With the Iowa caucuses and New Hampshire primary right around the corner and the debates finished up, the Democratic primary appears neck and neck as Bernie Sanders and Hillary Clinton jostle for support in key early states. They have each put forward detailed tax reform plans that give voters the chance to compare their ideas on how to reduce inequality through the tax code.
Comparing the two candidates’ tax reform plans requires the recognition of a bit of history. Bernie Sanders has made reducing inequality the marquee issue of his campaign. He has been calling for changes to the tax code that would raise taxes on the most profitable corporations, the wealthiest households, and the largest Wall Street banks since he first entered Congress in 1991.
Hillary Clinton’s record on tax reform, particularly regarding Wall Street, has been much less consistent in both tone and substance over the course of her career, although she recently has come out with detailed plans reflecting much of what is included in Bernie’s tax reform plans.
A fair comparison also requires an acknowledgement of scale. Clinton’s plans aim to raise about $500 billion over ten years. Bernie’s plans aim to raise over $5 trillion. Put simply, Bernie’s plans rate as 10 times more ambitious than Hillary’s plans.
The two candidates’ plans, seen side by side, do show significant overlap. Both seek to strengthen and expand the federal estate tax, a small levy on the inheritances of the wealthiest households. Both close loopholes that allow the wealthy to avoid paying their fair share, including the carried interest loophole. Both raise taxes on top incomes and put the squeeze on offshore tax havens.
But Bernie’s plans, on nearly every front, go further than Hillary’s do. This difference in scale has major implications for how much revenue would be raised and how much inequality would shrink. Bernie’s plans also come linked to concrete public programs, a crafty political move that builds in a constituency for each tax reform, a constituency that would be directly impacted by each reform and more willing to fight for it.
Bernie’s plans go an additional step further, by including a direct financial transaction tax on Wall Street as well as by lifting the (arbitrary) cap on income subject to the Social Security payroll tax, a move that would ensure the long-term solvency of Social Security. Together, these two plans would raise trillions of dollars in revenue over ten years.
Both candidates’ plans differ fundamentally from any of the plans proposed by candidates in the GOP primary field. Those plans all rely on debunked supply-side theories that treat enriching the already rich as the key to prosperity.
Disclosure: The author worked on the Bernie Sanders Senate Staff as a Legislative Aide before joining the Institute for Policy Studies.
Josh Hoxie directs the Project on Opportunity and Taxation at the Institute for Policy Studies. He is the co-author of the recent study, Billionaire Bonanza: The Forbes 400 and the Rest of Us.