Democratic Presidential hopeful, Bernie Sanders took a break from yelling at clouds long enough to release his tax plan today, and it’s, how should I put this…aggressive. Sanders proposes a top rate on individual income of a whopping 52%, which would be the highest since 1980, when tax rates reached a high of 70% under Jimmy Carter.
While the 52% rate is reserved for those earning in excess of $10 million, less wealthy taxpayers are not immune under the Sanders plan. For example, the top rate on someone earning $250,000 would increase from 33% under current law to 37% under Sanders, while someone earning $500,000 would see his top rate jump from 39.6% to 43%.
In addition, Sanders would do away with the preferential treatment long afforded capital gains and dividends, meaning those types of income would be taxed at the same rates as ordinary income for taxpayers earning in excess of $250,000. Under current law, the top rate on such income is 23.8%; as a result, a taxpayer who sells a business for $5 million of gain would pay $1.19 million in federal tax under current law, but would pay $2.4 million in federal tax under the Sanders plan (a rate of 48%).
Sanders would also limit the benefit of all itemized deductions to a 28% rate, meaning a taxpayer who earned $500,000, and was thus in Sanders’ 43% bracket would effectively pay a 15% tax on deductions such as mortgage interest, state and local taxes, and charitable contributions.