A not-so-small quibble about the way taxes are reported

There’s a nice post over on Vox explaining the impact of Bernie Sander’s proposals on tax rates. It’s good information, but I think it’s conveyed in a manner that is more than a little misleading. This chart has most of the goodies:


It’s pretty clear that Sanders is proposing some rather large increases. But the chart does a few things that I think are rather odd. First of all, it’s giving you marginal rates: the rates on each additional dollar of income you earn, not all those dollars below that amount. For example, at an adjusted gross income of $18,550, every dollar you earn above that amount will indeed be taxed at an income tax rate of 15 percent. But every dollar below that was taxed at just 10 percent. If you earn exactly $18,550, none of your income is taxed at 15 percent. Misleading, no?

Second, these figures are for adjusted gross income. An AGI of 0 corresponds to an actual income of $12,600 (if you’re married filing jointly). The actual income tax rate for a couple earning up to $12,600 is zero. Pretty tough to see that on this chart, isn’t it?

Finally, the chart includes “payroll taxes” that you don’t pay at all; they are payed by your employer. For every dollar of payroll tax the government collects from you, in most cases it also collects a dollar from your employer. That’s rather misleading in my view since most people never even knew that money was being paid. It’s part of the expenses a company has for each employee (along with office space, equipment, heating, and so on…).

So here’s a revised chart giving the same information but corrected to account for the three problems I just mentioned:


Here I’ve corrected the income figures to show gross salary, and totaled up the actual amount of taxes payed by the individual currently and under Sander’s plan. Quite a different story, isn’t it? A couple making $87,900 pays just 19.4% now, and that goes up to just 22% under Sanders. The other chart makes it look they are paying more than twice that!

Arguably, however, the employer contributions should be included as well. After all, an employer might behave differently, cutting salaries or firing employees, if their costs go up. Here’s a chart that shows the employer contributions as well:


Now you can see that the employer of a family earning $87,900 incurs about 6% more costs under Sanders compared to the current system. I’d argue this chart is still a little confusing, since the individual doesn’t see how much more he or she would pay, but the combination of the two charts does a fairly decent job showing the difference in Sanders’ proposals and the current tax system.

Sanders could also make the case that, for nearly all families whose health care is covered by their employer, the employer’s cost hardly goes up at all, because all of these increases go towards his “medicare for all” plan, meaning the employer no longer has to pay for health coverage. Here’s how much the employer portion increases for each salary point:


Even for a family making $262,600, the employer cost only rises $15,131 under Sanders; most folks making that much money are likely to have a health plan costing the employer significantly more. The serious increases don’t start until families are making high 6-figure salaries.

It’s pretty rare to see tax proposals covered the way I’m suggesting they should be here. I wonder if folks might be a little more amenable to change if they saw the proposed taxes presented a bit more clearly.

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One Response to A not-so-small quibble about the way taxes are reported

  1. dave says:

    If you’re interested in seeing how I crunched the numbers, my spreadsheet is available here.

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