into the costs of his tax plan, health care plan, tuition plan, minimum wage rise, etc.
If you have not already done so, you should look at this Vox tax calculator, posted yesterday www.vox.com/…
The text surrounding it notes that Bernie’s tax plan will provide $15 trillion over 10 years, Hillary’s about $1 trillion (mostly from big income tax increases on the wealthiest). Not surprisingly, Trump’s and Cruz’ dreadful plans drop revenues about $10 trillion a piece over ten years, largely as a gift to the wealthy, like W’s tax cuts on steroids.
The big surprise is that because of the structure of payroll taxes, Bernie’s plan makes effective tax rates higher on people earning less than the FICA cutoff (about $118K now) than between the FICA cutoff and $250K where Bernie starts charging proportionate FICA again. This is, I guess, a little middle class protection.
In fairness, the Vox calculator assumes that Bernie’s 6.2% employer tax to pay for single payer health care will be passed onto the employees as part of the payroll tax, while Bernie’s policy people and this Bernie supporter think instead employers will cover it in exchange for not paying any health care premiums.
Here are some numbers that might surprise you.
- If you are a single person, no kids, earning the $15 minimum wage that Bernie advocates, you will owe $3390/yr more under Bernie’s plan. That is approximately the cost savings Bernie suggests you will receive from single payer health care. So that is about a wash. Hillary’s plan would lead to an increase of $30/yr.
- If you earn $115000 as a single person, under the FICA cap, you would pay $11K more under Bernie, $300 more under Hillary. Your health care savings would be put at about $5K so this is a net cost of $6K to you.
- If you earn $115000, married, 2 kids, you would pay $16250 more under Bernie’s plan, $110 more under Clinton.
- If you are in the upper middle class, above the FICA cutoff, at $200K below the $250K recharge zone, you would owe $19200 more as a single person, and $21930 more as a married person with 2 kids under Bernie. Now if you save $5K per person on health care, that is about a wash on the family of 4, but that is $14000 more for the single person.
Without giving details, I am comfortably in the middle class, and would certainly be willing to pay more to see more people covered, but there is a pain point, and something in the ballpark of $10-20K starts to genuinely hurt. Notice that without the minimum wage increase, the payroll tax increase would lead to net costs to a low wage worker. Hence Bernie’s policy gurus are quick to point out you cannot consider the health care package without the minimum wage increase.
So this brings us to all that Bernie wants to do:
- Skip over the ACA to get single payer for all.
- Increase both income and payroll taxes for everyone.
- Increase the minimum wage.
- In some cases — but not all — cancel tax increases by health care reductions from going to single payer.
It is very clear that Bernie is not advocating “free stuff” — he wants to pay for it. It is a big question of just HOW you pay for it. To pull this off, Bernie needs to do the following:
- Convince congress to enact single payer healthcare.
- Convince health care insurance providers that closing them down is good somehow. I am not being snarky here — how do you do that?
- Convince congress to enact substantial income and payroll tax increases for all Americans.
- Convince congress to Increase the minimum wage to $15/hour nationally.
- To receive better benefits to all, convince employers not to pass the 6.2% healthcare tax onto employees.
- Convince the public — many of whom will see substantial real increases in taxes even after paying presumably less in health care — that these tax increases are good for them because they will benefit all of us.
We can add to that
- To pay for the tuition plan, Bernie wants to tax transactions. He estimates that the plan will cost $75 billion/yr, while estimates of the transaction tax yield are $30 billion/yr.
So how does Bernie do this? That is a lot of convincing to do. If, like LBJ, Bernie had cultivated a network of favors/allies in congress over his long time there, that would help, and if like LBJ, Bernie had a congress dominated by the same party that would help. If Bernie were cultivating downticket support by supporting downticket candidates, he could make up a new network. If everyone in the citizenry (apart from the wealthiest who get giant tax increases under Bernie) benefited uniformly, they could try to be persuaded to talk strongly to a less than enthusiastic congress.
As far as I can see, Bernie has none of those things going for him. He has beautiful visions, lots of young people supporting him, and no clear pathway to get it all done.
Let me add, by the way, that even if you accept the more optimistic estimates in this article, the tax increases will be substantial. For example, the single earning $75K will have an increased tax of about $5K under those estimates, the single earning $152K will pay about $10K more under those estimates.
From the policy side, I will be critiqued here by those saying with Hillary I am not supporting a candidate with bold visions. But bold visions with as many requirements to get them enacted as Bernie’s do not inspire me. They convince me Hillary is the more effective candidate for the moment.
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