Medicare for all! Free college for all! A guaranteed job for all! Such proposals are firing up progressive Democrats. Such promises appeal to lots of voters, maybe enough to win the White House and the government as a whole. Maybe the progressive agenda could become a reality!
But there is the matter of how much it would cost and how to pay for it.
David Weinberger at the Federalist brings up a little-noticed article on the subject from last August in Vox, the left-leaning online magazine. Using liberal sources, with liberal numbers, a liberal publication ran the numbers on how much those three initiatives would cost and how the government could raise the money for them..
According to the left’s own sources, democratic socialism will cost $42.5 trillion in its first decade. How would the US pay for it?
Under the most generous assumptions possible, liberal proposals would cut $8.5 trillion on the spending side. To begin with, state governments no longer burdened with health care costs would save $4.1 trillion, according to the Urban Institute. The popular leftist goal of slashing defense spending down to Europe’s target of 2 percent of GDP, for which there is no plausible blueprint, would nonetheless save $1.9 trillion if achieved, according to CBO data. Charitably assuming that the jobs guarantee would reduce antipoverty spending by one-quarter would save $2.5 trillion.
Paying for the remaining $34 trillion would require nearly doubling federal tax revenues. Let’s examine three paths using data from CBO’s menu of budget savings:
- What about just taxing corporations and rich families? Raising the final $34 trillion would require seizing roughly 100 percent of all corporate profits as well as 100 percent of all family wage income and pass-through business income above the thresholds of $90,000 (single) or $150,000 (married), and absurdly assuming they all continue working. (This calculation refers to individual income, not investment income.)
- How about a European-style value-added tax (VAT), which is basically a national sales tax? A rate of 87 percent would be needed to collect $34 trillion under the American tax base.
- What about payroll taxes? Lawmakers would need to create a new 37 percent payroll tax, on top of the existing 15.3 percent payroll tax, in order to collect $34 trillion.
Confiscating 100% of corporate profits? And taking 100% of all family income over $150,000? A national sales tax that would practically double the price of everything Americans buy? A payroll tax that would take over half of every paycheck?
But how do European countries offer such democratic socialist benefits? Well, many of them do have an effective tax rate of over 50%, taking half of what their citizens make in order to fund their generous social programs.
When I was in Denmark, I learned that the automobile tax is 100%. That is, when you buy a car, whatever the car’s price, you pay that same amount again to the government. (No wonder Copenhagen has so many bicycles! It isn’t just because the Danes are such environmentalists and exercise enthusiasts! No wonder Europe has such a good train system!)
Do you think Americans would be willing to pay this kind of price for “free” health care, college, and jobs? Seeing as how they are not free after all, but would cost the taxpayer far more than simply paying the necessary individual expenses out of pocket?
Photo by Molly Adams via Flickr, Creative Commons License
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