Feb 25 2016

Study: Sanders Tax Plan Would Reduce Average Incomes by a Sixth

Bernie Sanders tax plan

Startling news about the Bernie Sanders tax plan has come to light in the wake of his win at the New Hampshire primaries. What is this startling discovery? That the Bernie Sanders tax plan would reduce Americans’ income by one sixth.

This information is courtesy of a new study conducted by Tax Foundation, a non-partisan, independent organization that has been researching and analyzing tax policy since 1937. According to their research, Sanders’s plan would not only cut wages, but reduce the country’s gross domestic product (GDP), cost millions of jobs, and would hit middle class Americans particularly hard. In fact, Tax Foundation found that Bernie’s plan would be a $13.6 trillion tax hike – which is 27 times higher than Hillary Clinton’s proposed $498 billion tax hike, which would only lower average Americans’ incomes by 0.9 percent.

Contrary to the popular belief that Sanders would “only tax the rich,” he would in fact increase marginal tax rates on all taxpayers through both higher individual income tax rates and the addition of two new payroll taxes. The Sanders plan would introduce four new income tax brackets, the highest being 52 percent. However, he would create a new 2.2 percent “income-based [health care] premium paid by households.” Many Bernie supports say, “2.2 percent is nothing,” but it is equivalent to raising all tax brackets by 2.2 percentage points. The plan also creates a 6.2 percent employer-side payroll tax on all wages and salaries – which would hit employers on all wages in all income groups, and would be passed down to employees through lower wages. Tack on the additional 0.2 percent employer and employee payroll tax for paid family leave, and Americans are looking at a 4.3 percent decrease in wages. However, that’s before calculating in a decreased GDP and shrunken economy. Those incomes between the 40th and 60th percentiles – that is, the typical American income – would drop a total of 16.3 to 17 percent. In simpler math, an average worker making $50,000 a year would see their yearly income drop to only $41,500 – just from Bernie’s plan alone. That $41,500 isn’t taking into consideration other federal and state taxes already on the books.

Sanders supporters often make the case that, because health insurance costs won’t be directly deducted from workers’ checks, that their wages will increase. Which is partially true – if employers were no longer including health insurance in their employees’ compensation, wages would go up by the same amount of money previously taken out for insurance. But those higher wages would be taxed at higher rates, and are expected to provide the government with an extra $3.6 trillion. Under the current system, wages paid towards health insurance are not taxed, which costs the government over $300 billion per year in reduced federal income. So is it really about “providing everyone with health insurance”?

It gets better. According to Tax Foundation, the overall decrease in GDP and the American economy would add up to $2.6 trillion – $8,000 for every American, or $32,000 for a family of four. The idea that “the poor get poorer” is one that has been floating around Bernie circles for quite some time, and has been proven to be a myth – though the Bernie Sanders tax plan would turn that myth into a reality. Between lower wages, a crippled economy, and the loss of 6 million full time jobs, the average American doesn’t stand a chance.

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