Tax Payment Calculator (Rigged): 4 Presidential Candidates

Gary North - April 01, 2016

Someone has created a calculator for estimating the effects of each candidate's tax reforms. Each candidate has presented a broad view of marginal tax rates.

I think this is a clever idea. It gets voters thinking about how each candidate's programs would fare, other things -- e.g., like the economy -- being equal.

Problem: it does not tell you the truth, the whole truth, and nothing but the truth.

First, who designed it? The Tax Policy Center. Who are they? A non-profit liberal think tank that works with the Brookings Institution -- a Keynesian think tank -- and the Urban Institute, a liberal/Left think tank.

Second, it is being promoted by pro-Clinton liberal Ezra Klein. His Vox organization is publicizing the calculator. I found nothing on it on the website of the Tax Policy Center. So, we are not told about its assumptions on the Tax Policy Center.

I tried it. Under Trump and Cruz, I would pay considerably less. Under Clinton, a few hundred dollars more. Under Sanders, I would pay as much more as I would save under Cruz.

Note: Klein is a Clinton supporter. He is anti-Sanders.

What does each of them suggest?

According to a site that is promoting the calculator, the Free Thought Project:

According to the Tax Foundation, Hilary Clinton would add a 4% surtax on income over $5,000,000. She also raises rates on medium-term capital gains (investments held for less than six years) to between 24% and 39.6%.

Ted Cruz establishes a flat rate of 10% on all ordinary income and increases the standard deduction to $10,000 per filer.

Donald Trump establishes four tax brackets, with rates of 0%, 10%, 20% and 25%. The top rate applies to income over $150,000 for single filers and $300,000 for joint filers.

And, to fund his grandiose plan of government paying for nearly everything in our lives, Bernie Sanders proposes tax rates taking over half of the income of certain individuals.

Sanders establishes four new brackets of 37%, 43%, 48%, and 52%. The top rate applies to taxable income over $10 million. He also raises the rate of all other brackets by 2.2%. If you make $10 million in year, Bernie Sanders will take $5.2 million -- because "free stuff."

The problem is, this ignores corporate taxes. It also ignores Sanders' single-pay health insurance plan. An article on leftist site, Common Dreams, cries "foul!":

Mostly, that big number you get for the Sanders tax hike when you plug in your income is the payroll tax that employers will pay to cover the cost of a single-payer healthcare system. As the Tax Policy Center, which worked with Vox to create the calculator, explains:

We're including payroll taxes, excise taxes and corporate income taxes as well as individual income taxes…. Most economists think employers pass their share of the tax on to workers in the form of lower wages.

With all due respect to most economists, this is dubious. Unless you work at the rare enterprise that does not have profit as its primary goal, your bosses are already paying you as little as they think they can get away with. If they get a new cost associated with your employment, they may try to raise their prices. They may look for other areas where they can cut costs. They may even decide that they can no longer afford to employ you. But what they won't do is suddenly realize that they could have been paying you thousands of dollars less all along without you quitting. (They may even be forced to accept a lower profit rate, though that's something "most economists" seem to exclude a priori.)

This statement is true. It rests on the assumption free market economists make: businesses cannot safely assume that the consumers will accept any increase in prices to pay for new costs, including taxes. The customers are in charge, not sellers. Sellers do not dictate to customers in most businesses. If they try, customers may revolt, or new competitors move into the market.

But that's not even the real problem with Vox's calculator. Sanders' plan is based on using a new payroll tax to pay for a single-payer healthcare system, which will relieve businesses of the considerable burden of paying for employee healthcare. Since just about everyone agrees that single-payer is cheaper than what we have now (including Ezra Klein, before Sanders started running against Clinton on a single-payer platform), in theory business as a whole should come out ahead. But certainly you need to take into account that business would be getting a big break on expenses at the same time that it's getting a new tax, right?

This means that businesses should be clamoring for a single-payer system. They aren't. But it does raise the question: Who will pay how much? The calculator does not tell us any of this.

No, Vox thinks you don't need to take that into account. From the calculator's FAQ: "The Tax Policy Center's model does not include spending programs and thus can only show the effects of tax changes."

The calculator is rigged. It is rigged to favor Clinton.

What does Klein's site say? This:

To pay for his tax cut, Cruz would have to do something on the order of eliminating Medicaid, the Children's Health Insurance Program, all federal education spending (including Pell Grants, K-12 subsidies, Head Start, etc.), all federal spending on justice (including the FBI, the Drug Enforcement Administration, the federal court system, etc.), all international spending (close all embassies, zero out aid to Israel), all federal transportation systems, and all veterans spending. To pay for his tax cut, Trump would have to do everything Cruz did and then find another trillion dollars in savings.

So the three options, when evaluating Crux and Trump, is to believe they are lying about their tax plans, lying about their commitment to fiscal responsibility, or planning changes to the federal government that dwarf anything we've seen in memory. This is why the calculator is so useful -- the radicalism of their agendas is obscured by the absence of details but revealed by the size of their tax cuts.

I agree. They are lying. They are running for President. The basis of every campaign (except for Ron Paul's, who did not expect to get the nomination) has been to conceal the bad news and emphasize the good news. We do not get the truth, the whole truth, and nothing but the truth.

Sanders, meanwhile, proposes to raise taxes by more than Trump proposes to cut them. But it's wrong, I think, to view Sanders's plan as primarily a change to America's tax code. The huge tax increases are a byproduct of Sanders's plans to nationalize major sectors of American life.

In that way, Sanders is doing what Cruz and Trump are doing in reverse. Their tax plans reveal that they are dissolving massive swaths of the state into tax cuts; Sanders's plans speak to the fact that he's absorbing massive swaths of the private sector into the state. Unlike Cruz and Trump, of course, Sanders has been specific about his ideas -- the biggest driver here by far is Sanders's single-payer health care plan, which would cost more than $10 trillion but which would be replacing an equal (and, if the plan succeeded in saving money, greater) amount being spent on private health care.

This is Goldilocks calculating: not too cold (Trump, Cruz), not too hot (Sanders), but just right -- right down the middle (Clinton).

I would go with Cruz's plan: a flat tax. This honors the principle of the rule of law: all people pay the same percentage. I call it the principle of the tithe. To vote to impose a tax on someone else requires that you vote to pay the same. This principle is never honored in politics. A flat tax would shift political maneuvering to gaining exemptions. This is far better than to transfer maneuvering to getting increases on anyone else. The game would be this: "We also deserve exemptions," i.e., reduced taxes. That is the kind of political competition the world needs. When it comes to taxes, less is more.

This would involve massive spending cuts. I'm for that, too. But Cruz does not mention this in his speeches.

So, use the calculator. Enjoy whatever fantasies it provides. But be prepared: Trump and Cruz will not get their spending cuts, nor will they get Congress to back any major changes in tax brackets, especially a flat tax. Congress is gridlocked. Also, Sanders is not going to get a Democrat-dominated House of Representatives. Neither is Clinton.

The calculator is on numerous websites, but most obviously on Klein's site: here.