Monday, October 21, 2019
Manhattan Institute, Issues 2020: Taxing the “Rich” Won’t Pay for Politicians’ Promises:
"I believe that we should be asking the very wealthiest people in this country to start paying their fair share of taxes. That way, we will not only lower the deficit, but we will bring in enough revenue to invest in our economy and create the millions of new jobs we desperately need."
— Bernie Sanders
"My vision for Medicare-for-All does not include a middle-class tax hike. I’m not prepared to do that."
— Kamala Harris
"If we have enough money to pay for tax breaks for corporations. We have enough to invest in Medicare-for-All, Green New Deal and cancel student debt."
— Ilhan Omar
Politicians claim that agendas costing approximately $40 trillion over 10 years can be financed mostly by taxing wealthy families and corporations. Essentially, they promise a European-style welfare state without Europe’s burdensome taxes on middle- and lower-income earners. This is not possible.
Combining popular proposals to tax the wealthiest Americans and corporations would likely raise $3.9 trillion over the decade. This revenue could not even eliminate half the $15.5 trillion budget deficit that is already projected over the next decade, much less pay for $40 trillion in more spending. The overwhelming majority of new tax revenue to finance such expenditures would have to be raised from the middle- and lower-income earners.
- Leading presidential candidates are proposing a combined $40 trillion in new federal spending, yet the combined proposals to tax wealthy Americans and corporations would raise $9.3 trillion under the best-case, rosiest scenario and, more realistically, $3.9 trillion.
- Even annually seizing 100% of all income earned over the $1 million threshold could not generate more than $8.9 trillion in additional revenues.
- Funding $40 trillion in new spending would require raising the payroll tax by 38 percentage points or imposing an 88% national sales tax—even after cutting defense spending to European levels.
- Depending on the choice of taxes, the median American household’s $5,000 federal tax burden would double or even triple.
- Were Americans to accept all the taxes to finance this spending spree, it would still leave an escalating $15.5 trillion baseline budget deficit over the next decade under current policies.