The Cost of Socialism: “Medicare for All” Means Tax Hikes on All

March 12, 2020

Death and taxes, as Benjamin Franklin once said, are life’s two certainties.

Here’s another one: If you want socialism, get ready to be taxed to death. Today, 70 percent of Millennials say they would be open to voting for a socialist candidate. In Sen. Bernie Sanders (I-VT), those Millennials may have their chance come Election Day.

But ask many of those Millennials how to pay for socialism, and their support for the idea is quickly tempered by confusion and exposed as naïveté.

After all, most Millennials don’t associate socialism with government control of economic activity, which is the reality of the situation. What socialism truly means, in terms of execution, is a more centralized state that implements “socialist” policies through the power of the purse.

Taxation is the lifeblood of any socialist system, including all those we see today. In truth, there is no way to implement socialism without raising taxes on the general public—everyday people like you and me. Spoiler alert: It’s not just the “one percent.”

Let’s use “Medicare for All”—a staple of the Sanders platform—as an example. According to Sanders himself, the expansion of Medicare to cover all Americans would cost an additional $17.5 trillion over the next 10 years. And that’s a conservative estimate: The Committee for Responsible Federal Budget found that the price tag would exceed $30 trillion, while a Mercatus Center report pegged the cost at $32 trillion.

To put it into perspective, the federal government’s current spending projection for the next decade, for all purposes, is $52 trillion. So, yes, Medicare for All would cost a lot of money.

To finance such a sweeping overhaul of our health care system, the federal government would need to drastically increase the tax revenue it collects. Current levels of tax collection are simply inadequate.

Even Sanders acknowledges as much, proposing “a menu of financing options” to fund Medicare for All. One “option” is a 7.5 percent income-based premium (e.g. a tax) imposed on employers, exempting the first $1 million in payroll. Another is a four percent income-based premium (again, a tax) paid by employees, exempting the first $29,000 in income for a family of four.

Which brings us to another of socialism’s certainties. To implement proposals like Medicare for All, the government wouldn’t just increase taxes on the “one percent” or even the middle class. Tax hikes would affect Americans across the socioeconomic spectrum, including those struggling to get by.

Let’s review Sanders’ second option more carefully. If your household income (for a family of four) exceeds $29,000, your taxes would go up. Now, look at it this way: $29,000 per year is less than $15 an hour, meaning that one of Sanders’ “financing options” is to increase taxes on millions of minimum-wage workers—from McDonald’s servers to the cashier at your local convenience store.

That doesn’t sound like Bill Gates or Warren Buffet to me. In reality, the tax revenue that would finance Medicare for All (among other proposals) comes out of your pocket and mine. Sanders’ rhetoric may target the “one percent,” but everyday Americans would foot the bill too.

This is the reality of the situation in Scandinavian countries—some of Sanders’ personal favorites. (Sanders seems to ignore that Scandinavian success actually stems from their embrace of competitive free markets.) To be sure, countries like Denmark or Sweden have high taxes. Their tax-to-GDP ratios surpass 40 percent—that is, tax revenues as a percentage of gross domestic product exceed 40 percent. In the United States, the tax-to-GDP ratio is 24.3 percent. Taxes are significantly lower here.

Crucially, they’re lower for all taxpayers. Based on research from the Tax Foundation, Scandinavian countries tend to levy top personal income tax rates on middle-class earners, not just high-income taxpayers. For example, Denmark’s top statutory personal income tax rate (55.9 percent) applies to all income over 1.3 times the average income. In U.S. terms, this means that all income over $65,000 (1.3 times the average U.S. income of about $50,000) would be taxed at 55.9 percent. That’s right: All income over $65,000.

Denmark isn’t alone. For instance, Sweden’s top personal tax rate of 57.1 percent applies to all income over 1.5 times the average national income. That’s a whole lot of middle-class Swedes sending over half of their income to the government—not just the CEO of Ikea.

Keep that in mind: “Medicare for All” means tax hikes on all. Socialism is impossible to implement without a centralized state exerting its power of the purse.

Taxes, like death, come for us all. In a socialist America, they would come even harder and faster.

Luka Ladan is the President and CEO of Zenica Public Relations and a Catalyst Policy Fellow. Prior to founding Zenica, Ladan served as Communications Director at a leading public affairs firm in Washington, D.C.
Catalyst articles by Luka Ladan