The leading Democratic presidential candidates are promising to pay for their policy visions with new taxes on the wealthy -- and some of the 2020 contenders would have to pay dearly.
The four top-polling candidates – Elizabeth Warren, Joe Biden, Bernie Sanders and Kamala Harris – all earned at least $500,000 last year, according to their tax returns. And they’ve embraced tax-the-rich proposals that could increase levies on themselves and similarly situated peers as they look to unseat President Donald Trump in 2020.
Under Warren’s plan, the Massachusetts senator, who earned $846,000 in 2018, the first year under Trump’s tax cuts, would pay about 15 percent more.
Biden lived on his public salary until he left the vice president’s office and then joined the faculty of the University of Pennsylvania and has been on the speaking circuit. He was the highest earner among the candidates in 2018 with income of nearly $4.6 million. Under his plan to raise taxes on top earners, he’d pay about 6 percent more.
Sanders, who earned the least among the group with $519,529 in income, could see his liability climb about 13 percent from new taxes to fund his government-run health care plan. Harris, who with her husband earned $1.9 million last year, would see her joint tax bill increase 8 percent.
The figures are low-end estimates from the Tax Foundation, a right-leaning think thank. The foundation’s model about how much the candidates would pay in federal income taxes under their policies is based on their 2018 income. The projections aren’t a complete picture since the candidates haven’t fully fleshed out their tax policy ideas.
“They are walking the walk in putting out proposals that would indeed tax the wealthy,” said Michael Linden, a fellow at the liberal Roosevelt Institute.
The calculations didn’t take into account some tax changes the candidates have proposed because they either didn’t apply to them personally or weren’t quantifiable in the model. For example, neither Warren nor Sanders’ have accumulated enough assets to have to pay the wealth taxes they have proposed on households worth more than $32 billion in Sanders’ plan and $50 billion in Warren’s.
Taxes on stock and bond trades also weren’t included – which Harris, Warren and Sanders have floated – since those levies depend on the amount an individual buys and sells securities throughout the year, which isn’t reported on a tax return.
Democratic candidates have focused on taxing the wealthy as a key revenue source to fund such ambitious ideas as universal child care, free college education and government-run health care, which alone would cost around $30 trillion.
The candidates have proposed offsetting those costs with an expanded estate tax, a wealth tax on assets, a higher tax on capital gains income and increasing income taxes for top earners.
“There is pent-up demand for investing in everything from infrastructure, to free public college education, to addressing climate disruption and helping families address health costs and child care costs,” said Frank Clemente, the executive director for the progressive group Americans for Tax Fairness. “You cannot do the kinds of things that we need to do in this country unless you’re going to raise the revenue to do that.”
People with exceptionally high incomes could see their taxes rise even more than Biden, Warren, Sanders and Harris, because they tend to earn a significant portion of their money from capital gains income, currently taxed at 23.8 percent, instead of from salaries, currently taxed at a maximum of 37 percent.
All the leading candidates have talked about taxing capital gains at the same rates as wage income. That’s not reflected in the tax increase calculations of the candidates because none of them had much capital gains income in 2018.
Most of them got a tax break last year from Trump’s tax overhaul, according to the Tax Foundation’s model. Harris was the only candidate to see her tax liability increase.
Harris was able to deduct only $10,000 of her $225,440 state and local tax bill, because the 2017 law limited write-offs for so-called SALT payments. Democrats have criticized this portion of the law saying it singled out voters in Democratic-led states where taxes tend to be higher.
Democrats have also criticized the overhaul for not doing enough to help the middle class and have called instead to raise taxes on the wealthy and lower middle-income tax rates. That, however, may not be possible given their policy agendas.
Sanders has floated a 4 percent income-based premium to partly finance his Medicare-for-All plan, which Warren also endorses. That plan would likely require payroll and income tax increases on middle earners in addition to the wealthy.
“The candidates are not being realistic in how they would fund their plans,” said Nicole Kaeding, a vice president of policy at the conservative National Taxpayers Union. “They will have to raise taxes on people who are not the wealthy. Middle-income taxes would have to go up, because there is just not enough money.”
Many of the ambitious revenue-raising proposals would be difficult to get through Congress, even if Democrats controlled both chambers. For now, the plans remain campaign-trail talking points to tell voters what a progressive world would look like.
“I think it adds credibility,” said Morris Pearl, a former managing director at BlackRock, who is the chairman of Patriotic Millionaires, a group advocating for higher taxes on the wealthy. “We are in favor of policies that are not in our own short-term financial self interest, but are in the long-term interest of all of us.”
--Laura Davison and Misyrlena Egkolfopoulou, Bloomberg News
