When a teenager gets her first pay stub, the first thing she notices is dozens if not hundreds of dollars of tax withholding. Medicare tax alone consumes 1.45% of that first paycheck. But what our hypothetical youngster doesn’t see is the other 1.45% paid by her employer — an amount that quietly limits this employee’s total pay.
Now imagine taking that combined 2.9% of the paycheck lost, and multiplying it by 10. And then more. Picture a whopping 32% payroll tax to pay for Medicare on top of 12.4% taken for Social Security. Before you even pay a dime in federal or state income taxes, payroll taxes would have eaten up nearly half your check.
The nonpartisan Committee for a Responsible Federal Budget found that this is what it would take to finance for “Medicare For All” from payroll taxes.
Of course, there are other options to pay for the socialized health-insurance system leading Democrats such as Bernie Sanders and Elizabeth Warren are advocating, but they’re not much better. A 42% value-added tax would do the trick. Or Bernie or Elizabeth could more than double all individual and corporate income tax rates.
To avoid tax hikes, a “Medicare for All” bill could simply slash the rest of the federal budget of 80%. Absent any other spending or financing changes, Medicare for All would more than double the national debt, to 205% of gross domestic product.
Polls show a continuing collapse in approval for the idea, and Warren, Sanders, and other supporters refuse to answer how they would pay for it. Sanders at least concedes that taxes on the middle class will rise somewhat, but when asked for details, he shrugs it off. He told CNBC, “I don’t think I have to” disclose them. Warren simply dissembles, boasting that she’ll cover the cost with punitive taxes on the wealthy — an impossibility, as CRFB found.
The folks at the Committee for a Responsible Federal Budget wisely chose not to evaluate Warren’s beloved wealth tax. Not only is such a proposal likely unconstitutional, but it has failed in nearly every nation that’s tried it. Of the 12 European nations that had a wealth tax in 1990, just three still have it. The wealth tax is known to have chased tens of thousands of millionaires out of France.
And simply raising income taxes on the wealthy won’t work either. The CRFB found that raising the tax rate of the top two income brackets even to 100% wouldn’t meet the mark.
“In reality,” the Committee writes, “a tax increase that large would actually lose revenue because it would institute marginal tax rates above 100 percent when other taxes are incorporated – effectively requiring people to pay rather than be paid to work, earn business income, or sell capital assets.”
Democrats may salivate at the thought of repealing President Trump’s corporate tax cuts, but no serious politician in the country would catapult our corporate rate from its currently globally competitive level of 21% to 42%, nearly 20 percentage points greater than the world average.
And mind you, that would have to come with hiking our bottom income bracket tax rate from 10% to 20%, our top rate from 37% to 74%, and capital gains from 23.8% to 47.6%.
Democrats can continue to add to their socialist Christmas list as much as they please, but until they show us the math, their “plans” are nothing but financial fantasies.
