Opinion of Bernie's Income Tax Plan?

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linusvanpelt, one of our best posters, had a few keen points of criticism with regard to these calculations on AAD. I hope that he doesn't mind my re-posting them here. I do so less to defend the specifics of the Sanders tax plan than to demonstrate that Vox's policy analysis tends to be shallow and overconfident in its (frequently unspecified) assumptions:

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[Averroës Nix]

Anyway, I wouldn't go so far as to say that I like the Sanders plan: It's a very rough policy proposal, as all platform statements are.

But is it better than Clinton's absurd, reckless, and infeasible, pledge not to raise taxes on households earning less than a staggering $250,000 per year? Absolutely. Is it a better starting point for tax reform than the flat tax charlatanry that Trump and Cruz are peddling? Of course it is.

Given the level of public services that Americans currently enjoy and claim to prioritize, taxes need to go up on most of us, and some of us - including any family with an income of $300,000 which is above the 98% percentile for income - need to pay much more.

The only people who are currently paying "too much" are people at the lower end of the income distribution, some of whom are literally being taxed into poverty, others who face effective tax rates of  - *gasp* - above 50% (!) because they earn just enough to become ineligible for certain kinds of public benefits. (And, taking LvP's points into account, this mark against the Sanders plan is much less severe than Vox's calculations would make it seem.)

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Absolute and utter garbage. The way Bernie and liberal groups have talked lately would make one think that "the rich" don't pay any taxes at all, when in reality, they pay the overwhelming majority of federal income tax already.

It's all about taking money from people who have earned it and giving it to people who have not.

My wife and I would literally have 27% of our income redistributed away from us, just by the Feds. Add in state income taxes and property taxes and you're looking at almost 40%. This means that all my work from January 1 to almost the end of May would be working to earn money for other people, and that doesn't even factor in payroll taxes. And then, after that's implemented, the left will still think taxes are too low.

Does it get more "entitled" than living in a developed country, benefiting from public services and (relatively) non-corrupt governance, and expecting not to pay for any of this? That is exactly what rhetoric about working until whatever date "to earn money for other people" implies.

It's Randian garbage, and few trends in American politics have been more corrosive to our politics than the emergence of this narrative as a leading concern for middle-class households. Living in this country, working in this country, being a citizen of the United States means accepting the obligations that come with that, including paying taxes on your income. It's a shame that even Democrats are afraid to talk about this in terms of duty.

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My parents (who make around $300k a year) would pay a 62% tax rate under this plan (and around 67% if you include state income taxes). 67% tax rate is insane. No one should be paying that much.

Your parents make $300k a year and you dare to complain? Just be happy you won the lottery of birth while there are people in your country who don't have enough to eat every day.

Someone has to keep the upper part of the economy going.  Does Bernie want to put Lexus/Mercedes/BMW, high-value home manufacturers and resellers, boat sales, Saks 5th Ave. & Neiman Marcus, artists, classy restaurants, private schools, and other things that the $200K-1M income earners in this country like, out of business?  We live in a global marketplace now, BMW can't sell their cars at lower prices just because Bernie is giving the consumers less money.  They'll lose their profits and go out of business.

Everyone goes "oh those poor rich people!  They can't afford a BMW anymore!"  Come on guys.  If you work hard for twelve years to get your medical practice, and do the stressful and difficult work of being a doctor, don't you deserve a better quality of life?  Should we just run BMW and Mercedes out of town because f**k the rich?  Upper income earners have a right to their (usually hard-earned) livelihoods.  If you say "congratulations, you're rich, now you get to give all that money back to subsidize the poor" then we lose the motivation of becoming rich that inspires people to become entrepreneurs, to get their MBA/JD/MD, etc.

All of which takes for granted the idea that we need more lawyers, more MBAs, more medical specialists, etc. If higher tax rates encourage more high-achievers to opt for less remunerative careers with larger non-monetary rewards, I do think that we'd be better off.

Whether Sanders tax policy would encourage more MDs to become primary care docs rather than highly-compensated specialists (for example) is another matter, but you're coming at this with a set of assumptions about what is good that I suspect that most of the people you're arguing with do not share.

o/c this isn't even getting into some of the less favorable economic implications of what you're describing (e.g. Baumol's cost disease), or the negative sociological consequences: status anxiety, conspicuous consumption, consumerism, etc.

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My parents (who make around $300k a year) would pay a 62% tax rate under this plan (and around 67% if you include state income taxes). 67% tax rate is insane. No one should be paying that much.

Your parents make $300k a year and you dare to complain? Just be happy you won the lottery of birth while there are people in your country who don't have enough to eat every day.

Someone has to keep the upper part of the economy going.  Does Bernie want to put Lexus/Mercedes/BMW, high-value home manufacturers and resellers, boat sales, Saks 5th Ave. & Neiman Marcus, artists, classy restaurants, private schools, and other things that the $200K-1M income earners in this country like, out of business?  We live in a global marketplace now, BMW can't sell their cars at lower prices just because Bernie is giving the consumers less money.  They'll lose their profits and go out of business.

Everyone goes "oh those poor rich people!  They can't afford a BMW anymore!"  Come on guys.  If you work hard for twelve years to get your medical practice, and do the stressful and difficult work of being a doctor, don't you deserve a better quality of life?  Should we just run BMW and Mercedes out of town because f**k the rich?  Upper income earners have a right to their (usually hard-earned) livelihoods.  If you say "congratulations, you're rich, now you get to give all that money back to subsidize the poor" then we lose the motivation of becoming rich that inspires people to become entrepreneurs, to get their MBA/JD/MD, etc.

All of which takes for granted the idea that we need more lawyers, more MBAs, more medical specialists, etc. If higher tax rates encourage more high-achievers to opt for less remunerative careers with larger non-monetary rewards, I do think that we'd be better off.

Whether Sanders tax policy would encourage more MDs to become primary care docs rather than highly-compensated specialists (for example) is another matter, but you're coming at this with a set of assumptions about what is good that I suspect that most of the people you're arguing with do not share.

According to NBC, the most highly paid professions are surgeons, doctors, dentists, executives, petroleum engineers, lawyers, architects, pilots and air traffic controllers, pharmacists, and various upper-level managers.  I disagree strongly with your assertion that our brightest and most motivated people should be discouraged from pursuing those career paths.

That is not something that I said or implied, but maybe it was a mistake to engage with someone who declares himself a liar in his display name. Anyway...

Median pay figures mask quite a lot of variation in compensation within those professions - by specialty, by length of tenure, by public vs. private sector employment, by geography, by academic pedigree, and other factors. For example, primary care physicians earn 50% less than specialists, and primary care physicians living in under-served areas tend to earn even less. So, in principle, higher marginal tax rates could encourage people in these professions to make decisions that are more socially beneficial. And we know that even under our current tax code, many people are willing to work very hard for much less than they could be earning doing something else because of non-financial rewards. The idea that there's a direct correlation between a wage-earner's compensation and the degree to which that person's work benefits the public is not correct. It is not true for comparisons within professions, and it is not true for comparisons between professions.

Even if this isn't a policy goal - and this is the most direct and most important counterpoint to what you are claiming -  there's not much reason to believe that we'd be lacking for people who want to become high-status professionals because of higher tax rates. You might worry about how someone from a working class family would ever afford medical school, for instance, but that's an extremely severe problem even today. If we're lacking in a particular kind of professional, we'd be better off reducing barriers to entry - like the cost of medical school - rather than insisting on keeping everyone's income taxes low indefinitely in the hopes that it will encourage them to do something socially useful. And that's the argument that you set out to make - that there's some kind of public benefit in having people pay lower taxes on six-figure salaries (or, for that matter, investment income).

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Taxing high incomes more is everything I hate about the left - they want to give it all to the illegals, to the Muslims, and to successful people they throw up a big middle finger and say, we want to give it to losers.

(And my point about Muslims was just that liberals care about not offending Muslim sympathies - refusing to even call it radical Islamic terrorism - yet they certainly don't care about outright stealing hordes of money from successful people for no other reason than "fairness.")

You do realize - given your demographic profile and the, uh, somewhat fragile state of mind demonstrated by your posting history -  that you represent more of a "terror" threat than all but an almost negligibly small share of American Muslims?

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There's this weird misconception (especially amongst leftist) that a vast majority of rich people inherited their wealth and grew up in rich families.

That's far from the truth. 70% of billionaires didn't inherit anything and a majority of the Forbes 400 didn't come from rich families.

This discussion is pretty tangential to the "what marginal income tax rates are optimal" question, but this is... not even close to true:

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[Averroës Nix]

There's this weird misconception (especially amongst leftist) that a vast majority of rich people inherited their wealth and grew up in rich families.

That's far from the truth. 70% of billionaires didn't inherit anything and a majority of the Forbes 400 didn't come from rich families.

This discussion is pretty tangential to the "what marginal income tax rates are optimal" question, but this is... not even close to true:

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Fair enough, but tax increases on billionaires is far from what we're talking about.  If we're just talking about tax increases on those at that level, I'm OK with that.  What we were talking about is $10K+ increases in total tax bills for people just breaking the six figures.  That seems to be a different story entirely.

I don't think that talking about billionaires tells us much about other people's economic experiences, either, which is one reason why I dismissed the claim as not just false, but irrelevant. (Moreover, it's not as if the fact that a fortune is "self-made" is in itself a reason to favor lower tax rates.) But there's not much reason to believe that you can sustain the kind of programs that Sanders, other Democrats, and even Republicans usually campaign on, and fund them through income and payroll taxes, without raising those taxes on Americans earning $100k - $200k per year. In the long run, those of us who support those programs need to make that the case that they are worthwhile rather than deluding voters into thinking that only people with higher incomes will ever need to pay more.