The story of Wednesday, Jan. 20, was the inauguration of President Biden. But all the internet seemed to care about was the attire and demeanor of Vermont Sen. Bernie Sanders, who once again found himself as the star of a meme.
Specifically, denizens of the internet took note of the senator’s sweater mittens, which he hugged against himself in an attempt to keep warm.
Unfortunately, if you want a pair for yourself, you’ll have to look elsewhere. Jen Ellis, the maker of the mittens that Sanders wears, said in an interview with Slate that though she has received hundreds of emails asking to buy a pair, she doesn’t sell the mittens because taxes on small sellers are prohibitively high.
Ironically, it is policies that Sanders supports that have kept her from capitalizing on the popularity of the mittens by turning it into a business. Most small business owners file as pass-through businesses, meaning that their net business income “passes through” and is paid through the individual income tax code. In an attempt to reduce the tax burden on small businesses, the 2017 tax reform law included a 20% deduction to pass-through business income.
The implementation of this deduction wasn’t perfect, but Sanders proposed to eliminate the deduction entirely. Reforming the deduction to reduce complexity, making abuse less prevalent, and improving its economic impact would be a forward-thinking change, but Sanders would offer only further tax increases.
One such tax increase that would have hit hard, had it been implemented, was Sanders’s proposal to fund his “Medicare for all” plan, in part, by increasing the payroll tax paid by employees by 4%. Small business owners with pass-through income are already directly responsible for a 15.3% self-employment tax, with estimated tax payments due quarterly. Under Sanders’s plan, that would increase to a 19.3% self-employment tax.
Sanders has also supported other increases to the tax and complexity burden facing small sellers. Should the mitten-maker in question choose to sell her mittens online, Sanders has supported measures in the past to subject these sellers to new obligations to collect and remit sales taxes to each of the 45 states with a sales tax.
The Supreme Court eventually greenlit this idea with its decision in South Dakota v. Wayfair, to predictable results. Online sellers of a certain size now face a patchwork of state sales tax regimes and are expected to understand and comply with each, creating significant problems for small businesses without an army of in-house accountants.
It’s not just federal issues that prevent Ellis from monetizing her popular product. Thanks to high property, individual, and corporate income taxes, Vermont (where Ellis lives) ranks 43rd out of 50 in the Tax Foundation’s State Business Tax Climate Index, making it one of the most inhospitable states in the country to do business.
A well-designed tax system should allow producers of a product for which there is clear demand to create and expand a business. It’s an unfortunate irony that the maker of Sanders’s mittens gives them only as gifts because she was discouraged from selling them due to the punitive nature of the tax policies that Sanders supports.
Andrew Wilford is a policy analyst with the National Taxpayers Union Foundation, a nonprofit organization dedicated to tax policy research and education at all levels of government.
