On August 26, 2015, FeelTheBurn,org posted the following:
The United States currently faces a $468 billion deficit. There are many politicians who want to reduce this deficit by cutting back on social programs. For years Bernie Sanders has sharply criticized politicians who support such policies – which he considers regressive – as seen here in his fiery 2003 exchange with former Federal Reserve Chairman Alan Greenspan:
Bernie has different ideas:
Progressive Taxation: Progressive income and estate taxes will raise money for the budget while preventing the creation of an aristocratic class of Americans.
Tax Corporations and the Wealthy Fairly: Middle-class Americans are forced to pay taxes, while the super-rich and corporations enjoy loopholes. That needs to stop.
Reduce the Defense Budget: America spends almost as much on defense as the rest of the world combined, but our defense budget can and should be reduced.
Investment in Infrastructure: America’s infrastructure must be maintained and expanded, and doing so will create millions of jobs and help the economy prosper.
Progressive Taxation
A progressive estate tax, also known as the “billionaire tax,” may be the fairest way to begin reducing the federal deficit. Bernie has introduced a bill that closes many of the loopholes used by the extremely wealthy to avoid having to pay their fair share of taxes. An estate tax also serves to prevent the creation of an American aristocracy — a family that can continually hand down its wealth across generations without working or contributing to society in a meaningful way.
At the same time, Bernie wants to increase income taxes on the richest Americans so that they finally pay a decent share of America’s budget. That means taxing capital gains and dividends as ordinary income, which are currently taxed at a comparatively low rate.
Who are the “richest Americans”?
These are the Americans who qualify for the top income tax bracket. Right now, the top tax bracket begins with money made beyond $400,000, and any additional money is taxed at 39.6 percent.
Does this mean these individuals pay 39.6 percent of their entire income in taxes?
Not at all. It means that money earned beyond $400,000 is taxed at 39.6 percent. The first $400,000 they make is taxed at the lower tax bracket rates.
This is actually how all tax brackets work in a progressive tax system.
I heard Bernie wants to raise the top tax bracket to 90 percent. That seems too high.
That’s actually not true. Bernie has never said he wants to do that. He has recently said that he is “working right now on a comprehensive tax package, which I suspect will, for the top marginal rates, go over 50 percent.”
But has it ever been that high?
Actually, yes. The top tax rate was over 90 percent from 1944 until 1964, including while Republican Dwight D. Eisenhower was president. This article in Business Insider shows just how low the 39.6 percent tax is compared to historical tax rates.
OK, what’s the estate tax?
The estate tax is a tax on the estate of someone after they pass away.
What does Bernie think is wrong with it?
While for many years this tax unfairly affected the estates and farms of many working- and middle-class Americans, it has been significantly changed to only affect large estates, worth over several millions of dollars. The problem is that the rate has been lowered and the cap raised to such an extent that it has amounted to a huge tax break for the super-rich.
OK, so what is Bernie’s answer to reforming the estate tax?
Bernie has proposed lowering the bar on estate taxes, so individuals’ estates worth more than $3.5 million and couples’ estates worth more than $7 million will be affected. This bill also increases the amount of tax on these estates, and closes loopholes used to avoid paying these taxes.
How much revenue can raising taxes on dividends and capital gains yield?
Bernie estimates that it will raise over $319 billion over ten years.
To see a full explanation of Bernie’s tax reform ideas, read the tax section of the Addressing Economic Inequality issues page.
Tax Corporations and the Wealthy Fairly
Despite record breaking profits, the share of the federal budget paid by corporate income tax is down from 33 percent in 1950 to just 9 percent today. Meanwhile, the past decades have seen large corporation closing their American offices and moving headquarters overseas to avoid paying taxes. Bernie believes that closing tax loopholes for corporations is an absolute necessity for fixing the federal budget.
Bernie also wants to expand Wall Street regulation and discourage reckless gambling in the financial sector by instating the Financial Transaction Tax (FTT). Closing loopholes like this and others could be enough to raise $590 billion over the next ten years. For more info on the FTT and closing loopholes, see the Financial Regulation issues page.
What kind of loopholes are being used now?
There are many different ways that corporations and other businesses are able to avoid paying their fair share of taxes, but offshore headquarters used for avoiding taxes is one of the most costly. Bernie has personally penned a letter to President Obama highlighting six of the top loopholes corporations use in a plea for the president to close them.
How much are closing tax loopholes worth?
Bernie has stated that loopholes created by these corporations are costing the country an estimated $100 billion per year in lost revenue. That is a trillion dollars over ten years!
What about ending tax breaks and subsidies for oil, coal, and gas companies?
Removing these tax breaks will generate an impressive $113 billion in revenue over ten years.
Reduce the Defense Budget
America’s defense spending is three times more than the number two spender: China. Evenamong members of the military, many believe that the budget could be drastically reduced.
Will reducing military spending leave America vulnerable to attack?
The defense budget can and should be reduced without presenting any risk to our country.
By how much can the military budget be safely reduced?
Currently there is no clear plan for defense spending cuts, and anything will have to be done very carefully. The real problem now is that defense spending has risen dramatically since 9/11 and can eat up as much as 20 percent of the federal budget.
To learn more Bernie’s stance on the Military Budget, click here
Investment in Infrastructure
An estimated 1 in 9 bridges in the US are considered structurally deficient, and many of the country’s dams are high-hazard. Unfortunately, that doesn’t even scratch the surface ofAmerica’s deep infrastructure problems. Bernie believes the country has sacrificed its own needs in favor of spending on foreign wars and other wasteful expenditures. He has proposed an infrastructure plan to spend $1 trillion over five years to rebuild America’s dilapidated roads, water mains, and congested railways.
How will spending $1 trillion help the economy?
The most obvious answer is that it will get the country back to work again, and will get Americans spending money. But beyond that, there are huge added benefits to a properly functioning infrastructure. For example, according to a study by Duke University, every dollar invested in transportation infrastructure returns $3.54 in economic impact. That is over three and a half trillion dollars in economic benefit over five years!
How many jobs will this create?
An estimated 13 million people will be put to work rebuilding America’s infrastructure. A $1 trillion investment would modernize our physical infrastructure, making our country’s systems safer and more efficient, while also creating millions of well-paying jobs. Here’s Bernie talking about it:
To learn more about this proposal, read what Bernie has to say about infrastructure.
http://feelthebern.org/bernie-sanders-on-the-federal-budget-and-national-debt/
While many of Bernie Sanders policy ideas are excellent, I would propose some refinement, which is covered in my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://foreconomicjustice.org/11/economic-justice/
In essence we need justice-committed leaders, such as Bernie Sanders, and activists who will advance inclusive prosperity, inclusive opportunity, and inclusive economic justice for ALL Americans.
This is what I propose:
- Eliminate all tax loopholes and subsidies,
- Provide an exemption of $100,000 for a family of four to meet their ordinary living needs,
- Encourage corporations to pay out all their profits to their owners as taxable personal incomes to avoid paying corporate income taxes and to finance their growth by issuing new full-voting, full-dividend payout shares for broad-based citizen ownership,
- Eliminate the payroll tax on workers and their employers, but
- Pay out of general revenues for all promises for Social Security, Medicare, government pensions, health, education, rent and subsistence vouchers for the poor until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.
- While the tax rate should be progressive, eventually the tax rate should be a single rate for all incomes from all sources above the personal exemption levels so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt, but the poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, rents and other property incomes which under some tax proposals would be exempted from any taxes.
- As a substitute for inheritance and gift taxes, a transfer tax should be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
- The Federal Reserve should stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and
- Begin creating an asset-backed currency that could enable every child, woman and man to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
- The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets.
- The shares would be purchased using interest-free credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the added technology, renewable energy systems, manufacturing factories, rentable space for entrepreneurial endeavor and infrastructure, both repair and new, added to the economy.
- Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but
- Would not require citizens to reduce their funds for consumption to purchase shares.
Furthermore, enact the proposed Capital Homestead Act. (See http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.) The Capital Homestead Act will enable EVERY child, woman, and man to borrow newly created money to purchase a pro rata share of the capital “growth ring” added to the economy each year, to be repaid with future dividends received on the shares purchased.
immediately reinstitute Glass-Steagall legislation, except with much stronger provisions. Within 90 days there must be a complete separation between investment banking, commercial banking, insurance, and all other discrete forms of banking and financial services. Commercial banks may temporarily continue to offer consumer banking services, but these must be phased out or spun off from the commercial banking function within three to five years. Credit unions, savings and loans, and similar institutions were designed to handle consumer banking services, and specialization in financial services is one of the keys to good internal control.
Immediately open the Federal Reserve Discount Window to rediscount “qualified agricultural, commercial, and industrial paper” from commercial banks. This is what the Federal Reserve was designed to do as authorized under Section 13 of the Federal Reserve Act. Make certain, however, that “qualified” is defined as including a provision that expands ownership of newly formed capital, and is limited to financially feasible capital projects adequately collateralized, and “acceptable collateral” is defined as capital credit insurance. Extend the term of qualified paper to up to ten or fifteen years, as was done in part in the 1930s in an effort to provide funding for new capital. (Back then it didn’t work very well because otherwise qualified borrowers lacked collateral in the form of capital credit insurance to be able to take advantage of the program.) Short-term paper (90 day or less) may qualify without the expanded capital ownership provision, unless renewed past 360 days. (This will institute 100 percent reserves for all loans rediscounted at the Federal Reserve.) All of this is either currently in the law, or could be added without legislation with regulations. Also, begin phasing out open market operations in government debt paper, with the goal of retiring the debt completely and backing the money supply 100 percent with private sector assets.
Phase out the progressive tax with the phasing in of growing capital income simultaneously with the broadening of capital owners, and reform the tax code, simplifying it by treating all personal income from whatever source exactly the same for tax purposes. Exempt from taxation $20,000 for dependents, $30,000 for non-dependents, eliminate all other deductions and credits at the personal level, and give a lifetime deferral of $1 million on the current value of capital in a Capital Homestead Account. Tax all personal income above the exemption and deferral at the same rate for everybody. Increase the corporate tax substantially, but make dividends paid out to owners tax deductible at the corporate level, and treated as regular income at the personal level, unless used to acquire dividend-paying assets in a Capital Homestead account. A corporation or other business that pays out all profits and finances growth with new equity issues would thereby avoid all corporate income taxes.
The end result is that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elite controls the coercive powers of government.
