Bernie Sanders’s Tax Plan Would Test an Economic Hypothesis

http://www.nytimes.com/2016/02/09/upshot/bernie-sanderss-tax-plan-would-test-an-economic-hypothesis.html?smid=tw-nytimesbusiness&smtyp=cur

by salmonet • 10 years ago

69 194 10 years ago

nytimes.com

lintiness• 10 years ago

there's a fundamental flaw in the reasoning: if single payer healthcare plans save money, why do we need higher tax rates?

atroyn• 10 years ago

Because the increase in taxes would be more than offset by savings in other areas?

furyg3• 10 years ago

Because the payer changes? Maybe I don't understand your question...

gotothrowaway• 10 years ago

To cover the currently uninsured/underinsured, I imagine.

ctdonath10• 10 years ago

That's what the current "Obamacare" plan was supposed to solve. After thrusting much of the health system firmly under government control, raising costs substantially, and literally fining people for being unable to afford more expensive plans, we're left with ... the same number of un- & under-insured people.

fisherjeff• 10 years ago

I think think the idea is that the burden of a higher tax will be lower than that of a lower tax rate plus private insurance.

jeffmk• 10 years ago

Your taxes may go up, but the claim is that the amount your taxes go up will cost less than the healthcare premiums/out-of-pockets/copays/prescriptions/etc. you have to pay, thus the average individual's net cost for healthcare is lower.

dmm2• 10 years ago

In a single payer system the govt is the only one who pays for healthcare. That means even if healthcare spending is the same or less, the portion of healthcare paid for by the govt increases greatly, requiring higher taxes.

ctdonath10• 10 years ago

Medicaid & Medicare are practically "single payer" government-monopoly health insurance plans. They're notorious for severely under-paying doctors et al, to the point that many refuse to take such patients at all.

avar• 10 years ago

Let's say you make $1000 taxed at 20%, so you have $800 take-home. You spend $400 of that on health insurance. Now you have $400 left, or 40% of the initial amount with a 60% effective "tax" rate.

If your taxes increase to say 40% but health insurance is included your taxes have nominally gone up 20%, but down 20% if you consider non-tax costs that were folded into your taxes.

As anyone who's moved between countries can tell you, it doesn't make any sense to just consider what the tax rate is, instead you have to think about fixed costs (health care, housing, food, transportation, ...), deduct that from your pre-tax pay, and you're left with your effective taxation as it were.

Administrative changes in the government can increase your taxes but have the effect of increasing your take-home pay, that's effectively what Sanders is proposing.

There's no flaw in this reasoning, on the contrary you seem to have the fundamental flaw in your reasoning of assuming that the only way for the government to save you money is to reduce your tax rate.

chumich1• 10 years ago

The savings comes from no longer paying for private insurance which is currently extremely expensive

Spooky233• 10 years ago

The single payer is the taxpayer vs. the current model where you have a split between rate-payers and employer/medicare/medicaid.

clavalle4• 10 years ago

People who are paying insurance premiums and taxes currently put money in two areas we'll call 'insurance' and 'tax' for convenience sake (and because it accurately reflects reality). The money in the 'insurance' area goes toward paying private medical costs. If those private medical costs disappear and are shifted to public costs under a single payer plan, they don't go away, merely move under that other column. From then on, no money need be put into the 'insurance' area. Yay! But now, the 'tax' area has to pay out more since it took on those costs so much of the money that would have been put in the 'insurance' area must be put over in the 'tax' area to cover the medical costs that have not disappeared but been recatagorized in terms of what pool it is paid out of. Even if those private medical costs are halved somehow, saving the payee money in the process, the 'tax' area would still need to be bolstered to handle the additional burden. Thus, higher taxes even though overall money is saved.

sharemywin4• 10 years ago

I read somewhere that insurance company profits are the things you save in a single payer system. insurance "expenses" would be shifted to government expenses.

adventured• 10 years ago

There's a very simple answer: the middle class pays very low income taxes in America. Nearly all of the income tax burden is on the top 25%. If you want to shuttle over half the population into a new single payer health insurance system, they're almost all going to be a (big) net drain. It's an inherent consequence of a highly progressive tax system.

Your typical middle class single person is now spending $300 to $400 per month on health insurance (employer sponsored is closer to $100 per month, but that's merely subsidization), and you want to shift them into single payer, then you have to recover that $300 to $400 via taxation.

The median in the US has an effective income tax of about 3% to 5%. Put another way, putting all of that toward their new single payer insurance, wouldn't come close to covering how much they'll cost you (and that's before getting into family cost structures).

vorotato2• 10 years ago

highly progressive compared to what?

kefka6• 10 years ago

the middle class pays very low income taxes in America

Citation needed.

There's "fees", "taxes" and all sorts of hidden ways that eat into the middle class. Not only that, but how much "Fees" were in the eggs you bought? None, right? Not really: they're just bundled in and hidden.

Ever get a speeding ticket? That's a fucking tax. Property tax, car "license plates" - tax. Gas has taxes, and a lot of them. As does alcohol. And then there's sales tax- just because you sold something. Hell, there's taxes for dying.

But myopically, it looks small. I'd wager that these 'little bits' here and there by far exceeds the percent paid in taxes than the top 1%.. and we know it hurts the middle class far worse.

jljljl• 10 years ago

If the high tax rate only applies to ordinary income, won't this just shift compensation away from ordinary income and towards stock-based or alternative compensation?

paulmd• 10 years ago

It's already advantageous to structure your earnings in this way, so most high earners are already doing this as much as is possible.

pnathan• 10 years ago

Yes.

The Company will begin to provide these extra perks to high income earners, solely in order to advance the Company's efficiency. Perks may include: private jet, a house near the office (or far away), fully paid for meals, etc.

ansy• 10 years ago

Yes. In fact anyone earning that much has already shifted away from ordinary income. Famously, this is what Warren Buffet does to pay a lower tax rate than his secretary. The solution is taxing capital gains the same as ordinary income.

The next level beyond that is to shift earnings into personal corporations which are taxed at a corporate tax rate and enjoy other protections. This is like what Zuckerburg recently did.

The final dodge is to move earnings overseas much like most corporations do today.

With enough money there are always loop holes to exploit. I'm in favor of closing as many as possible. If there's someone out there rich enough to found their own sovereign nation in the Pacific, there's not much we can do about that.

clavalle4• 10 years ago

I am a Sander's supporter so I say this more theoretically than as a criticism of his plan:

It scares me that in our political structure that we feel like we need to experiment with the whole country. I understand that if we don't the super high income earners, in this case, would flee to cheaper areas but I sure prefer the idea of trying out large shifts in policy in more gradually widening areas than completely wholesale as we've been doing.

On a related note, what are the good software platforms for running economic simulations? Are any of them decent?

knodi1232• 10 years ago

It's an experimental return to the tax rates we used to have back in the 40s and 50s, before the massive tax cuts that started being implemented a couple of decades later.

seivan• 10 years ago

What about comparing to other countries and their tries? I am sure there are some slight variation and cultural differences, but it's a good start. On the same note, I am amazed how many mistakes Europe is doing when the answer sheet is just look at what LKY did.

notthegov• 10 years ago

Federalism.

vezzy-fnord3• 10 years ago

In practice, a marble cake federalism.

agentgt• 10 years ago

I would imagine a simulation to be extremely complicated and fairly unreliable given that the Economy is and can be more volatile than weather (and of course is a chaotic system as well).

That being said I bet a simulation would probably be better than many educated guesses.

pc864• 10 years ago

This is exactly the point of having states. They're not called laboratories of democracy just because we like flowery language.

Obviously you can't experiment on a statewide basis with federal taxes, but you can look at the economies of various states compared to their tax rates. Do states with low or no state income tax fare better than states with high state income tax? Do states with an additional capital gains tax have less investment or stock market participation per capita than states without an additional CG tax?

grecy3• 10 years ago

It scares me that in our political structure that we feel like we need to experiment with the whole country

How else do you expect to improve anything? You have to try something, and many, many other countries have tax structures close to this, so you know it's not going to fail.

dalke• 10 years ago

Every tax plan is an experiment. ("Trickle-down effects?") Every law is an experiment. ("Three-strikes?")

Remember, this NYT article was written by a conservative, who previously was a senior fellow at the Manhattan Institute for Policy Research, a conservative think-tank with the goal to "develop and disseminate new ideas that foster greater economic choice and individual responsibility". Before that he was a "commercial real estate banker at Wells Fargo".

There's no need to believe that any of his statements are false, but I can't help wonder why there's a focus why "Bernie Sanders’s Tax Plan Would Test an Economic Hypothesis" when every one of the candidates has an economic hypothesis to test. Even if it's the most extreme (and I think continued tax cuts for the rich and funding multiple overseas wars are also rather extreme), I can't help wonder if there is a bias towards which sources to draw from when writing this article.

heurist2• 10 years ago

Robert Axtell has done a lot of interesting work on agent-based modeling of economic systems [1]. He has a new book coming out this year about simulating national firm growth patterns based on his recent research [2], which could provide an ideological platform for experimenting with policy decisions. Agent-based modeling is relatively new and untrusted among economic policy makers, but if the success of these models is any indication we will see a shift toward a complex systems approach over the next few decades.

1: http://www.css.gmu.edu/~axtell/Rob/Research/Research.html

2: http://www.css.gmu.edu/~axtell/Rob/Research/Pages/Firms.html...

xixi77• 10 years ago

This depends what you mean by economic simulations -- if you are looking for general equilibrium models, Dynare is pretty popular, although many people would just code from scratch, and there are various codes here and there.

Someone else mentioned agent-based models; these are interesting, but there is a reason why there has been some (now decreasing, as models develop) skepticism towards them -- for example, quite often we see rather dumb simulated agents, who do not react to environment and do not learn from their repeated mistakes (for example, by not adjusting their behavior to tax rates...)

tyingq3• 10 years ago

"Mr. Sanders...proposed a...top tax rate of 52 percent...When you combine it with other taxes that apply to income...it would add up to a combined tax rate of over 73 percent"

I'm trying to imagine the scenario under which this would get through Congress unscathed.

dragonwriter12• 10 years ago

The scenario is this "the idea is aggressively sold during the campaign, and is a key issue in not only the Presidential election but a substantial number of Congressional elections".

Of course, even if Sanders is elected, its likely that there won't be sufficient support to.adopt his programs unmodified in Congress, and some alternative or compromise will be necessary. The same is true, for that matter, of any Presidential candidate.

Part of why you campaign on plans is to shift the public dialogue and set the groupies ds for the eventual compromises that are necessary as part of governing when you aren't a dictator. Holding back preemptively doesn't help that, it just cedes ground to the other side before the work of compromise starts.

tyingq3• 10 years ago

> is a key issue in not only the Presidential election but a substantial number of Congressional elections

Are there a substantial number of Democratic congresspersons that would line up behind Bernie's tax proposals?

Edit: Yes, I get how it works. There's a point, though, where reaching too far is counterproductive.

dllthomas2• 10 years ago

Combined top marginal tax rate, yes?

grecy3• 10 years ago

A hypothesis that has been tested and proven in many countries around the world for decades.

Not long ago my Dad was paying 50% income tax on ~$75k+ AUD. We had a nice upper-middle class life, no worries.

knodi1232• 10 years ago

In america, in 1948, the marginal tax rate on income over 200,000 was 91%.

The 50% tax rate was on income over $16k. Which is $157k in 2015 dollars.

harryh5• 10 years ago

Corporations responded by not paying high salaries but instead giving people lavish expense accounts and company cars that were not taxed.

merpnderp6• 10 years ago

But I'd hate to give up all these top rated hospitals. The US has more expensive health care, but the US also has most of the best hospitals.

http://hospitals.webometrics.info/en/world

grecy3• 10 years ago

Too bad tens (hundreds?) of millions of citizens can't afford to go there.

scottwhudson• 10 years ago

People are so quick to point this out, but the reality is that so many hospitals in the US lack basic standards of cleanliness & care. The CDC recorded 722,000 Hospital-acquired infections (often staph or UTI's) in 2011, one of the highest such rates in the modern world. This is simply unacceptable for a country of our resources.

The WHO's assessment on overall access & quality of care doesn't even put the US in the top 25 in the world while our per capita expenditures remain some of the highest worldwide. We may have a handful of exemplary medical institutions to brag about, but so much of our system is in terrible shape.

delazeur2• 10 years ago

Well, participation in single-payer health care will either hurt the top hospitals or it won't. If it doesn't, who cares? If it does, what's stopping them from remaining private and only accepting those who can afford it? Surely the market for the best available care wouldn't evaporate.

yread• 10 years ago

Huh? what does this have to do anything?

Purposes and Goals of Rankings
1. Assessment of higher education (processes, and outputs) in the Web.
Hospital activity is multi-dimensional and this is reflected in its web presence. So the best way to build the ranking is combining a group of indicators that measures these different aspects. Almind & Ingwersen proposed the first Web indicator, Web Impact Factor (WIF), based on link analysis that combines the number of external inlinks and the number of pages of the website, a ratio of 1:1 between visibility and size. This ratio is used for the ranking but adding two new indicators to the size component: Number of documents, measured from the number of rich files in a web domain, and number of publications being collected by Google Scholar database. As it has been already commented, the four indicators were obtained from the quantitative results provided by the main search engines as follows:

Size (S). Number of pages recovered from four engines: Google, Yahoo, Live Search and Exalead. For each engine, results are log-normalised to 1 for the highest value. Then for each domain, maximum and minimum results are excluded and every institution is assigned a rank according to the combined sum. Visibility (V). The total number of unique external links received (inlinks) by a site can be only confidently obtained from Yahoo Search, Live Search and Exalead. For each engine, results are log-normalised to 1 for the highest value and then combined to generate the rank. Rich Files (R). After evaluation of their relevance to academic and publication activities and considering the volume of the different file formats, the following were selected: Adobe Acrobat (.pdf), Microsoft Excel (.xls), Microsoft Word (.doc) and Microsoft Powerpoint (.ppt). These data were extracted using Google and merging the results for each filetype after log-normalising in the same way as described before. Scholar (Sc). Google Scholar provides the number of papers and citations for each academic domain. These results from the Scholar database represent papers, reports and other academic items.

so they compared hospitals by googling them?

chris_va4• 10 years ago

""" Mr. Sanders has proposed a headline top tax rate of 52 percent, applying only to incomes over $10 million ... “We do not assume taxpayers change their behavior,” said Warren Gunnels, the policy director for the senator’s campaign. """

... why?

The top marginal rate before Reagan was ~50%, and was lowered to 28%. Given this logic, you would expect that the US net tax revenue would have declined significantly in this period, which it did not. Basically, money just shifted from capital gains and corporate taxes to individual returns. If we increase the marginal rate again, it will likely just shift back without changing anything.

momerath• 10 years ago

Sanders would also seek to double the capital gains rate for the richest 2%, and close various loopholes.

pluckytree2• 10 years ago

Then it will shift somewhere else. Or being invested in countries where savings and investment are rewarded rather than punished.

chris_va4• 10 years ago

That complicates it more, and high net worth individuals will just leave their money in captive corporations/trusts instead.

This is not a route to saner tax policy, just something that sounds great to the average voter.

ck24• 10 years ago

By what freaking magic is Congress going to pass ANY of this???

Has no-one been paying attention the past eight years?

You think he can do any of these changes with an executive order?

aioprisan2• 10 years ago

How would he seek to do that without having a majority in Congress? The last 6 years haven't taught us anything?

netcan3• 10 years ago

(A) The real issue is not setting tax rates after some national soul searching, compromise and a moral-philosophical discussion about greed, wealth, liberty and so forth. It's not about economic theories. It's about practicalities. It is increasingly hard to tax the wealthy and large corporations. This is for reasons that are not easy to remedy, and may not be remediable. The reality in all developed countries is that (1) total budget/gdp is %35 - %45 and (2) the middle class pay disproportionately high taxes. This is effectively what you are working with as a leader in a 2016 developed country.

If you think you can get significantly more (ie percentage points of GPD) out of the wealthy... well... that's the significant part. Tell us about that. Lets debate that. Personally, I doubt it.

I think we need to acknowledge that these are the parameters of our nameless, global political-economic system. It carries some parts of the capitalism, welfare state theories, labour unionism theories, but it's pretty far from those on paper.

(B) There are examples in the US and elsewhere of high marginal taxes. This is not a venture into some unknown.

I'm not American, so no real dog in this race. That said, when I here someone talk in this way, as if from a sketchbook of political ideas, I kind of think it's naive.

Spooky233• 10 years ago

Actually, the conservative theory was that tax revenue would increase because all of the new economic activity.

If this sort of plan was enacted, you'd probably see all of the big investment banks revert to partnerships.

bmelton• 10 years ago

Because while Reagan lowered the top tax rates, he also eliminated many loopholes that were allowing top earners to effectively pay very little in taxes.

At the end of the day, pre-Reagan, a 1 percenter might have had a stated tax rate of 70-80%, but due to the massive amount of loopholes and write-offs, were only paying 25-35% in practice. Reagan's reforms allowed for less loopholes and write-offs, which curbed the effort many were willing to go to for tax avoidance, while also meaning that people were paying about the same as before, but paying closer to their actually stated tax rates.

chris_va4• 10 years ago

Yes, to some extent. Since we are looking at Saez: http://eml.berkeley.edu/~saez/course/Labortaxes/taxableincom...

You can see the massive shift in _reported individual income_ around the tax cuts.

prostoalex5• 10 years ago

Major loopholes (when sorted by revenue lost) in current tax code are standard deduction and home mortgage interest deduction. Touch either one of those and you'll quickly find out how many voters go from loophole-closing to "damn bureucrats from Washington reaching into our pockets again".

sanjiwatsuki• 10 years ago

This sort of "static tax analysis" makes tax increases look like they'll generate more revenue than they would really do. This, in turn, makes the policies sound more affordable since the tax revenues are exaggerated.

ghouse• 10 years ago

The US already tested the "trickle down" economic hypothesis.

ctdonath10• 10 years ago

"Trickle down" was a deliberate mischaracterization by opponents of Regan's economic plans. What it construes wasn't implemented.

kefka6• 10 years ago

Yes, and the Capitalists whom Reagan's plans helped ended up doing what with the gains?

That's right. They saved it. They didn't "invest" or whatever crap was spewed then. They didn't hire more people.

merpnderp6• 10 years ago

The tax rates during "trickle down" were hardly much different than they've been for the last 40 years. For instance the top capital gains tax rate was set to 20%. Exactly what it is today.

merpnderp6• 10 years ago

Won't this push a lot of highly payed professionals into early retirement? Doctors, lawyers, and managers, at the point in their careers where they are the most experienced and capable, will likely decide in meaningful numbers it is no longer worth putting in the hours if they only get to keep 27% of what they earned.

vorotato2• 10 years ago

Good, more room for the next generation.

pluckytree2• 10 years ago

To learn from whom?

ctdonath10• 10 years ago

Why would the next generation want to take up that room? Would you take up a career where despite long & expensive education, long hours, hard work, and lives-in-your-hands responsibility, you kept just 27% of your income? would you put in a million dollars of effort to net a quarter of that in return?

rglullis• 10 years ago

I don't know what is worse: the ageism you are showing or the mentality of an 18th century economist.

toomuchtodo5• 10 years ago

Only 27%. ONLY! Did you know the UK has a 40% income tax over £42,385? And plenty of doctors, solicitors (lawyers), and managers continue to work for income.

https://www.gov.uk/income-tax-rates/current-rates-and-allowa...

tyingq3• 10 years ago

The 27% is what they keep, not the tax rate. The comparison would be 73% to your 40%.

nightski2• 10 years ago

27% is what they keep, I think he was implying a 73% income tax rate. What are you trying to say here?

dangoor2• 10 years ago

People don't always work solely for the money. Also, that top tax rate is only in income above $10 million. The money below that threshold is taxed at lower rates. So, they would be keeping more than 27% of their total income

MuEta• 10 years ago

At least for doctors, I would think that the average annual income is somewhere around $300,000-400,000 (and that may be too high). This group would, all-in, be taxed somewhere between 50-60% including medicare, Social Security, etc., no where near the 73% imposed on any dollar made past $10,000,000. There may be a handful of doctors in the world pushing the $10,000,000 barrier. I assume that the landscape is similar for lawyers and managers, and that people tend to focus on those making huge money to generalize the whole field.

enraged_camel2• 10 years ago

You are assuming that those professionals choose to remain a part of the workforce due to their high income.

pc864• 10 years ago

No he's not. He's assuming that losing a large percentage of that income would be enough impetus to leave it.

maxerickson• 10 years ago

They get to keep a larger fraction of the first $10 million of income.

I wonder how many people earning more than ~$1 million per year really care about the exact level compensation they get (there are an awful lot of people that reduce their working time well before that level of income).

vnchr• 10 years ago

If so, that might improve the job prospects of many up and comers in those fields. I think your point is clear that there's potential for loss because of the retiring talent, but that can incentivize investing in talent down the pipeline.

ameister142• 10 years ago

There aren't enough qualified doctors for our population as it is.

frandroid• 10 years ago

How many of these people make over $10M a year? Also, even if they do, they wouldn't be taxes that high on the first $10M.

msbarnett4• 10 years ago

Doctors, lawyers, and managers, at the point in their careers where they are the most experienced and capable, will likely decide in meaningful numbers it is no longer worth putting in the hours if they only get to keep 27% of what they earned.

Only 27% of what they earned above $10 million. They keep considerably more of the first $10 million they earn.

Did the entire nation sleep through the day they explained how marginal tax rates work, or something?

dragonwriter12• 10 years ago

Won't this push a lot of highly payed professionals into early retirement?

Probably not.

Doctors, lawyers, and managers, at the point in their careers where they are the most experienced and capable, will likely decide in meaningful numbers it is no longer worth putting in the hours if they only get to keep 27% of what they earned.

This rate cuts in for income over $10 million/year. That's on the order of 5 times the cutoff for the top 0.1%, and the top 0.1% is on the order of 150k tax payers in a nation of 300+ million people. Even if the whole group decided to stop doing work that would subject them to the new rate (which is different than "early retirement" -- more on that next), we aren't talking about giant numbers.

And the way marginal taxes work, if they are okay with putting in effort as long as they are getting as good as they do under the current tax system but unwilling to do so at the new rate that would kick in at $10 million, then they wouldn't stop working entirely, they'd just stop doing the extra work to go over $10 million a year.

Which probably isn't that much of the work they are already doing in many cases, and, in any case, so what? It opens up more opportunities -- even if you assume no one is willing to do work that would only return what income over the new top marginal rate would return -- for people who are currently making less than the point at which that new top rate kicks in. So, the main effect would be the super rich having somewhat more leisure time (or making decisions less weighted by maximizing financial returns and more based on other factors, which may not always mean less total working time, but better working conditions or more enjoyable work) and everyone else having more income-earning opportunities available.

Not exactly the end of the world.

ameister142• 10 years ago

Yes, and the real rate for those making above 500k is less than 10% lower. So...35% of what they earn.

mc32• 10 years ago

As most middling earners, I'd support taxing people at extraordinary incomes, but at the same time, I don't think it's prudent to shock the economy with such a thing. Gradual does it, also work with other OECDs so that you have framework whereby you don't have people becoming Russian residents for the purposes of evading extraordinary taxes, thus defeating the whole purpose of the hikes.

brbsix• 10 years ago

The U.S. taxes citizens on worldwide income, so becoming a Russian resident is not likely to help. There is also a significant expatriation tax for those wishing to renounce their citizenship. I suppose you could move to Puerto Rico or expatriate well in advance of any expected earnings.

However you're absolutely correct that there are unfathomable unseen costs and effects.

mrfusion2• 10 years ago

Maybe we should move into doing a luxory sales tax instead? 100% sales tax on yatches and cars over 100k? 20% tax on homes over one million?

mrfusion2• 10 years ago

People might also be more supportive of taxing things they'd never dream of buying.

wnevets• 10 years ago

Unlikely, a lot of americans believe they'll be rich soon.

merpnderp6• 10 years ago

A tax on consumption? Why that would encourage people to save for the future. Blasphemy in modern economics where negative interest rates are being contemplated to further discourage savings.

SN76477• 10 years ago

I think Sanders has radical ideas that will not work in America... I also support him for this reason.

We do not need to be the next Norway, but we should have much better healthcare, education and intolerance of greed. I think that his fresh ideas will really bring this to fruition.

cmrdporcupine• 10 years ago

He is running a propagandistic campaign that seems to be more about 'bending the stick' of public perception of what is mainstream political/economic thinking in North America.

And I think that is good and I wish him well.

But for myself, as someone who would call himself a kind of Marxian socialist, I wish he'd stop calling himself a socialist. He is doing both himself (at best a Euro-style social democrat) and socialism a disservice.

ph0rque• 10 years ago

'bending the stick' of public perception

I prefer the term "opening the Overton window". (https://en.wikipedia.org/wiki/Overton_window)

vezzy-fnord3• 10 years ago

He might count as a Fabian, so I don't think the "socialist" label is necessarily inaccurate. It's a very diverse set of ideas.

wernercd• 10 years ago

We should have much better healthcare, education and intolerance of greed

And, isn't that what our current "Hope and Change" was supposed to bring? Just what we need... another 4/8 years of ineffectual leadership that changes nothing because this will cause nothing but gridlock.

jamiequint2• 10 years ago

Why do we need less 'greed' (if you can even define that)? Is that quantitatively better for the country in some way? If so, how?

merpnderp6• 10 years ago

Greed isn't going away. In purely socialist countries we just see the greed moved to the government where it is subject to far less checks and balances than in capitalism. For instance, see Cuba where there are a couple of really nice hospitals for the powerful in government, then some dirty hovels for everyone else. This is easily the biggest reason capitalistic countries are so much richer and better off than purely socialist ones.

djb_hackernews• 10 years ago

I am a Bernie supporter, but I have 2 issues: 1) I'm having a hard time understanding how such a policy shift could happen purely from the POTUS 2) Even if it did happen and we got single payer, I have a feeling it'd just turn in to another benefit for the employer. When employers no longer provide health insurance they'll just keep the money for themselves and the employees won't see the actual benefit, just the higher taxes. If my employer is currently paying 13k/yr for family coverage and all of a sudden doesn't have to, I doubt they'll be adding that, or even some percentage, to my salary.

kefka6• 10 years ago

Unfortunately, my founded belief is that if a Democrat gets elected president, the gang of Republicans that shut down government will also act to stop any action the D-President does.

We've already seen this with Obama. It's not hard to see them doing more of the same.

harryh5• 10 years ago

It's worth noting that any tax increase has to start as a bill in congress, so it wouldn't so much be Republicans stopping the action of a D-President as just not doing what he/she wants them to do.

Which...sounds like how the system is supposed to work? Checks & balances and all...

dangoor2• 10 years ago

Indeed, unless enough people get annoyed at the situation and vote for different Congresspeople over the next couple of elections. Might require fixing gerrymandering first though

enraged_camel2• 10 years ago

Bernie may be a democratic socialist, but he has decades of experience bringing together both sides of the aisle to pass legislation. His opponents may not agree with him, but they respect him.

In contrast, Hillary is pretty much universally hated among Republicans. In my opinion she has a much lower chance of getting anything done if elected.

dragonwriter12• 10 years ago

Unfortunately, my founded belief is that if a Democrat gets elected president, the gang of Republicans that shut down government will also act to stop any action the D-President does.

Which is a good reason for people voting for a candidate for President not to ignore the other races on the ballot, and a good reason for people who care about the policies embraced by their favorite Presidential candidate to not only advocate for that candidate, but advocate for down-ballot races as well. (And this applies just as much to any other candidate, of either party, as it does to Sanders.)

zaphoyd• 10 years ago

I'm also curious about #2 here: Some would certainly be offset by the new employer paid taxes... but my employer currently pays significantly more than the proposed tax in premiums now (of which I directly pay almost nothing). When I plug my numbers into http://berniecare.org for example, it says I'll pay $800 more. I know this is a very simplistic calculator, but it definitely seems like this plan would give some employers an opportunity to effectively cut salaries by a sizable chunk. Does anyone know if it has been studied or a transition like this has been observed before?

tarr11• 10 years ago

There's some interesting assumptions in berniecare.org buried in variables.

Would be nice if they exposed the assumptions instead of burying it in JS.

http://berniecare.org/dist/bundle.js

heimatau3• 10 years ago

I don't think your employer would either, no matter who they are. They will take advantage of the system like everyone else. We all benefit from roads, power, water, etc. Bernie is trying to reduce the cost of health care by taking profits out by controlling the costs. If you have an organization that is paying for 300+ million people's insurance, that organization has tremendous leverage. I understand that this is a very complex subject, but that's his position and I support it too. In other words, Bernie sees health care as an investment, in the infrastructure of the well-being of the American people. (I think this last sentence is poorly worded but I gave it my best effort)

(added, post edit) Also, the masses will benefit tremendously from it. He estimates about a $4,000 yr savings for middle class. You might not get any benefits from your employer but you're not voting for your employer, you're voting for your rights (Bernie says health care is a right).

As for this: > 'such a policy shift could happen purely from the POTUS' That's never been Bernie's rally cry. He's calling for a political revolution. Essentially, for young voters and progressives to actively engage in the political system and to vote for progressives (and to encourage others to do so as well).

This is a solid video about it all by Robert Reich: https://www.youtube.com/watch?v=VfIhonVoFSg

sharemywin4• 10 years ago

I remember him saying something about politicians looking out the window and seeing calls for change.

AnimalMuppet• 10 years ago

1) It can't. Unless Bernie gets several hundred like-minded people elected to the House and Senate, this is going nowhere.

2) Depends on how much competition there is between employers, but it could happen the way you fear, especially in a soft economy.

AndyNemmity• 10 years ago

A policy shift through POTUS is intended to happen with the President acting as a leader of people as opposed to a POTUS that does the standard job of President.

This hasn't happened in my lifetime, and was said was going to happen when Obama was initially elected, and never occurred.

It's an unknown property. To have a POTUS that actually regularly talks to the population directly and asks for their support and effort to force politicians to change. I think a similar example in concept, but not in policy is Hugo Chavez when he had a weekly program to the people.

It's difficult to say what effect this would have, I have absolutely no idea for or against. I think anyone who thinks they do is speaking more from their personal opinions and less about what will actually happen.

--Edit - I said "It's just never been tried in a country like the US", and then I remembered FDR's fireside chats, which are perhaps a better direct correlation than Hugo Chavez.

jandrewrogers• 10 years ago

High income tax rates do not "discourage greed", they merely cause it to manifest in different ways. Compensation structures in high tax jurisdictions like Europe reflect this, with myriad forms of lavish compensation for corporate executives that are technically not income, much more so than in locales where the taxes encourage people to simply write a check. An argument could be made that direct cash compensation in tax jurisdictions where that makes sense has the benefit of being a much more transparent kind of compensation.

Tax rates don't change human nature, they merely change incentives.

misiti3780• 10 years ago

This might work in other countries but I am skeptical it would work in the united states. I do like sanders ideas of reforming wall street:

https://berniesanders.com/issues/reforming-wall-street/

If he gets elected and can actually deliver on that promise, hopefully he can manage to siphoned off enough tax base from wall street alone to fund some of his other ideas.

JDiculous• 10 years ago

It bothers me that our politicians always talk about taxing labor income but never talk about taxing land values and/or capital. We need more economists coming up with tax plans rather than politicians.

(I say this as someone who will vote for Bernie Sanders)

hnal943• 10 years ago

That's a real problem. Wealth and income are radically different numbers for people at the top end. High income taxes end up punishing the upper middle class instead of the truly wealthy who own assets.

ohitsdom• 10 years ago

This would be devastating to athletes. Take the NFL as an example. A player's earning window is very short. Once their career is over, they often suffer from health problems and lack of training to do anything else. I don't like the idea of taxing these guys at 70%+ when they're giving up their bodies for money to last them a lifetime.

I know many athletes continue to get endorsements, speaking fees, and other income after their playing days are over. But that is only really significant money for the stars, and continues to decline as they age.

Obviously pro athletes are a very small percentage of the population, but it's still interesting to consider how this impacts different professions.

jacobolus• 10 years ago

The status quo is devastating for the vast majority of aspiring athletes. It’s only a tiny fraction who come out ahead.

harryh5• 10 years ago

It's not just pro-athletes who have short windows of high earnings. A lot of the so called 1% are only in that group for a small number of years. It might not be as extreme as NFL athletes but think about, say, a startup founder who takes a very low salary for 5-10 years but then has 1 great year when he cashes out.

riffraff• 10 years ago

there are athletes in less profitable sports than NFL (or leagues, or teams), their careers also don't generally last long but they still do it.

fnovd• 10 years ago

they often suffer from health problems and lack of training to do anything else

So do millions of Americans who did not have the chance to make millions playing sports in their twenties. A new tax plan would have the intention of making lives easier for folks struggling with low wages, ex-footballers included.

jamiequint2• 10 years ago

Successful entrepreneurs often make huge lump sums when their company is acquired, usually after many years of hard work and low pay.

Sanders' plan to make taxes on capital gains equal to those on ordinary income and to increase the marginal tax rate to effectively > 80% (once state taxes are included if you live in CA or NY) is effectively a wealth transfer from the most productive part of the economy (new enterprise creation) to the least productive part (government).

Its a shame that we have a presidential candidate with this level of economic illiteracy that is still taken seriously by a large part of the country.

hfourm• 10 years ago

Economics is politics, not science.

snowwrestler• 10 years ago

Government does not hold the money, though, it redistributes it again through contracts, credits, and payments.

All taxes are redistributive. If they weren't, they wouldn't need to exist--i.e. if private income is already paying for everything the country needs, there is no need to use taxes to move it around. But of course, private income is not already paying for everything the country needs.

Consider a basic function of a national government: self defense. Protecting the nation benefits all citizens. But not all citizens have the same amount of wealth and income. So any taxes that pay for national defense, even if applied with one flat rate to every person, will redistribute wealth. It will confer the benefits of national defense equally on a person who paid $1 in taxes and a person who paid $1,000 in taxes. Security is a form of wealth; the $1 payer got a better deal than the $1,000 payer.

So, the concept that taxes are bad if they redistribute wealth is flawed, because redistribution is the entire point of taxes. Instead, to critique tax policies, we need to be specific about the taxes and payments and outcomes.

MrZongle2• 10 years ago

Of course, this assumes Sanders even makes it to the general election. Despite his polling, the skeptic in me thinks that the Clinton campaign will be the Democratic candidate on the ticket in November....public support be damned, she's the candidate that the establishment wants.

ctdonath10• 10 years ago

Being halfway thru reading "Atlas Shrugged", I find it bewildering that on a site devoted to promoting the best of capitalistic productivity, so many posters adhere to compulsory redistribution of wealth confiscated from the productive.

talideon3• 10 years ago

It's 'Hacker News', not 'Objectivist News'.

ctdonath10• 10 years ago

It's a branch of Y-Combinator, funding startups with the expectations of high rewards for high risk & effort without strangers confiscating some 75% of profits. It's the discussion forum for real-world objectivism in action.

vezzy-fnord3• 10 years ago

Rand is overly simplistic and draws false dichotomies abound. It has never been the case that the "productive" have been opposed to wealth redistribution or other state proclivities, since they do in fact benefit greatly from favors such as limited liability laws, barriers to trade, subsidization, land laws, police power, government contract procurement and other initiatives. Hell, the NRA part of the New Deal originated from a plan drafted by the then-president of General Electric, Gerard Swope.

Thus they are not so productive as they are symbiotic with the state. Tax laws are a complete red herring, serving mostly as a public show to incite people about whether or not someone is paying their "fair share," even though nominal balances are generally frictionless in absence of velocity of spending. Poor people have lower wealth elasticities of demand and will always bear the most burden from taxation.

Rothbard is much more lucid than Rand.

ck24• 10 years ago

I love his spirit but absolutely nothing Bernie is selling can pass Congress which means absolutely nothing will change if he is elected.

You really think he could survive running for re-election at 80 years old?

Anyone old enough to remember Reagan will know what happens to people that old in the white house.

Not crazy about Hillary but I could live with her.

If Trump is elected, I'm somehow moving to Canada, not because of him, because of the 51% of people who elected him and having to live with them after surviving Bush.

ojbyrne• 10 years ago

As a progressive (but a highly-taxed one) I'd like to see defense spending cut by 50%+ first. That's not going to happen either.

devinhelton4• 10 years ago

Even the 73% optimal tax rate proposed by Saez and Diamond is based on bogus analysis. The point of taxation is not to maximize government revenue -- if the government wants to maximize revenue it could just print dollar bills. The point is to maximize purchasing power. Thus the downside of high taxes is not manifested in lower government revenue in dollar terms. It is manifested in fewer startups and fewer risky investments, and thus fewer new technologies and new products. Overly high taxes change the equation for risk taking -- why try to start a business when if you succeed, you won't keep that much of the winnings? If fewer people start businesses, the economy becomes more sclerotic as big corporations no longer have to face competition from upstarts.

The problem is that it is fundamentally impossible to quantitatively measure the impact of taxes on startups and economic dynamism. We know that if we taxed at 100%, we would likely have very few startups. But we do not know how much any given incremental change will hurt the economy. But as rough estimate, if the current tax rate is ~33%, and a tax rate of 100% would kill all startups, then a tax of 73% (the max rate proposed by Saez) would kill about half of startups (or rather, mean that they never exist. Immigrant founders would choose to start companies elsewhere, other founders would sell out early to a big company, and the big company would then just ruin the product like they normally do, etc.) Very roughly, such a tax rate might raise around an additional $100 billion. Would increasing total government revenue by 2% be worth killing half of all startups? That doesn't sound like a good trade to me. (Of course I am personally biased on this issue).

Someone1234• 10 years ago

why try to start a business when if you succeed, you won't keep that much of the winnings?

I'd call $9.9 million or less a year pretty big "winnings" without hitting these tax thresholds. Plus the way tax brackets work mean you get a pretty big payday on the money below the top most threshold.

It is completely unrealistic to claim that people won't start businesses because any personal profits they make over $10mil/year will be taxed too highly. It is completely out of touch with the financial position that most normal people are in.

devinhelton4• 10 years ago

If the high tax rates only apply above $10 million, then the big impact would be on:

1. The most skilled global talent, who might choose to start their business elsewhere, where there would be the prospect of becoming super rich. 2. Angel investors and second-time founders. A major reason these founders would want to take risks, reinvest, and double down is to hit the home run, and have change-the-world amounts of money. 3. First-time founders who sell-out early to a big company, rather than try to go big. This could really do great damage to the pipeline of new and great products, since big companies are often where innovation goes to die.

I do agree that a high percent tax rate on income over $10 million would not do much to discourage run-of-the-mill new businesses, such as restaurants and landscaping companies. But I think it could majorly discourage the types of startups which drive the continued advancement of technology.

cookiecaper• 10 years ago

Whenever we're discussing startups or entrepreneurs, we're already out of touch with most normal people. That alone isn't a reason to ignore the sector.

dota_fanatic• 10 years ago

Ok... I might be completely off base here, but why can't we increase taxes on mega-earnings, AND refactor tax laws such that startups are incentivized? Eg, you spend 4 years bootstrapping a business while taking a bare minimum salary and then, through whatever mechanism, are ready to 'cash out'. Why can't we look favorably upon people doing this and apply some kind of retroactive benefit to their earnings, taking those 4 years into account?

I don't understand why tax laws are applied evenly (in theory...) across industries. If you make a product that effectively poisons the masses (tobacco, prescribed opiates, watered sugar), resulting in huge negative health outcomes, why aren't those profits taxed unevenly? Do we not need to fix those problems then in the health sector? Humans are irrational, ads are made to take advantage of the bugs in our decision-making code, but it's all on the victims to take care of themselves? Something they've already demonstrated to be incapable of doing.

I'm sure there are intractable problems with this approach that I'm simply unaware of... but it seems better than what's on the table. We need taxation with an ethical component. Make unethical behavior un-profitable.

devinhelton4• 10 years ago

You could try to design the tax code to try to distinguish people who were getting rich from zero-sum games, versus those who were getting rich from taking risks and creating wealth. In practice, there is a lot of subjectivity in doing so, and it would make taxes more complicated and unpredictable. In general, the more subjective and complicated government policy is, the more room there is for powerful and unscrupulous entities to manipulate the system to their own benefit. Complexity almost always favors the parasites.

prostoalex5• 10 years ago

How is that different from a hedge fund manager not earning much for a few years, but then hitting a big liquidity event?

I think the assumption here is that a lot of people with eight-digit incomes choose to continue participating in the workforce, but I don't know if there's data to support that.

heurist2• 10 years ago

"Why try to start a business when if you succeed, you won't keep that much of the winnings?"

Some people start businesses to solve legitimate problems. I suspect that higher corporate tax rates would encourage the average Silicon Valley startup founder to seek more fruitful income streams, but people who are passionate about solving real-world problems would still attempt to do so. Furthermore there are people like me who don't work well outside of a startup environment who will pursue startups regardless of the tax rate. I doubt small businesses will be taxed at such a high rate anyway, given that they are the lifeblood of the American middle class. I'd rather have a thousand medium-sized businesses that suppress their growth to avoid higher taxes than ten massive businesses with low tax rates.

devinhelton4• 10 years ago

See my reply here: https://news.ycombinator.com/item?id=11066875

prostoalex5• 10 years ago

Few businesses would suppress growth to lower the tax base. One way to avoid profit (and punitive taxes associated with it) is to expand the business or seek new markets. Amazon, Alphabet and Warren Buffett are fans of this approach.

heimatau3• 10 years ago

It seems a lot of people are misinformed in this thread about Bernie's plan. Here is a quick video explaining Berine's plan to change Washington (by Robert Reich): https://www.youtube.com/watch?v=VfIhonVoFSg

tldr; Bernie wants a political revolution of voting progressives which will put new Senators/Congressmen(women) in DC, which will allow for new FDR like changes to occur.

jpollock• 10 years ago

I saw this article listing the proposed new tax brackets.

http://www.fool.com/retirement/general/2016/02/07/bernie-san...

Personally, I can't afford a house in the valley, and the new brackets would cost me an additional $10-15k/yr, putting home ownership out of reach for a long time. In fact, the additional $10-15k/yr would put me close to not being able to afford my rent.

That's even before looking at the change to capital gains, which would tax them at the marginal rate.

tmaly• 10 years ago

I would like to see Mr Sanders proposed rates for the middle class and what range of income he deems to be middle class. Middle class in SF or NYC is much different than say Detroit, MI.

Housing costs, cost of living, and local taxes are not really factored into the current federal tax rates, and higher rates on the middle class could hurt a lot of people.

greggyb• 10 years ago

Why not make it cheaper to pay taxes than to pay accountants, lawyers, and financial strategists to avoid those taxes in the first place?

Bernie Sanders’s Tax Plan Would Test an Economic Hypothesis

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