High taxes can buy some pretty big government programs.
The Democratic presidential debate earlier this month showed we’re probably stuck with Bernie Sanders for a while. At least he’s going to stay in the Democratic primary for a few more months. And so we might want to look at his economic plan a little seriously. The longer he sticks around the more his ideas are going to influence the policy plans of the eventual nominee.
Democratic socialism wouldn’t solve all of the world’s problems, of course. Critics often complain that the Sanders plan for much higher taxes and free college is impractical or will hurt the poor or something. But, unlike as is the case with tax plans that tend to be suggested by the world’s right wing, we can’t say that the Bernie plan for tax increases won’t raise enough money. Because higher taxes on the rich would raise a hell of a lot of money.
According to this article by Patricia Cohen in the New York Times:
If the tax increase were limited to just the 115,000 households in the top 0.1 percent, with an average income of $9.4 million, a 40 percent tax rate [it’s currently 34.9 percent] would produce $55 billion in extra revenue in its first year.
That would more than cover, for example, the estimated $47 billion cost of eliminating undergraduate tuition at all the country’s four-year public colleges and universities, as Senator Bernie Sanders has proposed, or Mrs. Clinton’s cheaper plan for a debt-free college degree, with money left over to help fund universal prekindergarten.
Oh, but wait. There’s more.
Move a rung down the ladder and expand the contribution of those in the 95th to 99th percentile — who earn on average $405,000. Raising their total tax rate to 30 percent from a quarter of their total yearly income would generate an additional $86 billion. That’s enough to cover the cost over eight years of repealing the so-called Cadillac Tax on high-cost health plans, which Senator Sanders and Mrs. Clinton have endorsed.
The reason for this, as the article explains, is that while America’s richest people already pay about a third of their income to the federal government, because they earn so much, they also have a lot more left over than other people do. Also note that the one-third tax rate on the richest taxpayers is relatively low compared to the upper tax rates in other wealthy democracies, and also fairly low compared to the tax rate even in this country’s past. During the Eisenhower administration the country’s top marginal tax rate was more than 90 percent.
Moving the rate down to 95th or 99th percentile would actually represent a relatively broad tax plan. In truth this sort of tax plan would not just hike taxes on the world’s plutocrats; it would also increase taxes for our successful doctors and lawyers. The working rich would pay dearly here, too.
But not to worry. It looks like they’d get some really nice benefits from the free public college plan, too.