Well it’s no surprise that Senator Bernie Sanders came out against Trump’s tax reform plan saying it is a “disaster.” In the video above he lays out why he doesn’t like the plan, and of course it’s the usual Democrat socialist lines like “the rich need to pay their fair share, it helps the rich at the expense of everyone else, and income inequality blah blah blah.” Let’s go over some of the problems I have with his thinking.
“The rich need to pay their fair share.” This criticism always gets me. How much exactly would be considered a “fair share”? Knowing Sanders he would probably be happy with going back to a 70% or 90% tax rate for the top bracket. But why is that fair? It’s not. Right now the top marginal tax rate it 39.6% and under Trump’s plan it would go down to 35%. Last time I checked that’s still a higher rate than anyone in the lower income categories have to pay, yet it’s still not fair? If anything it’s not fair to them.
Bernie Sanders then will say it’s not just unfair that the rich don’t pay a higher rate, but they are not paying their fair share of the tax burden as compared to everyone else, that the lower and middle classes have to shoulder most of the burden in this country. Well that’s not true either. According to IRS data from 2013, the top 1% of income earners earned 19% of the income in the country, but paid 38% of the taxes. This is compared to the bottom 50% of income earners who earned 11% of the income and paid just 3% of all the taxes. The divide is even more stunning when you realize that in 2015 45.3% of Americans paid NO income taxes. Tell me why it’s not fair that the rich pay 35% tax rate again?
“It helps the rich at the expense of everyone else.” This is misleading as well. How does lowering taxes for the rich or for corporations hurt me? How is it at my expense? My taxes aren’t going up either. Sanders’ thinking on this is not that the lower classes will have to make up the tax burden, but his argument is that it will mean less money going to the government for big government programs. He believes that the best ways to help the middle and lower classes is to take money from the rich, and redistribute to the middle and lower classes, and THAT’S how you stimulate the economy. The fact of course is the opposite. The private sector is much better at creating economic growth for the middle and lower classes than big government welfare programs.
“Income inequality.” Ah good old socialist class warfare. His arguments are always that the rich have too much of the wealth in this country and that they are accumulating it at the expense of everyone else. This is a lack of understanding of basic economics of course. Just because the rich are getting richer doesn’t mean everyone else is getting poorer. It’s not a zero sum game. The richest people in this country did not get rich by “stealing” the wealth from the lower and middle classes. Most times they got rich by creating more wealth for everyone! Just look at Bill Gates. Yes he is very rich. His net worth is $85.5 billion. He didn’t get that money from stealing from anyone, but creating a company that has a market value of $507 billion today. Microsoft has no doubt created an almost immeasurable amount of economic growth and wealth in the country that has benefitted everyone. Yet I’m supposed to be upset because he’s rich? The amount of money he is worth doesn’t compare to the amount he has created.
These points being made, I will admit that Sanders makes one good point in his socialist diatribe. He makes the point that it’s hypocritical for the GOP to be constantly complain about the deficit and then want to pass a tax plan that will increase the deficit. This is no doubt why their Obamacare replacement plans were more focused on reforming Medicaid rather than cutting regulations. The Republicans are arguing that the future economic growth will offset any potential deficit. With the way government spending is going I’m not sure I buy that. I’m all for tax cuts, but we need to also get serious about cutting spending and entitlement reform.
Trump’s tax plan has a lot of good and some bad. The tax cuts for businesses will stimulate economic growth for years. This is already evident in the rising stock market, which most market analysts are saying is a result of investors counting on future tax cuts. It also simplifies the tax code which is something that has been needed for a while in this country. The verdict is still out on how many will benefit from the changes to the personal income tax rates with the raise in the standard deduction. Most likely it will help most but hurt some (all depending on where the bracket cutoffs will lie). The bad is it will increase the amount of people who don’t pay taxes, and increase the deficit and debt at a time when we should be getting serious about doing the opposite.