Can America afford Sanders’ big plans?
Vermont Senator Bernie Sanders has some big plans for America, including ending the reign of money in politics and reshaping the US economy.
But sweeping changes like single-payer health care, free college tuition, and guaranteed parental leave don’t come cheap. They require an abundance of new tax dollars, not just from the rich but from virtually all classes of society.
Tally it up, and the annual cost of Sanders’ plans crosses into the trillions.
Yet, the real question is not how much they cost; it’s whether the benefits might be even greater. And the fact that Sanders ran away with the New Hampshire primary earlier this week suggests that some Democratic voters are hungry for his higher-tax, bigger-government approach.
How much do Sanders’ plans cost?
Sanders’ campaign makes no attempt to hide the big sticker-cost of its “political revolution,” nor does it pretend that universal programs can be paid for with budget gimmicks.
Every major spending proposal comes with a matching tax plan.
• New infrastructure spending is covered by a crackdown on corporations funneling money through tax havens.
• Paid family and medical leave is made possible by a tax on workers’ wages.
• To eliminate tuition at public colleges and universities, Sanders targets Wall Street with a tax on financial transactions.
No Sanders initiative, though, requires as much new revenue as his single-payer health care plan, which would make the government responsible for a vastly larger share of the nation’s health care spending.
To achieve that, Sanders needs to boost a whole range of different taxes, including raising income taxes across the board, creating new 50 and 54 percent tax brackets for multimillion dollar earners, increasing the amount businesses pay as part of payroll taxes, and taxing capital gains as normal income, among other tweaks.
Look across all these tax plans, as the center-right Tax Foundation has done, and you find that the total cost to taxpayers would be around $1.4 trillion per year over the next 10 years.
Considering that federal taxes currently amount to about $3 trillion annually, this is a substantial jump.
Would everyone pay more?
On the tax side, yes. Just about everybody in the United States would pay higher taxes in a world where Bernie Sanders’ plans came to fruition, according to the Tax Foundation.
But there could be widespread savings, too. Those hefty college tuition bills, and the debt they leave behind, would disappear for lots of American families.
Not to mention all the money to be saved on doctor visits, medical tests, and insurance premiums. In its current form, Sanders’ universal health care proposal has no user fees at all, like copays or deductibles. That has prompted some pushback, including suggestions that eliminating these kinds of user fees would make the plan vastly more expensive than Sanders is estimating. And as with many of Sanders’ plans, there are practical questions, too, about whether supporters realize just how disruptive this change would be, or what would become of the entire health insurance industry, suddenly superfluous.
But in the end, the United States spends far more on health care than most every other advanced country, and there’s a fair bit of evidence that a single-payer system done right can drive down the cost of health care and ultimately save Americans money.
Would higher taxes hurt the economy?
There are a couple of ways to answer this question — and it does need answering, because higher taxes can dampen economic incentives, giving people less reason to work, invest, and innovate. By some estimates, Sanders’ plans push tax rates to the point that they might actually become counter-productive, forcing such dramatic changes in economic behavior that the high taxes end up generating less revenue than you could get from a slightly lower rate.
But when assessing the impact of a tax proposal, you also have to look at where the money would go. Wasting tax dollars is bad for everyone, but raising new revenue to invest in kids, schools, roads, and other vital areas can spur long-term economic benefits.
And some of Sanders’ plans seem to qualify as economy-strengthening. Free tuition should boost the skill level of workers; single-payer health care could shave health spending and free up money for other uses; and paid family leave has been shown to increase women’s participation in the workforce.
Separately, though, the Sanders campaign might well respond that concerns about the economic impact of his tax-and-spending plans are backwards. His backers would say the economy is already broken, and what’s needed (from their perspective) is a better-resourced, more involved government.
Would Sanders turn the US into Norway?
At the first Democratic debate of this primary season, Sanders spelled out his attachment to Scandinavian social welfare states, saying “we should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people.”
By that standard, his tax plans actually fall short.
Of every dollar earned in Norway, about 39 cents goes to taxes. In Sweden, it’s 43 cents. In Denmark, 51. And in the United States, a relatively paltry 26.
Just to emphasize, the overall tax rate in Denmark is nearly twice as high as in the United States, when you factor in federal, state, and local taxes.
Should Bernie Sanders succeed in his political revolution — besting Hillary Clinton in the primaries, beating the Republicans in the general election, winning Congress over to his worldview, and passing his full array of campaign proposals — the United States will still trail all three Scandinavian countries in overall taxes.
In fact, a fully revolutionized, Bernie Sanders-led America would have tax rates that looked pretty average compared to most of Europe.