Bernie Sanders has lately been pretending that there was a time when he appreciated businesses in a market economy. He’s certainly not pretending to like capitalism now. As he begins another campaign for the presidency, it’s getting difficult to keep track of his various proposals to move cash from the private economy to the federal Treasury. His latest is a plan to collect $15 trillion in additional payroll taxes over the next 75 years.
The basic idea is to stop pretending that Social Security is a retirement program in which participants make contributions during their working years and then draw upon their savings in retirement. The Sanders plan is to raise taxes on some participants and spend the money on others.
A recent letter to Mr. Sanders and his legislative partner Rep. Peter Defazio (D., Ore.) from Social Security Chief Actuary Stephen Goss features an analysis of the proposal. For now, Messrs. Sanders and DeFazio are saying that their plan would raise much more in taxes than it would spend in new benefits. So the official forecast from Mr. Goss, who notes that the work of his office is “not consistent with estimates made by the Office of Management and Budget or the Congressional Budget Office” suggests that the plan will make the Social Security program go bust less quickly than under current law. But by tradition, taxpayers should not expect such forecasts to accurately predict changes in behavior as a result of rising tax burdens or expanding benefit packages.
Americans earning high incomes should definitely expect that if the Sanders bill is enacted they will be paying higher payroll taxes and receiving nothing in return for the tax hike. Currently the 12.4% Social Security payroll tax (6.2% is collected from employees and another 6.2% from employers) is applied to a worker’s first $132,900 in earnings. The Sanders plan will also apply the full tax to earnings above $250,000. Mr. Goss explicitly states that the plan will “not credit the additional taxed earnings for benefit purposes.” This is about redistribution, not retirement savings.
But wait, there’s more. Mr. Sanders also will apply a separate 6.2% tax on investment income starting at $200,000 for a single filer and $250,000 for a married couple filing jointly. Mr. Goss observes: “Under this provision, there is no limit on the amount taxed.”
“No limit on the amount taxed” sounds like a perfect slogan for the Sanders 2020 campaign. Whether or not Team Sanders chooses to use this catchy phrase in its advertising, it would clearly be the overriding theme of a Sanders presidency.
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(Teresa Vozzo helps compile Best of the Web. Thanks to Eric Pease, Chris Garvin, Amy Avery and Andrew Quigley.)
Mr. Freeman is the co-author of “Borrowed Time,” now available from HarperBusiness.