“We will raise taxes. Yes we will,” Sanders shouted out at no one in particular during his last debate against presumed Democratic presidential nominee Hillary Clinton. Why does he shout so much? Perhaps he hopes to create the illusion that raising taxes is somehow bold and courageous. But it’s not, not at all. Raising taxes to give away free sh*t is what politicians do.
Bernie’s main target for punishing new taxes is, of course, “the rich.” Hillary Clinton also wants to raise taxes, but only on people making over $250,000 a year. Here, she is drafting carefully behind Barack Obama, who promised something quite similar in 2008. “Under my plan no family making less than $250,000 a year will see any form of tax increase,” he pledged. “Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”
It was a lie. They are all lies. Even Sanders’ *bold* tax proposals, which openly target the middle class as well, are lies. Why? Because so much free sh*t costs far more money than these tax hikes could possibly pay for.
Bernie has proposed spending $18 trillion more over the next 10 years to pay for all sorts of new government giveaways. There will be free healthcare, free college tuition, big government subsides for private pensions, free government jobs for young people, free childcare, and a trillion dollars in new transportation spending. And let’s be honest, he’s just getting started. Hillary, for her part, doesn’t really quibble with all of these giveaways. But she has been on the defensive for questioning how he will pay for free healthcare. “There is no way that can be paid for without raising taxes on the middle class,” she said at an Iowa campaign stop. “The arithmetic just doesn’t add up.”
Here is the logical end of the road for the Democratic Party. There is really no end to the demands of political interests once you accept the idea that by voting, you can take stuff from your neighbors. If you did it directly, we would all agree that it’s called stealing. That’s wrong, right? But done through the political process, wrapped up in the right populist rhetoric, it’s not wrong at all. It’s progressive.
There’s only one problem. “The trouble with Socialism,” Margaret Thatcher once observed, “is that eventually you run out of other people’s money.” There simply are not enough taxpayers to feed the infinite demands of big government.
Back of the envelope, the Federal government takes in a little over $3 trillion in tax revenue annually. Of that, income taxes paid by individuals amount to $1.48 trillion, and payroll taxes paid jointly by workers and employers total $1.07 trillion. That’s a lot of money, but the Obama administration has still managed to more than double the national debt since taking office, now at a little over $18 trillion. It will rise to $20 trillion by the time he leaves office.
Must. Get. More. Revenue. So what if we really, really wanted to stick it to the rich? If the Treasury taxed the top one percent (people who make over $428,000) a one hundred percent confiscatory tax, it would take in $1.7 trillion. That’s not nearly enough, so let’s go after the total incomes of those making over $178,000, the top five percent. That raises $3.1 trillion. Now we are getting somewhere, but still far short of $18 trillion. Now things get more difficult. Even rich people don’t work for free, so this one hundred percent tax would be, at best, a one-time event. That means that total revenue over the ten-year window will be exactly the same $3.1 trillion.
As it turns out, successful people, the ones who pay the vast majority of income taxes, are a crafty bunch. They hire lawyers and accountants, and they make choices based on marginal tax rates. So even an avowed socialist isn’t likely to grab everything at once. The Tax foundation estimates that Bernie’s “honest” tax hikes still only bring in $9.8 trillion of the $18 trillion he wants to give away, while lowering economic growth by 9.5 percent over the long term. True fact: Higher tax rates have an adverse impact on job creation and new investment, the very things struggling middle class workers need right now.
There are only a few options for governments wanting to spend money they don’t have. Raising taxes on the rich just wont get you there, so the next step is to hit almost everyone, and higher payroll taxes on workers can help pay for free healthcare. But that’s not nearly enough, so the federal government borrows from countries like China, hoping that interest rates don’t spike. But they always do, so a lot of borrowing will be monetized by the Federal Reserve by “printing” more dollars, diminishing the real value of your savings account. All of this economic manipulation creates a lot of chaos for Americans trying to earn a living to support their families. But the political insiders and their cronies, the ones with a seat at the table, always come out fine.
As it turns out, free sh*t costs a lot.