Issues 2020: Taxing the “Rich” Won’t Pay for Politicians’ Promises

“If America wants to spend like Europe, it must tax like Europe.”

NEW YORK, NY — The key to funding many presidential candidates’ generous proposals is raising substantial taxes on the wealthy. But will that be enough? Though many politicians are opposed to increasing taxes on lower and middle-class Americans, the latest issue brief in the Manhattan Institute’s Issues 2020 series shows that is exactly what would be required. According to senior fellow Brian Riedl, even a 100% tax on all income over $1 million wouldn’t come close to paying the bill.

Leading presidential candidates are typically proposing $40 trillion in new federal spending over the next decade, including $32 trillion for Medicare-for-All, $3 trillion for higher education, and $2 trillion for climate plans. Yet, the combined proposals to “tax the rich” would raise $9.3 trillion under the best-case scenario and, more realistically, $3.9 trillion. In other words, if these politicians want to spend what they say, they’ll have to impose enormous taxes on the middle class.

One candidate, Bernie Sanders, is proposing $97 trillion in new spending over the decade.

Riedl factors in the long-term effects of increased tax rates and current federal debt and spending to give a more accurate picture of what these promises would require. Key findings include:

• Even annually seizing 100% of all income earned over the $1 million threshold could not generate more than $8.9 trillion in additional revenues.
• Funding $40 trillion in new spending would require raising the payroll tax by 38 points or imposing an 88% national sales tax—even after cutting defense spending to European levels.
• Depending on the choice of taxes, the median American household’s $5,000 federal tax burden would double or even triple.
• Were Americans to accept all the taxes to finance this spending spree, it would still leave an escalating $15.5 trillion baseline budget deficit over the next decade under current policies.

Click here to read the full report.

ABOUT ISSUES 2020

The Issues 2020 series applies the Manhattan Institute’s breadth and depth of expertise on major issues of national public policy to the key arguments and proposals of the 2020 presidential campaigns. MI scholars identify where the central claims driving key debates reflect fundamental misunderstandings about what is happening in America. With succinct explanations of what the data show, they provide a much-needed corrective and a solid foundation for political debates about the nation’s future. Click here to read more.