Saturday, February 29, 2020

Bernie Sanders' deceptive tax numbers

News stories say some posted on Facebook that Bernie Sanders proposed a 52% tax rate on all income over $29,000. The posts went viral. The assertion is false, so many in the mainstream media pounced. Yet Google News search results for {Bernie Sanders 52% tax $29,000} show significant  media bias. Defending Sanders far outweighs any critical analysis of his proposals. BS proposes to pay for his spending spree here.

The Facebook posters conflated two things. The truth is BS wants a payroll tax of 4% of income over $29,000 and an income tax of 52% of income over $10 million. He also wants to increase the Social Security payroll tax rate 6.2% on income over $250,000 (the smaller maximum wage base more accurately and the rate is now 0%). Adding them makes a tax rate of 62.2% of income over $10 million. None of the media stories I read reported the 62.2% or even 56% (= 52% + 4%).  (For Schedule C income it may be more, 68.4%, since the person must also pay the employer's 6.2% Social Security payroll tax. On the other hand, it may be somewhat less due to the qualified business income deduction.) Most also gloss over the other income tax hikes Sanders proposes on incomes much lower than $10 million, starting at 40% on income over $250,000 (link), which the first Sanders link above even omits.

The marginal income tax rate at $250,000 for married filing jointly is 24%; for a single it is 35%. So BS proposes a 16% tax rate increase for married filing jointly; 5% for single.

Regarding his proposed tax of 4% over $29,000 to pay for Medicare For All, the first link says: "In 2018, the typical working family paid an average of $6,015 in premiums to private health insurance companies.  Under this option, a typical family of four earning $60,000, would pay a 4 percent income-based premium to fund Medicare for All on income above $29,000 – just $1,240 a year – saving that family $4,775 a year.  Families of four making less than $29,000 a year would not pay this premium."

If the current 1.45% payroll tax for Medicare isn't eliminated, then BS sweeps it under the rug. Also, the picture is quite different for an income of $250,000, which is middle class in some places (e.g., Silicon Valley, NYC). 4% * ($250,000 - $29,000) = $8,840. So there is more tax and likely no savings for them! Even for a $200,000 income 4% * ($200,000 - $29,000) = $6,840, which is still more tax and likely no savings.

To fund the Green New Deal he proposes "collecting $2.3 trillion in new income tax revenue from the 20 million new jobs created by the plan." He says nothing about how many jobs his plan would eliminate. The number of unemployed people in the U.S. last month was only 5.89 million! So that implies eliminating several million jobs. The $2.3 trillion, which is very likely for 10 years, looks inflated in two ways -- number of jobs and tax rate. 20 million * $60,000 * 0.20 tax rate * 10 years = $2.4 trillion. For an income of $60,000, the average effective income tax rate is only about 10%. So the $2.3 trillion appears to be several times a realistic number.

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