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Originally published on Forbes.com.
I had despaired of there being anything for tax bloggers in the Clinton Sanders debate last night, but nearing the end my patience with the tedium finally paid off when they got into the Social Security cap. The Social Security cap gets at what I see as the essential difference between Clinton and Sanders. Who are these rich that are going to have to pay more?
Who Is Rich?
The way Clinton spoke it did not sound like the rich included her. She and her husband, as she is wont to call him in debate settings, according to the 2014 return had adjusted gross income of $27,336,212. The Sanders return for 2014, released but lacking some pages, prepared by Jane, as Sanders refers to his spouse, shows adjusted gross income of $205,271.
Where Does Clinton Stand On The Cap?
The social security cap, along with the way “Medicare for all” is financed, is one of the biggest differences between the tax plans released by Clinton and Sanders. Although both plans reduce the after tax income of those making over $730,000 (Sanders much more dramatically), the Clinton plan barely touches what I call “the other 4%” ($140,000 to $730,000), the Sanders plan reduces their after tax income by over 10%.
Much of that difference comes from the Sanders plan fooling with the income cap on social security tax. Social security tax still gets turned off at $118,500 under the Sanders plan, but it gets switched back on at $250,000. That change would have cost the Clintons over $2 million on their 2014 returns and the Sanders, well, zero. The challenge in the debate was to Clinton as to whether she would support the cap change in order to shore up social security. Following the transcript from the New York Times, her answer is just a bit confusing.
I have said repeatedly, Wolf, I am going to make the wealthy pay into Social Security to extend the Social Security Trust Fund. That is one way. If that is the way that we pursue, I will follow that.
After a lot of back and forth and Clinton talking about getting more social security payments to women, Sanders accuses her of not having answered the question. Citing an Obama proposal, Sanders says
He called for lifting the cap, which is now higher — it’s at 118 — and starting at 250 and going on up. If you do that, you’re going to extend the life of Social Security for 58 years. You will significantly expand benefits by 1,300 bucks a year for seniors and disabled vets under $16,000 a year.
What’s wrong with that?
Are you prepared to support it?
Her answer is “I have supported it. You know, we are in vigorous agreement here, Senator.”
Only in the tax plans as scored by the Tax Policy Center adjusting the social security cap is not included in the Clinton plan.
I think when you boil it down, the difference between Sanders and Clinton is that for Sanders rich starts at around $300,000 per year. It is not clear where it starts for Clinton other than that it is much more.
Medicare For All Hammering The Medicare Already
Clinton did not get into what I see as the biggest distributional weakness in Sanders “Medicare for all” plan. She does allude to it:
People have been analyzing the new plan. And there is no doubt by those who have analyzed it, progressive economists, health economists, and the like, that it would pose an incredible burden, not just on the budget, but on individuals. In fact, the Washington Post called it a train-wreck for the poor. A working woman on Medicaid who already has health insurance would be expected to pay about $2,300.
The plan would also hit the working elderly, people like I will soon be, for example and Sanders for that matter. We already or soon will have Medicare coverage, but will now be paying for everybody else.
Beyond Tedious
The rest of the debate was beyond tedious. When will Clinton release transcripts of her quarter million a pop Wall Street speeches? Sanders has already released all none of his. What about the Sanders tax returns? Well, I have to admit that one has me thinking. I wonder if we will be having a TurboTax made Jane do it moment ala Tim Geithner soon.
How many New York hoodlums are driving to Vermont not for the foliage, the maple syrup or the Ben and Jerry’s, but rather to buy guns? Actually that section was more about what the Clinton campaign meant. At any rate, I think I will close with what I find most disappointing about both Democratic candidates.
The 1040 Smack Down
One of my methods for evaluating Presidential candidates, which I call the 1040 smack down, is who they used to prepare their tax returns. In my mind that person earns the title of First Accountant. I see the First Accountant as somebody who might serve an informal advisory role to bring some common sense to the country’s finances, like Murray Blum in the movie Dave.
Both Clinton and Sanders are very disappointing in this regard. Clinton uses the international law firm of Hogan Lovells and the Sanders return is prepared by Jane a former college President. That puts them far behind Ted Cruz whose return is signed by Karen Jones CPA, Managing Partner of Meador & Jones LLP. Local CPA firm with a woman managing partner. It just doesn’t get any better than that.
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