Originally published on Forbes.com.
Bernie Sanders supporters seem to want to make it real clear that he will not be proposing a 90% income tax rate. Yesterday Vote Bernie Sanders 2016, an unofficial site, posted a clip (Bernie Sanders Myth: The 90% Tax Rate) from a Katie Couric interview from several months ago in which Sanders indicated that he was in favor of a Wall Street transactions tax and taxing corporations on income stashed offshore.
Bernie Not Looking For 90%
Sanders indicated that he did want to raise the top rate some, but not to the level that it was at under that “great communist” Dwight Eisenhower, a good Republican. He said he wanted a Wall Street transactions tax and an end to corporations offshoring income.
Those three items – an unspecified higher rate, a transactions tax and an end to offshoring – along with the Eisenhower reference also came up in the November debate.
Feelthehbern.org fleshes things out a bit more. There is taxing capital gains and dividends the same as ordinary income and lowering the estate tax threshold to $3.5 million. There is still waffling on the top marginal rate which they are still working on, but an indication that it will be over 50%.
What Is He Up To?
I find this hanging fire on the top marginal rate kind of fascinating and am puzzled as to what is behind it. The comments on the video on the unofficial site offer a clue.
Fourth-Dimensional Quasar writes “What’s wrong with 90% exactly? That’s my question.” Oscar Svensson answers “Diminishing returns after certain percent. But that point is far beyond 50%.” Stikbits writes “If we don’t have 90% marginal rates, then the People get robbed and the concentration of private wealth and power takes place; fascism.”
It was a Democratic administration that made the first big cut in the top marginal rate bringing it down to 70%, which was where it was when I started in 1979, with a special lower rate on earned income. Then the Economic Recovery Tax Act brought us down to 50%. And then came the great compromise. During the high rate era, tax shelters of all sorts were rife. The Tax Reform Act of 1986 killed most shelters and for a brief time equalized ordinary income and capital gains. Since then rates have crept up along with bells and whistles that TRA 1986 stripped out.
In reality, very high marginal rates are counterproductive and the grownups in the Sanders campaign probably know that. The 90% rate is the Sanders equivalent to the wall on the Mexican border that Trump is promising or Carly Fiorina’s three-page tax code or Ted Cruz’s plan to close the IRS and post all its agents on the border. Republicans run against Lois Lerner. Bernie Sanders runs against the Koch brothers.
Sanders As A Conservative
The odd thing about Sanders is that in some ways, he is more truly conservative than many of the Republican candidates. They seem to alternate between a libertarian paradise or some sort of vision of how things must have been in 1795 when the Founding Fathers were still keeping an eye on things. Bernie Sanders wants us to have an economy like it was in the sixties and early seventies, when a summer of hard work could pay a year’s tuition and there were plenty of factory jobs that would support a family. Of course that post-World War II golden age might also prove elusive due to demographic changes and the rest of the world catching up with the United States.
President Sanders Might Happen
I’m still thinking that a Sanders administration in 2017 is a contingency worth planning for. His Rolling Stone interview with Killer Mike might show a broadening of his base. Killer Mike was very impressed with Bernie’s civil rights credentials. The only thing that they had to agree to disagree on was assault rifles, which Killer Mike thinks should be generally available. His income tax proposals are really too vague to do any planning with, but when it comes to transfer taxes, I think his proposals could serve as a spur to make some moves that might be a good idea regardless.
Update
Prior to Iowa, the Sanders campaign did come out with a more comprehensive plan. The top marginal income tax rate which does not kick in until $10 million is 52%. When you throw in his health care tax and the elimination of the FICA cap, there is an argument that some people would be in the high sixties or low seventies on some of their income. Still a good way from 90% though.