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June 25 2019

Why “Free Stuff” Could Cost Average Americans Dearly

by Charlotte Hays

So, you thought all that “free stuff” the Democratic 2020 candidates are promising to spread around would help the downtrodden. Think again.

Senator Bernie Sanders’ college loan debt forgiveness will shower advantages on the wealthy, according to a number of people who are taking a close look at the senator’s plan to erase $1.6 trillion in debt.

The editorial board of Issues & Insights notes:

It would be hard to devise a plan that would shower more benefits on the wealthy than this one. 

Just 12% of college debt is owed by those in the bottom quarter of income earners, according to the Urban Institute. “In other words, education debt is disproportionately concentrated among the well off,” the report notes.

Sanders’ plan would relieve doctors, MBAs, computer scientists of their student debt. These are people who are or soon will be making six-figure salaries. Keep in mind, too, that students who borrow money for college are investing in their own futures, since a college degree is a ticket to higher incomes.

Even the left-leaning Slate.com had to admit that “from a pure fairness perspective, this would be a pretty questionable use of federal tax dollars.”

Democrats say that the bill for all their “free stuff” will be picked up by “the rich,” whose tax burden will go up and take care of the extra expenditures. Don’t count on it.

It is more likely that the burden will fall on ordinary, middle class citizens will pick up the tab. I & I explains:

Just look at countries that have already gone (just part way) down the socialist road Democrats are proposing. The tax burden they impose on the middle class is enormous compared with the U.S.

Data from the Organization for Economic Cooperation and Development show that the average taxes for people who earn less than the national average are significantly higher in European nations than the U.S.

In all but three EU countries that are members of the OECD, the marginal tax rate is 40% on incomes above $37,000. In alleged socialist paradises Finland, Denmark, The Netherlands, Sweden and Belgium, the top tax rate — of more than 50% — kicks in for families earning less than twice the national average. The data also show that as the countries’ overall tax burden goes up, so does the amount paid by lower-income families.

And this is to say nothing of Europe’s often steep VAT tax on consumption, which hits lower-income families harder than the rich.

Working class families would pay in other ways for the Democrats’ “free stuff” agenda. Even if they could manage to target only the rich, massive tax hikes they propose would send the economy tumbling. And guess who gets hit hardest when that happens?

So, what we have here is a party that wants to dramatically expand government benefits in ways that will benefit upper-income families. And in order to finance it, they will have to raise taxes on working-class families.

We’ll take “trickle down” economics any day over this. We suspect most hard-working Americans would, too, once they realized how expensive free stuff can be.

The Wall Street Journal makes the same point this morning.

Sanders claims that he could pay for his debt forgiveness and free tuition through a tax on financial transactions, which he calls “speculation.” That means normal trades will be taxed.

The Journal notes that Sanders would create an exemption for people with incomes under $50,000 or couples under $75,000. So if you are making a little more than that, conscientiously scrimping and saving for retirement, and want to make a trade to improve your retirement portfolio, you’ll have to kick in to help pick up the college debt of people whom you don’t know.

And, besides, as the Journal notes:

There’s no way a financial-transactions tax would pay for this. It could make America’s capital markets less liquid or push traders overseas. By lowering asset values, it would dent every 401(k) and public pension, while raising costs for institutional investors. Mr. Sanders says it would raise $2.4 trillion over a decade, but France’s version failed to meet revenue targets.

The only way Mr. Sanders can possibly pay for his agenda—not only free college and this student-loan amnesty, but also a Green New Deal, Medicare for All, an expansion of Social Security, a federal job guarantee, higher teacher pay, and more—is to soak the middle class. Bernie won’t admit this, but he knows it’s true. He isn’t a socialist for nothing. 

The Democratic 2020 candidates are vying to see who can give away the most free stuff. It’s going to be hell to pay for this largess if you happen to be an ordinary, average American earner.





Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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