Senator Bernie Sanders released his official tax-plan for healthcare just hours before the Democratic debate was held last night. Surprisingly, his plans are very well-thought out and would actually save the average American a great-deal of money on healthcare each year.
Before I explain exactly what his tax plan does, I would like to clarify a couple of terms.
Mandatory Spending: is federal spending that is spent based on existing laws rather than the budgeting process. For instance, spending for Social Security is based on the eligibility rules for that program. Mandatory spending is not part of the annual appropriations process.
Discretionary Spending: is the portion of the budget that the president requests and Congress appropriates every year. It represents less than one-third of the total federal budget, while mandatory spending accounts for around two-thirds.
Federal Budget: The total federal budget when mandatory spending, discretionary spending, and interest paid on debt are added together.
For 2015, the total federal budget was approximately $3.8 trillion.
The total amount of discretionary spending was about $1.11 trillion and the total amount of mandatory spending was $2.45 trillion.
About $66 billion of the discretionary spending and $986 billion of mandatory spending went into healthcare and medicare.
This total number comes out to be about $1.05 trillion.
– This $1.05 trillion figure is what is spent on medicare/health and doesn’t factor in the $1.3 trillion spent on social security, unemployment and labor.
However, the total spending for healthcare was just over $3 trillion in the United States for 2015.
Well, how does that make sense?
If the total spending for healthcare was about $3 trillion in the United States and the federal government only covered $1.05 trillion of that, then what happened to the other $1.95 trillion?
The other $1.95 trillion is paid for by state governments and by American citizens. A majority of that $1.95 trillion is paid for by the American people for healthcare coverage and out-of-pocket expenses.
This plan has been estimated to cost $1.38 trillion per year. If you add the $1.05 trillion to this figure then it’s roughly $2.4 trillion.
Under Bernie Sanders’ healthcare plan, the total amount of health expenditure in the US would be roughly $2.4 trillion which would save about $600 billion every year. This number reinforces the number that the Sanders’ campaign released. The Sanders’ campaign had stated that their plan would save America approximately $6 trillion over 10 years. $600 billion mulitplied by 10 years = $6 trillion. This number checks out.
Under Bernie Sanders plan, everyone would be covered for everything.
Bernie’s plan would create a federally administered single-payer health care program. Universal single-payer health care means comprehensive coverage for all Americans. Bernie’s plan will cover the entire continuum of health care, from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments. Patients will be able to choose a health care provider without worrying about whether that provider is in-network and will be able to get the care they need without having to read any fine print or trying to figure out how they can afford the out-of-pocket costs. – Berniesanders.com
Where Does This Money Come From?
This additional $1.38 trillion would come from new taxes.
- A 6.2 percent income-based health care premium paid by employers = $630 billion per year.
- A 2.2 percent income-based premium paid by households = $210 billion per year. (Currently this same tax is for medicare and is 1.45% and it’ll be increased by 2.2%)
- Taxing capital gains and dividends the same as income from work = $92 billion per year.
- Limiting tax deductions for rich = $15 billion per year.
- The Responsible Estate Tax = $21 billion per year.
- Savings from health tax expenditures = $310 billion per year.
Additionally: This tax-plan would effect the marginal income tax rate which would raise about $110 billion a year.
Here are the new figures for the income tax rate.
- 37 percent on income between $250,000 and $500,000.
- 43 percent on income between $500,000 and $2 million.
- 48 percent on income between $2 million and $10 million. (In 2013, only 113,000 households, the top 0.08 percent of taxpayers, had income between $2 million and $10 million.)
- 52 percent on income above $10 million. (In 2013, only 13,000 households, just 0.01 percent of taxpayers, had income exceeding $10 million.
In total it’s about $1.38 trillion.
In addition to this, he also wants to end the law allowing American corporations to defer paying federal income taxes on profits of offshore subsidiaries, prevent corporations from avoiding taxes through loopholes and other means and to end tax breaks on big oil, coal, and gas. He’d also like to tax wall-street speculation.
What Does This Mean Realistically?
Let’s take a look at a family of four that would be making $50,000 ayear.
The announcement said the average working family now pays $4,955 in premiums for private insurance and spends an additional $1,318 on deductibles for care that isn’t covered. A family of four making $50,000 a year taking the standard deduction would only pay $466 this year.
A family of four taking the standard deduction can have income up to $28,800 and not pay this tax under Bernie’s plan.
Businesses would save over $9,400 a year in health care costs for the average employee.
The average annual cost to the employer for a worker with a family who makes $50,000 a year would go from $12,591 to just $3,100.
Below are the current marginal tax rates and the new ones with the increases rates added.
Current marginal tax rates for individuals:
- 0 – $9,225 = 10%
- $9,226 – 37,450 = 15%
- $37,451 – 90,750 = 25%
- $90,751 – 189,300 = 28%
- $189,301 – 411,500 = 33%
- $411,501 – 413,200 = 35%
- $413,201+ = 39.6%
And for families:
- 0 – $18,450 = 10%
- $18,451 – 79,900 = 15%
- $79,901 – 151,200 = 25%
- $151,201 – 230,450 = 28%
- $230,451 – 411,500 = 33%
- $411,501 – 464,850 = 35%
- $464,851+ = 39.6%
Here are the increases:
- Under $28,800 = +0%
- $28,801 – 249,999 = +2.2%
- $250,000 – 411,500 = +6.2%
- $411,501 – 499,999 = +6.2%
- $500,000 – 1,999,999 = +5.6%
- $2,000,000 – 10,000,000 = +10.6%
- $10,000,000 = 14.6%
Note: these take into account the new income tax + the new income based Medicare tax of 2.2%.
Here are the predicted tax brackets and their tax rates:
- $0 – 18,450 : 10%
- $18,451 – 28,799 : 15%
- $28,800 – 79,900 : 17.2%
- $79,901 – 151,200 : 27.2%
- $151,201 – 240,450 : 30.2%
- $240,451 – 249,999 : 35.2%
- $250,000 – 411,500 : 39.2%
- $411,501 – 499,999 : 41.2%
- $500,000 – 1,999,999 : 45.2%
- $2,000,000 – 9,999,999 : 50.2%
- $10,000,000+ : 54.2%
Note: these take into account the new income tax + the new income based Medicare tax of 2.2%
Note: All calculations for predicted tax brackets and their tax rates are made with the available data as of Jan 18, 2016 and are subject to error. All percentages were calculated by Clay Graubard.
Bernie Sanders has officially released a competent and feasible tax plan. A large majority of Americans will not see much of an increase in their taxes. Only about 1.7-1.8% of Americans earn $250,000 or more a year the most recent statistics from the IRS. You can find this number by finding the total amount of tax returns and the total amount of tax returns that filed for an adjusted gross income of less than $250,000. A majority of Americans would be between $28,801-$250,000 a year and they would only see an increase of 0.75% taxes. This really isn’t that much when compared to the amount of money paid for health insurance and health issues.
Bernie Sanders’ tax-plan will not be a war on the middle-class like many Republicans and fellow front-runner Hillary Clinton would like the public to believe. This is Bernie Sanders fulfilling his half of the bargain. Bernie is a politician for the people paid for by the people.