Bernie Sanders Is Dumb Enough To Join The Trump Administration.
We've criticized Bernie Sanders economic plans in the past but now he's lost his mind. He has a wealth tax plan that is as stupid as radical Republican proposals. We've previously discussed Warren's wealth tax here. So read that post to understand what we're discussing here.
We'll be discussing information about the rollout and the plan itself.
The plan as currently listed on his website:
How the Tax on Extreme Wealth Would Work
This tax on extreme wealth would have a progressive rate structure that would only apply to the wealthiest 180,000 households in America who are in the top 0.1 percent.
It would start with a 1 percent tax on net worth above $32 million for a married couple. That means a married couple with $32.5 million would pay a wealth tax of just $5,000.
The tax rate would increase to 2 percent on net worth from $50 to $250 million, 3 percent from $250 to $500 million, 4 percent from $500 million to $1 billion, 5 percent from $1 to $2.5 billion, 6 percent from $2.5 to $5 billion, 7 percent from $5 to $10 billion, and 8 percent on wealth over $10 billion. These brackets are halved for singles.
Under this plan, the wealth of billionaires would be cut in half over 15 years which would substantially break up the concentration of wealth and power of this small privileged class.
Under current law, the IRS is already required to assess the net worth of the wealthiest Americans when they pass away, to calculate estate tax liability. A federal wealth tax would require the IRS to make the same assessment on an annual basis for the wealthiest Americans. Steps would also be taken to streamline the process for purposes of the wealth tax.
For assets that are difficult to appraise, the Treasury Department would have the option of allowing taxpayers to have appraisals done periodically instead of annually. The Treasury Department would establish the average rates of appreciation for several classes of assets. Those appraised only every few years would be assumed to appreciate in the intervening years at the average rate established for their designated class.
Assets placed in a trust would be treated as owned by the grantor of the trust (by the person giving assets to the trust) until that person’s death.
A Wealth Tax Is Enforceable
In order to ensure that the wealthy are not able to evade the tax, the proposal includes a number of key enforcement policies. First, it would create a national wealth registry and significant additional third party reporting requirements.
Second, it includes an increase in IRS funding for enforcement and requires the IRS to perform an audit of 30 percent of wealth tax returns for those in the 1 percent bracket and a 100 percent audit rate for all billionaires. Third, the wealth tax includes a 40 percent exit tax on the net value of all assets under $1 billion and 60 percent over $1 billion for all wealthy individual seeking to expatriate to avoid the tax. Finally, the wealth tax proposal will include enhancements to the international tax enforcement and anti-money laundering regime including the strengthening of the Foreign Account Tax Compliance Act.
We'll go past the low hanging fruit about how Bernie would bankrupt himself within a year or two because of personality rights that we talked about in our previous Warren wealth tax post.
He claims that the tax is hard to evade. No, it's not. Sham marriages can lower tax bills since single people pay more wealth taxes. They can also give wealth to their family members so that it will make each person's wealth lower. Family members who did nothing will receive small fortunes from their wealthier family members. People will also give up their citizenship before they become extremely rich.
It will completely destroy the fortunes of the wealthy. Spending 4% is generally considered to be the maximum amount of wealth that can be spent in a year without losing money. The number in many cases is actually lower. If you pay more than that in taxes in a year you are growing poorer. In bad years you'll lose even more money. You'll also pay capital gains tax along with your wealth taxes so you'll pay 23.8% on anything you sell to pay for your wealth taxes. If you borrow to pay your taxes you'll also have to pay interest on those loans. It will be impossible to privately own a large company. How could any company pay it's corporate income taxes every year (which Bernie will raise) in addition to several percent of it's value. It couldn't compete against companies that don't have to pay that. Expect public companies and executives to benefit. If Wall Street is making loans they can benefit too.
If Americans must pay the wealth tax and foreigners are not then they can buy up all of our assets. Of course poorer Americans can and may do so, but they'll most likely be putting a lot of the money into improving their lifestyles. Foreign states and people sitting on cash will be able to buy up our assets cheaply. This includes people like Putin, Xi, MBS, and their oligarch friends. Should they and the governments of China, Russia, and Saudi Arabia plunder our economy. I don't think so. It's also harder to tax foreigners and foreign governments and officials who are protected by international laws.
His plan leaves unanswered what happens to trusts when the grantor dies. So who knows how that part works.
Bernie also claims that he'll use this tax to fund his proposals like Medicare For All and Free College etc. This is true, but only for a time. Once all the wealth from Americans is confiscated his wealth tax will have low receipts. Foreigners will take what they can like valuable Intellectual Property and high technology workplaces offshore if they must pay wealth taxes here. Asset values will plummet since people will have less money to buy them, which lowers wealth. This is a tax that after the first few years will raise very little. His economists who created the plan are either lying or fucking stupid.
He will also possibly trigger a 2008 style financial crisis. One of the easiest ways to be able to pay your wealth taxes is to take out way more debt and get higher returns on investments with more risk. This will create asset bubbles and when the economy goes into a recession the wealthy will not have enough money to pay back their lenders, which will possibly create another financial crisis.
Warren's wealth tax proposal was somewhat misguided but was definitely a good step in the right direction of having a well thought out wealth tax on the largest fortunes. Bernie's is just a Hugo Chavez style way of getting rid of people with too much money. If enacted as it stands it will cause tremendous economic damage to the country.