The Democratic plan for a 42% national sales tax

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The Democratic plan for a 42% national sales tax
By Rick Newman
October 28, 2019

If you’re a Democrat who supports “Medicare for All,” pick your poison. You can ruin your political career and immolate your party by imposing a ruinous new sales tax, a gargantuan income tax hike or a surtax on corporate income that would wreck thousands of businesses.
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The Committee for a Responsible Federal Budget (CRFB) has done voters a favor by spelling out what kinds of new taxes it would take to come up with that much money. Warren justifies many of her programs by saying all it would take is “two cents” from the wealthy. That’s a reference to her 2% wealth tax on ultra-millionaires. But Medicare for All would be so expensive that if you taxed top earners at 100%—that’s right, if you took all the income of couples earning more than $408,000 per year—you’d still fall far short. And everybody getting taxed at 100% would obviously stop working.

Okay, that won’t do it. So what will? CRFB outlined a variety of options. A 42% national sales tax (known as a valued-added tax) would generate about $3 trillion in revenue. But it would destroy the consumer spending that’s the backbone of the U.S. economy. A tax of that magnitude would be like 42% inflation, wrecking consumer budgets and the many companies that depend on them, from Walmart and Amazon to your local car dealer.

Other options include a 32% payroll tax split between employers and workers or a 25% income surtax on everybody. Or, the government could cut 80% of spending on everything but health care, which would include highways, airports and the Pentagon. Or here’s a good one: Just borrow the money and quadruple Washington’s annual deficits.

The best idea might be charging every enrollee in the new program $7,500 per year, so they’d be paying directly for the coverage they’re getting. Some people pay more than that now for health care, by purchasing insurance outright or sacrificing pay raises in exchange for employer coverage. It would still be a nifty trick to propose that to voters. . .

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