Bernie Sanders, Issues, Medicare, Obamacare, Socialism

Unsurprisingly, “Free” Healthcare from Government Is Very Expensive

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In a strange way, I admire Bernie Sanders. He openly embraces big government. Back during the 2016 campaign, I frequently observed that the difference between the Vermont Senator and Hillary Clinton is that he wanted America to become Greece at a much faster rate.

Photo: Gage Skidmore/Flickr CC by SA 2.0

Well, he just installed a turbo-charged engine and stepped on the accelerator. He’s proposed a single-payer healthcare scheme that is being called “Medicare for all.”

According to Sanders and other advocates, the government’s health system is a good role model: People pay a tax while working and they get health care when they’re old. But there’s a not-so-slight problem with that approach. For every dollar that Medicare recipients paid to the program, taxpayers are financing three dollars of spending.

That approach is workable (though only in the short run) for Medicare. But it won’t work if government is paying for everyone’s health care.

So even Bernie admits that a tax increase will be necessary. And not just any tax hike. He’s proposing the biggest tax hike in the history of the United States. Heck, it’s the biggest tax hike in world history. Here are some of the frightening details, as reported by the Washington Post.

The Medicare for All legislation backed by Sen. Bernie Sanders (I-Vt.) and 16 Senate Democrats does not include details on how it might be paid for. …Sanders’s Senate office released a white paper on possible ways to pay for the legislation.

He starts with a giant payroll tax of 11.5 percent (on top of the 15.3 percent payroll tax that already exists).

The taxes themselves would fall on both employers and employees. Sanders floats the idea of a 7.5 percent tax on employers… Another tax, of 4 percent, would hit individuals.

To understand what this means, just contemplate the disastrous impact of Obamacare on the job market.

Sanders also has a big class-warfare tax hike.

The next big slice of funding: higher tax rates on the very wealthy. Income…$250,000…higher…would be hit harder, on an upward sliding scale, ending at a 52 percent tax on income over $10 million.

Sanders imagines a tax on financial institutions worth more than $50 billion, a one-time tax on offshore profits (an idea that is continually floated then sunk in tax reform negotiations), a higher estate tax (topping out at 55 percent), and a 1 percent wealth tax on the richest 0.1 percent of households.

That’s all the tax hikes listed in the Washington Post story, but Sanders also has some additional material on his office website.

A huge increase in the double taxation of dividends and capital gains (particularly when you consider that personal tax rates will be much higher.

…end the special tax break for capital gains and dividends on household income above $250,000, treating this income the same as income earned from working.

A restriction on itemized deductions.

…itemized deductions would be capped at 28 percent for households making over $250,000. In other words, for every dollar in tax deduction a high-income household could save at most 28 cents.

For what it’s worth, I don’t like the state and local tax deduction and the charitable deduction, and I also don’t like preferences for housing.

But I want to eliminate such distortions only if the revenue is used to finance lower tax rates, not to finance bigger government.

That being said, let’s get back to our list. Sanders has a special tax targeting small business.

…ensure that all business income of high-income people would be subject to the existing 3.8 percent tax to fund Medicare, either through the net investment income tax or the additional Medicare tax on earned income.

Last but not least, he wants to skim $112 billion over 10 years from corporations by manipulating accounting rules.

…eliminate the “last-in, first-out” (LIFO) accounting method.

The bottom line is that Sanders, in one fell swoop, would saddle America with a European-sized government. And that would mean European-level taxes. The only thing that’s missing is he didn’t propose a value-added tax.

Though I’m sure that would get added to the mix since the huge increase in the government’s fiscal burden would retard growth. And since that would mean sluggish revenue, politicians would seek another way to extract more money from the economy’s productive sector.

P.S. I’m a policy wonk rather than a political tactician, but my guess is that Bernie is misreading the mood of the American people. Yes, “free” healthcare sounds nice, but people get understandably scared when they get a price tag. This is why single-payer was repealed in Bernie’s home state. And it’s why Colorado voters rejected a similar scheme by a landslide margin.

This is a guest post by Dan Mitchell “a high priest of light tax small state libertarianism”
  • proudtexan62

    Crazy Bernie is just a socialist and socialism will never be allowed to take over our capitalism, I hope and pray. I know how the European economies struggle and the people with them with socialized governments. Maybe he needs some kickbacks from healthcare providers to fund his legal fees on the scandal that his wife involved him with in defrauding banks.

  • olddawg1

    Bernie has historically had difficulty with basic math. Remember when he was ranting about Verizon because that company’s CEO made almost $20 million per year, so he wanted all Verizon employees to “negotiate a fair contract” that “guarantees fair pay”? It’s the old democrat zero sum game, where “the rich” must suffer in order for “the poor” to gain anything. Okay, so the CEO of Verizon makes $20 million per year. Verizon had 235,000 employees in 2007, but like most companies, the number of Verizon’s employees steadily dwindled during the Obama years to 177,700 in 2015, so let’s use that number. If Verizon’s CEO forfeited his entire salary and divided it evenly among all 177,700 employees, each employee would get a raise of $112.50 per year, or 5.4 cents per hour (assuming a 40-hour work week).
    Hmm, maybe that would help to explain why Bernie thinks that “the billionaires” can provide free tuition for college students. There are about 540 U.S. billionaires, and about 20.2 million U.S. college students. That means each billionaire would be responsible for over 37,000 students–every year.
    I’m pretty sure Bernie wasn’t a math major.

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