Moneybox

Why Bernie Sanders’ Crazy High Tax Rates Aren’t Really That Crazy

Raise ‘em up.

Eric Thayer/Getty Images

Bernie Sanders wants to raise your taxes. If you’re working class, he wants to hike them a little in order to pay for his single-payer health care program. If you’re wealthy, or a corporation, or a person who frequently buys and sells stocks, he wants to hike them a lot in order to finance the rest of his vision for a social democratic America.

Sanders, of course, says there’s plenty of precedent for soaking the rich in U.S. history. He points out that marginal rates topped out at greater than 90 percent during the Eisenhower administration and that his would be lower—“I’m not as socialist compared to Eisenhower,” he joked last year. Conservatives, in turn, have argued that the high tax rates we remember from the 1950s and ‘60s were basically an illusion—that the wealthy paid far less than advertised thanks to generous deductions and low rates on investment income.  

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So, who’s right? Have we ever seen anything along the lines of what Sanders has proposed?

In short, yes—yes, we have.

First, what kind of tax rates are we really talking about? The Tax Policy Center has concluded that, under the Sanders plan, the highest earning 0.1 percent of Americans would fork over about 63.7 percent of their income to the IRS. The top 1 percent would pay a rate of roughly 55.4 percent, while the top 95th to 99th percentiles would owe about 33.8 percent.

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And, conservative protests to the contrary, those figures aren’t far from the actual rates that prevailed during the postwar era, or even later. The tax code might have been shot through with more holes than a mesh cylinder, but Thomas Piketty and Emmanuel Saez have found that when all was said and done, the top 0.1 percent still paid an average rate of about 64 percent in 1970, right in line with what Sanders has called for. The average rate for one-percenters peaked near 48 percent in 1968, a bit below the mark Sanders envisions, but not too far off. The 95th to 99th percentiles, meanwhile, paid around 31 percent through much of the ‘90s.  

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To be clear, both the Tax Policy Center analysis and the historical figures from Piketty and Saez include more than just personal taxes Americans file each April on income and investments. They also factor in things like the estate tax, which obviously doesn’t hit every family every year, as well as the burden of corporate taxes, which more or less falls indirectly on shareholders. It’s not necessarily intuitive, but in the end it’s a more accurate way of discussing the total tax burden faced by Americans.

There are some big differences between the Sanders plan and the midcentury tax regime. For instance, back in the 1960s, 0.1-percenters got hit hard by the corporate and estate tax. Sanders, it seems, would put more emphasis on direct income taxes, including capital gains—which makes more sense in a world where corporations and the rich have become adept at using tax havens but might create slightly different economic incentives.

The major takeaway, though, is that when it comes to tax rates, Sanders really isn’t talking about much we haven’t seen before.

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