Editors' Pick: Originally published Jan. 28.
Bernie Sanders's tax plan would raise taxes on everyone, especially the wealthiest, triggering a sharp decline in national growth, according to a study from the Tax Foundation.
If elected president, the Washington-based Tax Foundation, which bills itself as "independent, calculates that U.S. gross domestic product would drop by 9.5% "over the long term." The decline in GDP would mean six million fewer full-time equivalent jobs, and wages would decline by 4.3%.
Sanders's plan, however, would raise tax revenue by $13.6 trillion over the next decade, but then claims the IRS would end up only collecting $9.8 trillion because of "decreased economic output." The assumption being that increased taxes is ipso facto a drag on economic growth. The notion that higher taxes means slower growth is disputed, as is the idea that cutting taxes automatically leads to higher growth.
Sanders would also seek to institute a new 6.2% employer payroll tax in addition to a new 2.2% "broad-based" income tax. To help offset higher taxes on lower-income earners, Sanders is also calling for elimination of healthcare-related tax expenses as well as programs such as paid family leave tied to pregnancy and early childcare.
Taken together, these provisions would raise $6.6 trillion over 10 years, or $5.2 trillion after accounting for economic effects, the Foundation said.
Regardless of your political viewpoint on the issue of taxes and the economy, one thing is clear: Sander's tax plan would raise taxes on the 1%.
High-income households would bear the brunt of Sanders's increased levy. Taxpayers in the highest income bracket would face a rate of 54.2%, according to the Tax Foundation. At present, the highest marginal tax rate is 39.6% for individuals making $415,050 and more, and for married filers making $466,950 and higher.
The upshot of the plan is that most people will have less money in their pocket. After-tax income would drop by 10.6% for all taxpayers and 17.9% for those in the top 1%. Accounting for a lower GDP, the Tax Foundation says all taxpayers would see their take-home pay fall by at least 12.8%.
As far as U.S. corporations go, Sanders supports putting the U.S. on a "worldwide tax system" that would automatically make companies pay taxes on their foreign profits. His plan would eliminate corporation's ability to defer foreign-source business income. Sanders's plan seeks to "bring home" part of the $2 trillion that U.S. companies are estimated to be keeping abroad.