Bernie's plan for a 100 percent tax on corporations
Sen. Bernie Sanders (I-Vt.) will soon introduce legislation that would require large employers such as Amazon, Walmart and McDonald’s to fully cover the cost of food stamps, public housing, Medicaid and other federal assistance received by their employees. The goal, he says, is to force corporations to pay a living wage and curb about $150 billion in taxpayer dollars that go to funding federal assistance programs for low-wage workers each year.
The bill, which Sanders plans to introduce in the Senate on Sept. 5, would impose a 100 percent tax on government benefits received by workers at companies with 500 or more employees. For example, if an Amazon employee receives $300 in food stamps, Amazon would be taxed $300.
“At a time of massive wealth and income inequality, the gap between the very rich and everyone else continues to grow wider," Sanders said.
What could possibly go wrong with forcing companies to pay for 100 percent tax? According to the Tax Foundation, plenty:
If this tax were in place, one possibility is that the firm raises the prices of its goods to offset the tax burden, meaning consumers effectively pay at least part of the tax. Economically, this case would be similar to the present situation, wherein taxpayers fund federal assistance programs. But in this scenario, only the company’s customers, rather than taxpayers in general, would pay the tax.
Another scenario is that the firm starts looking for ways to reduce costs to offset the new tax liability. This would likely prompt employers to reduce their reliance on low-skill employees by cutting wages or hours, or by limiting new hires. If low-skill workers suddenly become more expensive, it weakens the incentive to hire them. In some cases, employers might rely more on automation, since new technology would have a lower cost relative to low-skill workers under this tax. The result would be an increase in the economic inequality Sen. Sanders condemns.
It’s also worth noting how many companies this legislation would affect. Sen. Sanders has criticized “billionaire-owned profitable corporations” in the context of his bill, but in 2017, 23,000 private-sector firms would have met the threshold size to pay this tax. That’s less than 1 percent of all private-sector firms, but they employ 47 percent of all workers. The tax would apply to far more than just a few massive companies that make it into the news.
Despite Sen. Sanders’ goals, his tax proposal would increase the cost of hiring low-skill workers, resulting in higher prices for consumers or fewer job opportunities for workers. Neither of those outcomes would help individuals receiving government assistance.
So it's not just the big name companies that get whacked, it's thousands of other firms, too. And rather than absorb the extortionate tax rate, the costs would be passed along to consumers.
We could excuse the Senator for reaching too far with a proposal meant merely to gain attention and rally the anti-capitalist faithful. But he really belives this stuff, which only confirms our belief he (like his supporters) is dangerously illiterate about basic economics, and should be kept as far from any levers of political power as humanly possible.