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Op-ed: Why Higher Taxes Under Bernie Sanders Makes Sense

There are two certainties in life: death and taxes. Now, the first is unavoidable and the latter can be manipulated; but the sad reality is…

There are two certainties in life: death and taxes. Now, the first is unavoidable and the latter can be manipulated, but the sad reality is that our world and the mere nature of society is that every collective of people requires some kind of tax system, whatever it may be.

It must be stated early on that the hypothesis of this story is purely theoretical and that the governments are inefficient by their very nature. Not only is managing budgets, implementing policy and looking after the welfare of your citizens and businesses difficult, but it can be counterproductive and politicians are always going to be corrupt. This is just how the world works. My argument cannot take into account the finest nuances, simply because you would be reading a book if I had to cover the distribution of every last nickel or penny. This is more of a moral standpoint, an ideological framework.

Taking into account the realities of several nations around the world, we will be taking a look at the American, largely fiscally conservative approach, find its advantages and flaws, and explain why a social democrat outlook would be beneficial for the biggest and most influential economy in the world. Let’s also agree that, although China leads America in GDP, their population simply doesn’t reap even nearly the same level of quality of life and that serves to discredit the idea that their economy is more functional. America’s most redeeming quality always has, and always will be, the strength of their democracy.

Speak to any political scientist the world over and they will all agree that the American constitution is one of the best, if not the best, binding documents that dictates the behaviour of government and protects the individual rights of a population. The reason why some less than appealing laws, such as the Second Amendment (the right to bear arms) continue to exist today, leading to a devastating frequency of mass shootings throughout the country, is because their constitution is so robustly protected and abides largely according to the will of the people.

Constitutional amendments, such as those that ended slavery, enshrined civil rights and legalised gay marriage, all went through strict processes and followed the will of the people. Particularly after the triumph of capitalism in the ideological conflict that defined the Cold War, an economy that strives to reduce taxes and government regulations has entrenched itself into the will of the people. However, with millennials bearing the brunt of unchecked years of environmental exploitation, unaffordable healthcare, exorbitant costs of education and stagnant wages, an ideology of social democracy akin to those in Scandinavia and around Europe has become overwhelmingly popular.

To this end, Donald Trump appears to be the last remaining antithesis to this ideology and he’s highly popular among the older generation that still lives in the anti-communism Cold War, McCarthyism, Red Scare framework. The most popular politician among young people is Bernie Sanders and his 10.8% lead in the national polling averages for the Democratic primaries are evidence of that. Joe Biden’s massive victory in South Carolina, where he grabbed 48.4% of the popular vote largely comes down to the fact that his campaign pumped a lot of resources into the state and took a major gamble. But it’s also because South Carolina’s voters are predominantly from the older generations. Sanders, on the other hand, holds huge leads in all of the Super Tuesday states and it seems quite likely that, following his hat-trick of popular vote wins in Iowa, New Hampshire and Nevada, he will win the nomination.

So, why is Bernie popular? He supports Medicare-for-All (he wrote the damn bill), which will create a single-payer system where healthcare is free at the point of service, similar to the systems in place in Canada and the United Kingdom. He supports a Green New Deal, a policy that aims to tackle climate change by dismantling the fossil fuel industry and guaranteeing federal jobs to American workers as the government makes a major effort to create renewable energy structures – this is based on Franklin Delano Roosevelt’s New Deal, which brought America out of the Great Depression and led to him winning four consecutive presidential elections and only death keeping him from winning more. He was incredibly popular and the social reforms, including the creation of the social security system, he implemented are untouchable to this day.

Bernie also supports forgiving student loan debts and legalizing marijuana. However, the average American voter will still see this as a “pie in the sky” pipe dream because they ask, “how are you going to pay for it?”

Sanders released a plan on his campaign website.

America’s current healthcare system would cost the American people $52 trillion over the next 10 years and, under a medicare for all system it would cost $47 trillion – a $5 trillion saving. How does that work out? If everyone is getting served without paying, how on earth do they save money? The answer mostly down to administrative costs. Under a privatised system, hospitals have to bill every patient that walks through their doors or the numerous insurance companies, as well as whatever government program pays in subsidies. Sometimes people don’t pay, that requires legal fees too… Under a single-payer system, hospitals go to the government alone. No legal fees, no plethora of documentation, no debt collection. Making sure money is paid and budgets are in order is the government’s issue – a public expense.

Then you get the consumers themselves. Under the Medicare-for-All system, a 4% tax on every dollar earned above $29,000 a year will be charged. An average American family of four has a household income of roughly $60,000 and pays as much as 20% of that on medical insurance premiums, drugs, deductibles and co-pays. Calculate the difference between $12,000 a year on private medical expenses and $12,400 in taxes on a free-at the point of service system. Medicare-for-All saves the average American just less than 90% of their income. This is a no-brainer. Then, account for the fact that there is an increase in economic activity because people aren’t going to work when they’re sick and there will be an uptick in their productivity. People have more consuming power and can put more money back into the economy, and people will simply be saner, they won’t live in poverty and resort to crime to make ends meet or turn to illegal drugs to escape their feelings. Parents will be able to send their kids to better schools and societal welfare simply improves without the burden of medical debt on people’s backs.

The same goes for Bernie’s policy of free college tuition. In fact, schools in America are already free, so it’s just taking that stance a step further. And there is over $1.6 trillion in student loan debt plaguing the American economy as of 2019. For the same reason as above, removing that burden can only have an incredibly positive affect on the American people and their economy.

Bernie’s economy may be a pie in the sky idea, but the challenge with the idea is not a matter of money, it’s a matter of clarity and educating people on the nuances behind how much his plans will cost. And this takes us to the dark idea of taxes.

The OECD average for income taxes, according to the Federal Budget Committee, is 34% – America’s is 26%. Only South Korea, Chile and Mexico have lower tax rates. The highest income tax can be found in Denmark, who charge their citizens 50.9% in tax.

The World Bank estimates for the gini coefficient (an equality index where a value of 0 means a country is completely equal and 100 is completely unequal – one personal owns all of the wealth) found Denmark’s coefficient to be 28.20 in 2015 (making it the 16th most equal country in the world). The United State’s value was 41.50 in 2016(the 51st most unequal state in the world, South Korea was at 31.60 [a counter point to my argument] and Mexico, the 19th most unequal country on earth, had a coefficient of 48.30. Why is there a correspondence? High taxes ensure that the most vulnerable people in your society are protected.

Now you get some great examples of countries that pay 0% income tax, some because they’re oil rich, like the UAE, some because their tourism industry thrives enough to sustain their economies, like the Bahamas, and some simply because everyone that lives there is rich, like the principality of Monaco – the poster-child for tax havens. Then you get others, like Somalia and the Western Sahara, the war-stricken failed states that simply can’t tax their citizens.

The failed states don’t really provide an argument to either end of the debate because the answer to how their tax systems have failed is obvious to everyone. The tax-exempt states have a different outlook though. Their vulnerable people are taken care of through alternative income streams… oil is always nice. Norway’s social democracy is built on the backbone of its nationalised oil industry, for example. Monaco is different – there are no vulnerable people for the government to take care of and everyone’s rich.

America and most countries around the world are neither failed states, nor oil rich, nor absent of poverty. But the fact is this: even the wealthiest American, should he or she have to pay an income tax of even 40%, will save money on not paying for medical expenses, not paying college tuition and their sanity will be preserved knowing that they aren’t likely to fall victim to the crime that corresponds with poverty, knowing that their children won’t be offered drugs on the street, knowing that there’s a little less chaos in their society.

Now, perhaps its a cultural issue that serves as a mental block to Americans, but most conservatives would agree that the golden era for America’s Middle-Class can be accredited to one of the most popular presidents ever, Dwight B Eisenhower, who ran the country from 1953 to 1961. Under his administration, the top marginal tax rate was 91%. What does that mean? For exeryone who earns more than ‘x’ amount of money, they are charged 91% on every dollar they earn above ‘x’. So let’s say that x is $1 billion. Basically, you will be taxed the normal rate up until the first billion that you earn, and every billion after that is taxed 91% – for example. So… you’re still earning a billion dollars. Even getting a mere 9% back on the next $120 billion or so, if your name is Jeff Bezos, is not exactly going to kill you. And most Americans aren’t billionaires, so they don’t even have to worry in the first place.

And let’s not forget that Eisenhower was a Republican! What did he know back then, just before the booming middle-class of the 60s emerged? He knew that high taxes led to a large middle-class. This was a time in American history where the middle-class thrived, when they became the most revered economy in the world and when they put a man on the moon. There is no need for extreme wealth and extreme poverty to exist in the world’s biggest economy and the moment Americans begin to realise that higher taxes create greater societal welfare will be the moment that America truly becomes great again.

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