(Bloomberg) — Senator Bernie Sanders's proposals for sweeping tax hikes on businesses and individuals to bankroll universal health care, infrastructure and free college tuition would raise $15.3 trillion over the next decade but "substantially reduce incentives to save and invest in the United States," according to a new policy study.
Sanders's plan would "modestly raise" tax rates for average taxpayers and "raise them significantly for high-income taxpayers," according to the report by the Tax Policy Center, a research group in Washington, D.C. that's a joint venture of the Urban Institute and the Brookings Institution. The report is the last of the center's analyses of leading presidential candidates' tax plans.
While the plan — which would be sure to face opposition in a Republican-controlled Congress — could generate benefits by increasing "the nation's investment in productive physical and human capital," economists are unsettled on the question of just how much increases in tax rates spur or stymie economic growth. Sanders's proposals "would be a great experiment," said Len Burman, director of the Tax Policy Center.
Warren Gunnels, Sanders's policy director, criticized the tax center's findings. The analysis was conducted "in a vacuum without taking into account the savings the American people would gain" under the candidate's proposal to replace private health-insurance with a publicly funded "Medicare-for-all" plan, he said. Gunnels cited an earlier study by Citizens for Tax Justice, which found that 95 percent of U.S. households would see their take-home pay increase under Sanders's health plan.
Capital gains
Sanders would tax capital gains as ordinary income and eliminate opportunities under current law for avoiding the tax through gifts and bequests of appreciated property. Under Sanders, the top marginal tax rate on long-term gains and dividends would more than double to 64.2 percent from 23.8 percent, the report said.
Still Sanders, who describes himself as a Democratic socialist and is seeking the Democratic presidential nomination, would generate about 40 percent of his trillions in new revenue from broad-based plans that include levying an additional 2.2 percent income tax on all taxpayers; implementing a 6.2 percent payroll tax that would be paid by employers on all earnings; expanding the Social Security payroll tax to earnings over $250,000; and imposing higher rates on the highest incomes, the report said. Those taxes would pay for Sanders's health-care program, which he says will cost $1.38 trillion a year.
"This is a very ambitious proposal," Burman said. "Changes of this magnitude are going into uncharted territory."
Highest incomes
Tax increases on Americans with the highest incomes would generate about 25 percent of the new revenue. Sanders would create a new top marginal rate of 52 percent for people who make more than $10 million a year. (The current top rate is 39.6 percent.)
The remaining 35 percent of the new revenue Sanders envisions would come from higher taxes paid by businesses, a new tax on financial transactions and a new tax on carbon emissions.
If not spent on new programs, the revenues would be enough to reduce the national debt by $18 trillion through 2026 and, by 2036, eliminate the $56 trillion debt, the report said. Instead, he proposes an array of new spending initiatives — which, like his tax measures, would face political opposition in a Republican-controlled Congress.
'Welfare state'
"Sanders is clearly betting that people are willing to pay for his expansive welfare state" and "is very clear about how he'd pay for it," Burman said. In fact, he said, Sanders's plans are more detailed than any other presidential candidate's in laying out how he would raise revenue.
While Sanders' proposals share some elements with those of Hillary Clinton, the Democratic presidential front-runner, the two are "radically different" in general, Burman said. Clinton's plans "are more incremental," he said. "Bernie Sanders clearly wants to change things radically. There's a very, very clear choice."
