My interest in tax plan calculators is relatively recent. I’m not an expert, but I do want to know how it will affect me.
It is important for us to know what a candidate's policies are. Even more important is to know what impact those policies will have on each of our lives.
Below, I review some current calculators that provide glimpses into how the plans of each candidate will affect us.
There are qualitative differences in how each candidate addresses healthcare, education, inequality, law enforcement and foreign policy. That is left up to each of us to decide what we want for this country.
There are also quantitative differences that can be estimated based on the plans put forward. This piece is a plea for sane estimates that improve upon the existing tools.
The Calculators
There seem to be two quantitative approaches that have been published, "total tax liability" or cost+benefit. One looks at how taxes change, one looks at how much take home pay will change.
I've been able to find four distinct calculators (as opposed to media that only repeats one of those four), that detail their assumptions. Note: the top three Google results for "2016 candidate plan calculator" are all based on the Vox calculator. It takes a bit of research to separate out the duplicates.
Those calculators are:
- Vox/Tax Policy Center - estimates "tax liability", i.e. total tax change for an individual including employer taxes, but no estimate of benefits. Input variables are income, marriage status, and number of children.
- The Nation - estimates after-tax take-home pay including the savings from single-payer healthcare. Input variables are income, marriage status, and number of children.
- datatician.org - estimates total effective rates with taxes and average family healthcare costs included. A detailed comparison and review of Vox assumptions with respect to the Sanders plan. Not interactive, graph provided based on Vox assumptions and adding in healthcare. Original analysis with more details, graphs and demographic breakdown (how groups are affected by income, gender, business, billionaires).
- taxrate.xyz - estimates "money you keep per year" based on tax and health insurance beneits. It produces estimates based on 2008, 2016, Sanders and Trump tax plans in separate tables. Input variables are income, marriage status, deductions and current health insurance cost.
The Numbers
Let's look at some of the numbers from those calculators, assuming a married person with one child earning $20K, $40K, $80K, $120K, $200K and $500K with employer sponsored healthcare insurance costs. Changing those assumptions will vary results, but the overall trend is expected to be the same.
The table below shows the results of running the assumptions above through three calculators. The datatician.org article only includes static results and only considers Bernie Sanders, so it has been excluded.
Note1: "Money you keep per year" provides a historical baseline for 2008, 2016, Bernie and Trump. As such, it provides a single model view of the net income for pre-Obamacare, current and planned scenarios, but does not include Hillary or Cruz. I hope that future calculators will include the same for all the candidates.
Note2: If the table is not legible, please right click and “view image”.
As you can see, the differences are readily apparent.
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Trump and Cruz lower taxes and boost income, but the upper income brackets get the lion's share of the benefit while healthcare is gutted and education is ignored.
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Hillary keeps taxes roughly the same for incomes under $200,000 and raises taxes of the upper income levels slightly (~1%). There would be an additional 4% surtax on incomes above $5 million. One quantifiable promised benefit is a cap of health insurance premiums to 8.5% of income, but it is not clear if that is accounted for in any calculator. Please reply in the comments if there are other quantifiable benefits promised in Hillary’s plan that should be included.
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Bernie increases taxes for everyone, while the net affect for incomes under $120,000 puts thousands more into your pocket each year. Those making over $120,000 will see take-home pay decline by ~1% at $200K to ~14% at $1 million. Those tax increases pay for universal healthcare via single-payer and free tuition at public universities.
The Details
Now let's look at details behind the calculators.
Vox
Vox calculates only the "tax liability". They pool employee and employer taxes to arrive at their total. It estimates tax impact, but does not estimate any policy benefits. This implies only taxes matter and there are no benefits to public policy other than how much tax is paid. In this perspective, the Republicans win hands down. They will cut taxes. The more income you have, the more tax break you will get.
Trump and Cruz are winners by Vox's one-sided calculation.
I mentioned the media echoing one of the calculators. It happens to be the Vox calculator, which has been repeated by Fox Business and a whole host of other sites. NPR' Tom Ashbrook has joined in by publishing an article claiming to show "what they could mean for you and the country". That article has a "reading list" with three other sites for reference, but all use the Vox calculator.
As Tax Policy Center economist Roberton Williams says in response to The Nation asking what Vox missed, "To the extent that [the candidates’ tax plans] affects your overall economic well-being, it’s misleading…. we do not say how this will affect people’s overall financial situation."
From fair.org, "The [Vox/]Tax Policy Center’s model does not include spending programs and thus can only show the effects of tax changes."
From huffpost, "Vox’s calculator tells us that your taxes will be lower under Trump and Cruz, they’ll stay the same under Clinton, and under Senator Sanders you’ll pay thousands more in taxes. Relevant numbers tell a very different story. ".
In the end, the Vox calculator provides numbers that do not reflect what we each would have at the end of the day. It is showing one number plucked from the middle of an incomplete calculation of how the candidate plans affect us. They estimated the costs, why did they not estimate the benefits?
The Nation
The Nation embeds their calculator in an article debunking the Vox calculator. The article includes "How We Made The Calculator" at the end. Most of the article goes into the details of the Vox calculator, finding that "Contrary to what is implied in Vox’s calculator, TPC (the Tax Policy Center) finds that under the Sanders plan, middle-income the take-home pay of earners with employer-provided healthcare increases." They quote the economist at TPC who admits "we do not say how this will affect people’s overall financial situation."
Included in the "How We Made..." are the specific policy points applied. Hillary Clinton shows zero "after-tax take-home pay" in the table. I assume this is due the $1 million max income in the table cutting off before the sole policy point listed for Hillary, 4 percent surtax on adjusted income over $5 million.
taxrate.xyz
The calculator at taxrate.xyz is different than the other two.
- It makes a claim to be non-partisan (The Nation has endorsed Bernie Sanders and Vox/TPC has created a calculator characterized by a TPC economist as "misleading…. we do not say how this will affect people’s overall financial situation"). The simple page has the following at the top "we do not endorse any particular candidate. We have seen people on both sides misusing and misquoting this tool. Please try it for yourself and make sure to read the "more information" sections."
- It allows you to put in income, deductions AND healthcare costs.
- It provides scenario tables including historical view of 2008 and 2016 to compare with proposed plans.
- The resulting tables include a breakdown of pretax deduction used to determine taxable income, and a breakdown of tax and healthcare costs.
- The final number is presented as "money you keep" of total income rather than relative change from the 2016 baseline.
- The detailed assumptions and analysis are available under each scenario table via "More Information" links.
Overall, this calculator seemed to be the most straightforward and thankfully lacked the overt partisanship of the other two. However, the details under "more information" still leave unknowns as to how the numbers are calculated, and they do not include analysis for Cruz or Clinton.
Conclusion
We are just over six months from the 2016 general election and more than halfway through the primary season. The tools published to date are all lacking, but a major issue has already been highlighted. Do we consider only the cost of tax liability, or do we consider the costs and benefits of public policy?
The Vox calculator chose the former and, as a result, does not show how individuals will be affected at the end of the day. It has adopted a view that ignores the benefits of public policy while promoting the Republican tax plans.
Each calculation that considers costs and benefits, including the Tax Policy Center's own analysis, shows that single-payer and universal education will have strongly positive effects for the majority of the Americans.
I expect more calculators to be created. They will each have their own assumptions and chosen metrics. I hope that future calculators will include estimates of both costs and benefits of our candidates' plans.