Bernie Sanders Releases Tax Plan, Nation’s Rich Recoil In Horror
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Democratic Presidential hopeful Bernie Sanders took a break from yelling at clouds long enough to release his tax plan today, and it’s, how should I put this…aggressive. Sanders proposes a top rate on individual income of a whopping 52%, which would be the highest since 1980, when tax rates topped out at 70% under Jimmy Carter.
While the 52% rate is reserved for those earning in excess of $10 million, less wealthy taxpayers are not immune to increases under the Sanders plan. For example, the top rate on someone earning $250,000 would increase from 33% under current law to 37% under Sanders, while someone earning $500,000 would see his top rate jump from 39.6% to 43%.
In addition, Sanders would do away with the preferential treatment long afforded capital gains and dividends, meaning those types of income would be taxed at the same rates as ordinary income for taxpayers earning in excess of $250,000. Under current law, the top rate on such income is 23.8%; as a result, a taxpayer who, for example, sells a business for $5 million of gain would pay $1.19 million in federal tax under current law, but would pay $2.4 million in federal tax under the Sanders plan (a rate of 48%).
Sanders would also limit the benefit of all itemized deductions to a 28% rate, meaning a taxpayer who earned $500,000, and was thus in Sanders’ 43% bracket would effectively pay a 15% tax on deductions such as mortgage interest, state and local taxes, and charitable contributions.
Democratic presidential candidate Sen. Bernie Sanders (I-VT) speaks at Boutwell Auditorium, January 18, 2016 in Birmingham, Alabama. (Photo by Hal Yeager/Getty Images)
These changes, when added to the revenue Sanders would generate by increasing the tax rate on the top 0.3% of estates, would raise an additional $235 billion in tax revenue annually.
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A comparison of the rates proposed by Sanders to those under current law and the rates proposed by Republican candidate Donald Trump are illustrated in the following table. As you can see, the differences are dramatic.
Income Levels Current Law Trump Plan Sanders Plan
$0-$18,550 10% 0% 10%
$18,550-$75,300 15% 10% 15%
$75,300-$151,900 25% 10%/20% 25%
$151,900-$231,450 28% 20%/25% 28%
$231,450-$413,350 33% 25% 37%
$413,350-$466,950 35% 25% 37%
$466,960-$500,000 39.6% 25% 37%
$500,000-$2,000,000 39.6% 25% 43%
$2,000,000-$10,000,000 39.6% 25% 48%
$10,000,000 – Howard Stern 39.6% 25% 52%
And despite what the nation’s late-night talk show hosts might have you think, Sanders wouldn’t use the extra cash to get the nation’s youth a decent haircut and some damn pants that fit; rather, the tax windfall would be used to pay for a federally-administered, single-payer healthcare plan. Sanders argues that his universal health care plan would save the U.S. $6 trillion over the next decade, while a family of four earning $50,000 would see its annual healthcare costs plummet from $6,200 to $466.
Sanders states that the Affordable Care Act was a “critically important step” towards a universal health care plan, which would seem to indicate that Sanders would not repeal the ACA. As a result, the top rate on ordinary income and long-term capital gains could actually climb as high as 55.8%.
Sanders has proven to have staying power, and promises to pose a serious threat to Hillary Clinton. We won’t have to wait long to see how Clinton attacks the Sanders’ tax plan, as the two are set for their next debate tonight.
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