The major criticism from Republicans and the media talking heads about the Sanders plan for tuition free public colleges and universities and universal health care is that it will cost too much in taxes. Of course that argument completely ignores the actual facts on the ground about how much Americans are already paying for these services. I will explain my methodology for calculating the information I am reporting in the above headline, and I will show my homework so to speak with links to where I found my numbers so that anyone can check my work. This is no exhaustive analysis, but it is a rough example of how Bernie’s tax plan would impact an “average” American. I fully explain who my “average” American is and how I arrived at my description of them in this article.

The fact of the matter is that for the majority of Americans they are already paying considerably more in taxes than their European brethren with universal health care and tuition free colleges and universities although Americans are paying through “hidden” taxes in our economy. The corporate media in America will never explain these numbers. The picture which accompanies this article shows a screenshot of where I arrived at the number for the average income in America. Is Google a trustworthy source?

Let’s begin by assuming that the average American earns $51,939.00 as Google reports in the screenshot above. Now, for my example, I am going to assume that the individual in question is self-employed, 100% of their income is derived from self-employment, and that they are single. As a self-employed individual the tax rate for Social Security and Medicare self-employment tax would be 15.3% on the full amount of earnings. This means that after those taxes are paid, the average American would have paid $7,946.67 in taxes. Half of those taxes would be deductible as a business expense, the employer’s share of the self-employment tax. This means that the starting adjusted gross income for this individual would be $47,965.67 after the employer’s share is deducted. State income tax rate in the United States vary from between 0% and 12.3% at the high according to the table located at the link below:

www.taxpolicycenter.org/…

For our purposes, I am going to split the difference and assume that the average state income tax rate in the United States is 6% for the purposes of the calculations that I am providing. I am also going to use the New York State Standard deduction for a single individual filing as the head of household as a baseline deduction for state income tax calculations. That deduction is $7,900.00, some states will provide a larger deduction, and some states a lower deduction, so this seems appropriate as well. This would mean our “average” American would be paying $2,403.94 in state income taxes. You can see the New York Standard deductions at the link below:

www.tax.ny.gov/…



Now, let us assume that our “average” taxpayer is able to use the same single head of household deduction for their federal income tax rate. This deduction is $9,250.00 federally. You can view the standard federal deductions at the link below:



www.efile.com/…

The first $13,250.00 for head of household filers is taxed at 10%. Income up to $50,400.00 for these individuals is taxed at 15%. This means that the federal income tax paid by our “average” American in this scenario would be $5,144.85. You can examine the federal income tax brackets at the link below:

taxfoundation.org/…

I have not calculated the effects of any student loan interest deductions, nor any deductions which may be available to our “average” American for the purpose of simplifying the numbers, but those effects have a negligible impact on the overall tax burden for our “average” American and their “hidden” tax burden.

This means our “average” American is paying $15,495.46 in state, and federal income taxes, as well as Social Security and Medicare taxes presently. This represents 29.8% of their total income paid in these taxes, BUT THEY ARE STILL PAYING A HIDDEN TAX that our European allies already pay in taxes accounted for in their actual tax bill. In Europe and most of the industrialized world, health care costs are included within the tax bills that citizens pay, and because tuition free college is also included as a service provided by their governments these costs to American taxpayers have as of yet been unaccounted for in our scenario. As businesses benefit from a healthy workforce and healthy consumers, and businesses benefit from an educated workforce and educated consumers with more money to spend, the majority of these costs are born by the greatest beneficiaries of these expenses in Europe through progressive tax policy. In America, the consumer of these services bears the vast majority of the costs for higher education in the form of student loans, and they bear a considerable portion of the costs of healthcare.

The average cost of an employer sponsored family health insurance plan in the United States is $17,545.00 per year according to the National Conference of State Legislatures. The Affordable Care Act does not require employers to provide spousal health coverage. According to the National Conference of State Legislatures, the average cost of health insurance for the employee beneficiary is $5,430.00, while spousal coverage costs on average $6,609.00. Because the Affordable Care Act does not require spousal coverage, but only coverage for dependent children up to age 26, many employers are restructuring their health care plans to eliminate spousal coverage. This information can be found at the NCSL website at the link below: www.ncsl.org/…



According to the Henry J. Kaiser Family Foundation the average health insurance premium per person in the United States is $235.27 per month, or $2,823.24 per year, which means if our self-employed “average” American decided to have a family, that would cost them an additional $14,721.76 per year to add a spouse and child to our equation. The average single head of household with no dependents is presently paying 5.43% of their income for health insurance. If that individual has a family and they remain self-employed, they are paying 33.7% of their income for health insurance.



According to the US Census Bureau 50.2% of American Adults are unmarried. Of course this statistic does not account for the percentage of single parents in America who would also be paying higher health insurance premiums. The statistic on the percent of single adults can be found at the link below:



www.csmonitor.com/…

Interestingly enough, according to the Census Bureau 66% of US households are family households. This means that our “average” self-employed adult is actually likely to be paying a much higher family rate of $17,545.00 for their insurance costs. In fact the percentage of single person households in the United States declined from 27% in 1970 to 17% in 2012. Americans are less likely than ever to be living single, despite the fact that 50.2% of Americans are unmarried. You can examine the source of this information at the link below:



www.census.gov/…

So our “average” American is paying 29.8% of their income to direct taxes, and 33.7% of their income in hidden health care taxes if you are to believe the statistics. For our purposes, I am going to assume the following about our “average” American, they are single because 50.2% of American adults are unmarried. I am going to assume they are part of the 17% of Americans living alone, but they have children, and are required by court order to provide health care coverage for their dependent children, which means that they spend $17,545.00 a year on average for health care coverage for a family plan for the children who live with the other parent. Since 66% of American households are living together as families, this doesn’t seem impossible.

At this point in the calculation, our “average” American is earning $51,939.00 a year, paying $15,495.46 in state, federal, social security, and medicare income taxes, and paying $17,545.00 a year for health insurance coverage for their dependent children and their own coverage. This means that they have $18,898.54 a year left to live on after direct and hidden taxes for health care coverage.

What about college education?

The “average” American has not gone to college if you examine the statistics because only 33.8% of Americans have bachelors degrees. About 8.5% of Americans have graduate degrees, but let us assume that our “average” American is a Millennial. The statistics on the percentage of Americans with bachelors and graduate degrees was found at the link below and it is Google’s number 1 answer to the question of what percentage of Americans have a college degree:

www.phonydiploma.com/…

Millennials are different though, because while the youngest Millennials are just now reaching adulthood, almost 50% of Millennials over 18 have a college degree. At least according to the White House report linked to below they do:

www.whitehouse.gov/…



Sixty-nine (69%) percent of all American college graduates finish school with student loan debt, this means that our “average” American Millennial adult has student loan debt, at least according to the Institute for College Access & Success this is the case. You can review their findings at the link below:



ticas.org/…

According to The Institute for College Access & Success, the average student loan debt when finishing college is $28,950.00 according to Google citing the same link above when asking the question “what is the average student loan debt in the United States?” The current interest rate for a federal student loan is 4.66%. This means that if our “average” American was paying the current interest rate and repaid their student loan debt in 10 years, they would be making a monthly payment of $302.00 per month, or $3,624.00 per year, or 6.97% of their pre-tax income to pay their student loan debt.

This means that our “average” American’s total direct and hidden tax burden is $36,664.46 per year, or a 70.59% direct and hidden tax rate.

Now if our “average” American were a Millennial with a graduate degree, their student loan debt could be as much as 5 times higher than the “average” student loan debt, and is almost assuredly more than 2 times that amount as the vast majority of American students with graduate educations finish school with more than $50,000 in student loan debt. As it stands, our “average” American would have $15,274.54 per year to pay for rent, food, clothing, health co-pays and deductibles, transportation expenses, such as a car payment, car insurance, and vehicle maintenance, not to mention, heat, lights, Internet access, and other utilities, to say nothing at all about saving for retirement, a vacation, or having a little fun.

But the average American isn’t self-employed, why did you make our “average” American self-employed?



Because self-employed individuals create jobs! We always hear Republicans talking about job creators, don’t we want to encourage job creators? Fully 3 out of every 10 jobs in America are the result of self-employed individuals or the workers they employ. While only 10% of Americans are self-employed, they create 30% of all US jobs. This means the average self-employed individual creates 2 jobs in addition to their own by becoming self-employed. 44 million US Jobs are the result of Self-employed individuals. This is according to Pew Research, and you can check out these facts at the link below:

www.pewsocialtrends.org/…

How does Bernie’s plan change the tax rate, including the “hidden” tax rate? How does our “average” American fair under Bernie’s plan?

Well because our “average” American is self-employed and you now know that our “average” American as a self-employed individual hires 2 additional workers, I want to talk to you a bit more about this hypothetical “average” American’s business. I want to explain to you how Bernie’s plan will help create jobs.



Because we are talking in “averages” let’s assume that our self-employed individual creates 2 jobs that pay both workers the “average” income, but let’s be realistic and assume that our “average” job creator isn’t overly altruistic and while they provide their workers with a family health insurance plan, that the company only pays 50% of the costs, and the worker pays the other 50% of the costs. All of the costs for the employer’s share of the health insurance costs are deductible as a business expense, as is the two employee’s salaries.



Assuming that Bernie’s Medicare for All plan was adopted, our self-employed individual just got a $17,545.00 a year bump in income because the health insurance premiums that they paid for their own family are eliminated, but they also received a $17,545.00 a year bump in pay for the half of insurance costs they paid for their employees. This means our self-employed “Average” American now has a gross income of $69,484.00 per year to begin with, instead of $51,939.00.



It is my understanding that Bernie’s plan eliminates the current Medicare tax system, and replaces it with the following system. Please correct me in the comments below if I am wrong about that.



Currently the Medicare tax is 1.45% for the employer and 1.45% for the employee. This means that in addition to the $17,545.00 our “average” American is no longer paying for health insurance premiums, they would no longer be paying $1,506.23 in Medicare taxes for those employees. This means that they would have a pre-tax pre-adjusted gross income from their business of $70,990.23.



My understanding is that Bernie’s plan taxes workers at a rate of 2.2% on their earned income for Medicare for all, and charges employers a 6.6% tax rate on all of their income to pay for Medicare for all. This means that the employees of our “average” American would each save $8,772.50 per year in health insurance costs and save $753.12 by the elimination of the present Medicare tax, for a total of $9,525.62 in reductions, but would now pay a tax of $1,143.66 per year. Which means they would pay $309.54 more in taxes as an employee for Medicare taxes. While they would pay $309.54 more in taxes to the government, they would save $8,382.96 overall! This means our “average” American’s employees have an extra $8K a year to spend at the store, or take a vacation with, so I hope they are happy.

That is what would happen to our “average” American’s employees, but what about our “average” American, how would they fair?



They have more money to start off this process with, but will they finish the day with more money in their pocket like their employees will?



It is my understanding that the self-employed individual will pay a tax of 6.6% on their gross income for the Medicare for all tax under Bernie’s plan, and will still pay the 2.2% tax on earned income that their employees pay, and will continue to pay the 12.4% Social Security tax, so let’s calculate that part of our “average” American’s tax bill. It is my understanding that the 6.6% Medicare for All tax is decoupled from the amount employers pay employees and is purely a flat income tax on the profits of a business.



This means that the new self-employment tax will be a bit more complicated to figure out because the 6.6% tax would be fully deductible from our individual’s gross income as a business expense, but they would still be responsible for the 2.2% Medicare tax on earned income from employment.



This means that on the $70,990.23 of new gross income, our “average” American would owe $4,685.36 in taxes for Medicare for All as an employer. This should also reduce their Social Security gross income to $66,304.87.



This means that they would owe $8,221.80 in Social Security self-employment taxes. It also means their “adjusted gross income” for the purposes of calculating their federal income tax would be adjusted down by $4,110.90 to $62,193.97.

Our “average” American would still need to pay the employee’s share of the Medicare for All tax of 2.2% on this new “adjusted gross income” which means they would owe an additional $1,368.27 in Medicare taxes under Bernie’s plan. Our “average” American’s Social Security and Medicare taxes would balloon from a combined $7,946.67 to $14,275.43 nearly doubling their tax amount, and increasing their taxes by $6,329.76, but our “average” American would have reduced their health care premium expenses for their family and their employees’ family plans during that same period by $35,090.00 which means that while their taxes almost doubled, they have saved $28,760.24 on health care costs by paying these higher taxes. I wonder if our “average” American would be able to afford hiring that new part time employee in their business that they know they need, but haven’t been able to afford, from those savings?

Of course this doesn’t explain our “average” American’s complete tax picture just yet, they have more money to start with, so they have more state and federal income taxes to pay, but if we are comparing health care on a fee for service basis, clearly Medicare for All is a win-win for employers and employees the only loser is the American health insurance industry.

But won’t Bernie make our “average” American pay higher income taxes too?

No!

The tax brackets effected by Bernie’s changes to the federal income tax code begin at incomes in excess of $250,000.00 per year, our “average” American earns nearly $200,000.00 a year less than where these changes occur. Our “average” American in this scenario will be paying higher income taxes because they are earning a bit more, but the income tax bracket they fall into is not effected by Bernie’s proposed changes to the standard federal income tax.

Assuming the same state income tax rules as above apply to our “average” American, this means they will pay $3,257.64 in state income taxes, or $853.70 more in state income taxes than they paid before, while their employees will continue to pay the same amount they previously paid. Our “average” American would be moving into the next tax bracket in this scenario because they have moved into the next highest tax bracket. Their top marginal rate would move from 15% to 25% because they are earning more in this scenario, but I believe the final calculations will prove that most people would prefer to pay that higher marginal rate.

At their new “adjusted gross income” and the new higher marginal bracket they fall into, our “average” American would be paying $7,533.49 in federal income taxes under Bernie’s plan. This means that they would be paying $2,388.64 more in federal income tax under Bernie’s plan; however, their employees earning the same amount our “average” American used to earn would continue to pay the same amount in federal income taxes. Our “average” American would be paying $25,066.56 in combined federal and state income taxes, Social Security taxes, and Medicare for All taxes in this scenario.

Now let’s consider the possibility that our “average” American was a beneficiary of Bernie’s tuition free public college plan, and was able to avoid taking on any student loan debt by working a part-time job during college, a full time job during their summer vacations from college, and thanks to a little help from their parents to cover the costs of room, board, and books while they pursued their college degree, so they now have no student loan debt in this scenario. This means that in addition to the $35,090.00 our “average” American has already saved in health insurance premiums for themselves and their employees, they have also saved $3,624.00 per year in student loan payments. This means that the Sanders’ plan reduced our “average” American’s expenditures by $38,714.00 per year, while charging them $9,571.10 more in taxes, for a grand total savings of $29,142.90.

Of course this assumes our “average” American has made no stock market investments because Senator Sanders is proposing a 0.05% transaction tax on all Wall Street securities or stock trades. This small transaction tax will raise approximately $300 billion per year to pay for college and university tuition based on current stock market transactions of approximately $60 Trillion per year in the United States.



You mean Bernie wants to tax retirement accounts?

This is the refrain that Republicans and the media talking heads will continue to utter over and over again about the small transaction tax. The reality is that the average American has no more than $12,000.00 in their retirement plan according to the National Institute on Retirement Security. You can review their information at the link below:

www.nirsonline.org/…

If the “average” American retirement plan is readjusting their holdings quarterly using an index fund, then at that value, Bernie’s plan will result in at the high end $24.00 in additional taxes due from those retirement accounts. That’s right, just $24.00 a year more from the “average” American to pay for public college and university tuition for all Americans who qualify to pursue and choose to pursue higher education. That sounds like a fair deal to me.



How much does our “average” American have left for living expenses under Bernie’s plan?

$45,899.67 that includes the extra $24.00 a year they are spending on the transaction tax because they invested $12,000.00 into an IRA.



So under Bernie’s plan, our “average” American has $45,899.67 to spend on housing, transportation, utilities, food, clothing, vacations, and entertainment. They might even be able to afford to save something for retirement in this scenario. Under the current arrangement, they have $15,274.54 to live on. Under Bernie’s plan their tax rate is 35.3% under the current arrangement their tax rate is 70.59% once you calculate the hidden taxes they are already paying. In other words, our “average” American would cut their taxes in half under Bernie’s plan!

Where can I sign up for Bernie’s tax cuts?



I hear what you are saying, this is a tax cut for self-employed Americans, and there might be some health insurance premium savings for working Americans who are not self-employed, but Why aren’t the Republicans clamoring about how Bernie’s plan cuts taxes for job creators? Self-employed individuals create 3 out of 10 jobs in America, do you think taking $17,545.00 in health care expenses off the top of the risks of starting your own business will encourage more Americans to start a company? I sure as hell do! Do you think freeing young people from the burden of student loan debts will give them the chance to start that business they want to start, because they can afford to risk life without a steady paycheck because it won’t ruin their credit rating if they fail? I sure as hell do! Nobody is talking about how Bernie does more to help small business people in America than any other candidate. But you have the numbers in front of you in black and white. You also know the numbers for the average, employee in America now too. They will spend $300 a year more in taxes under Bernie’s plan, $324 if they have the average amount in their retirement plan. Now go forth and spread this message, let people do the math. They can do the math, and it adds up to big savings for most Americans. It adds up to new job creation in America. It adds up to higher wages. It adds up to increased spending and demand. It adds up to a bigger take home check for the average American. We just need to let the average American know what they are actually spending in taxes, so share this article to let them know!