Bernie Sanders on the Federal Budget & National Debt
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:
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 qualified 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 the estate tax 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 economic inequality 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
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 of America’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.