A central promise of Barack Obama's 2008 campaign and presidency — that the middle class would not pay more in taxes — is now dividing the Democratic candidates vying to replace him, underscoring how Democrats are split over how far to go with their ambitions for what government can accomplish.
Sen. Bernie Sanders of Vermont and former Maryland governor Martin O'Malley say the middle class could see at least somewhat higher tax rates to pay for the expansive government programs they favor. They also say the middle class will benefit overall from their plans.
But Hillary Rodham Clinton, for the first time in this campaign, is now committing to the same pledge Obama made: no new taxes on households earning under $250,000 a year. Clinton also took the pledge when she ran for president in 2008 — a position that then aligned with Obama's — but she is making it today in a more populist Democratic environment.
"Hillary Clinton is proposing a bold, ambitious agenda," Clinton spokesman Brian Fallon said in a statement, "but in paying for her proposals, she fundamentally rejects the idea that we should be willing to raise taxes on middle-class households. We need to raise these families' incomes, not their taxes."
The split reflects a difference in philosophy and ambition among the candidates. All are proposing to expand government spending beyond the levels of the Obama era. And while they favor many of the same policies — such as government-paid family leave and expanded access to child care — Clinton has pushed less sweeping programs than her rivals.
Clinton’s plans, both announced and forthcoming, appear likely to echo the spending levels of Obama’s most recent budget proposal, which proposed about $2 trillion in additional taxes over 10 years, all concentrated on the wealthy.
Sanders, meanwhile, already has proposed at least one small tax increase that would hit all taxpayers — an increase in the payroll tax to fund a guaranteed paid leave benefit. Analysts say he will almost certainly need to propose others in order to finance his plan to offer government-funded health care to every American.
But Sanders’s campaign says that for all but the richest taxpayers, those tax increases will be more than offset by the publicly provided benefits he is proposing, such as tuition-free higher education and universal child care. Aides argue that, because his health care plan would save consumers so much money, middle-class Americans would actually bring home larger paychecks if his plans are enacted, even if they are paying higher tax rates.
Sanders believes that income and wealth inequality are the greatest issues of our time, said Warren Gunnels, his policy director, who declined to speak directly to the Obama pledge. "We need bold solutions," he added, "to rebuild the middle class of this country."
O'Malley, who is running third in the race, will not endorse the Obama pledge, aides said. They noted his support for the same payroll tax increase that Sanders backs as a means of funding paid family and medical leave for workers. His spokeswoman, Haley Morris, said that in general, "any tax increases would be instituted in a progressive way and concentrated at the top."
All the Democrats’ plans stand in sharp contrast to the Republican presidential contenders. Every GOP candidate has at least sketched the details of a large tax cut plan. Independent analyses of those plans have found they would all produce higher incomes for taxpayers across the board, though in general those gains would be largest, in percentage terms, for the highest income earners.
Obama's 2008 pledge shaped his presidency. Administration officials have acknowledged that he could not endorse the leading paid leave proposal from Democrats partly because it would raise middle class taxes, for instance. Liberals complained the pledge handcuffed his policy ambitions — forcing him only to seek tax revenues from the top 2 percent of earners — while also making it harder for him to negotiate during key moments like the 2012 fiscal cliff. The pledge also opened him up to criticism whenever the administration proposed anything that did ask more of the middle class, such as a tanning salon tax in the Affordable Care Act or a new tax on tobacco to pay for preschool.
New plans for domestic spending
This campaign, none of the Democratic candidates have finished rolling out spending proposals. But the details they’ve released so far, coupled with estimates about the proposals they have hinted at, give a good sense of how their plans might affect taxpayers up and down the income ladder.
Sanders has detailed about $3.5 trillion over 10 years in proposed new spending programs, including an expansion of Social Security, a "College for All" plan, $1 trillion in infrastructure improvements, and 12 weeks of government-paid family and medical leave for any worker who needs it. He supports universal child care but has not said how much it would cost or how he would fund it.
Sanders's total agenda could end up costing perhaps as much as $18.5 trillion more over the next 10 years, if you add the $3.5 trillion in spending programs to the $15 trillion cost estimate of one major study of what it would take to implement the type of fully public health care program Sanders wants. Sanders's campaign argues that estimate is too high, but doesn't provide one of its own.
To offset his spending plans, Sanders has detailed a batch of tax increases mainly targeted at corporations and the highest income earners. Those include new taxes on financial transactions such as stock trades and on income that corporations are sheltering in tax savings overseas, ending a preferential tax treatment that benefits hedge fund managers, boosting estate taxes and eliminating the cap on income subject to payroll taxation for earners who make more than $250,000 a year.
Sanders, along with O'Malley, also endorses a 0.2 percent payroll tax increase across the board to fund paid leave, which sponsors estimate would add up to about $72 a year for a typical female worker.
Overall, Sanders's campaign estimates that his tax proposals would bring in an additional $6 trillion revenue over 10 years, half of that from the financial transaction tax. Other outside estimates suggest the yield from that tax would be much lower — about $500 billion over 10 years, according to the independent Tax Policy Center.
Sanders is also set to propose a tax on the carbon emissions that scientists blame for climate change, refunded to low-income Americans who would face higher costs as a result of the tax.
Health care plan
The biggest middle-class tax question for Sanders is his plan to shift every American to government-funded health insurance, which he has not detailed for the campaign.
"I can confidently say we can’t raise that much by taxing the rich," said Len Burman, who directs the Tax Policy Center.
A single-payer health care bill Sanders introduced in 2013 included an additional 2.2 percent income tax for most Americans — and considerably more for the rich — and added a 6.7 percent payroll tax for all employers. Economists generally believe payroll taxes are passed on to workers, meaning poor and middle-class taxpayers would have seen tax increases totaling nearly 9 percent.
One of the few economic projections of a single-payer plan, by the University of Massachusetts economist Gerald Friedman, estimated that the plan would cost about $1.5 trillion a year, but raise overall income for 95 percent of Americans, after accounting for tax changes and lower health costs. The Sanders campaign says that model should not be used as a guide for the overall costs of their forthcoming plan.
Burman said the revenue estimates in that model appear overly optimistic, which would imply that lower- and middle-income families might need to pay more to fund the program.
Clinton, too, has yet to detail a key piece of her fiscal plans — her tax reform proposal, which would affect several of the other tax plans she has spelled out.
Still, she has proposed several hundred billion dollars in increases on corporations and the rich, including a tax on banks (similar to one that Obama has proposed that would raise an estimated $110 billion over a decade), a limit on deductions for higher earners and the so-called Buffett Rule that would also force high earners to pay more.
Her spending plans total about $1 trillion, with more likely to be announced. They include efforts to reduce the cost of college, to provide paid family and medical leave, and to expand Social Security benefits for widows and some others. Aides have hinted that she could also propose additional tax credits for lower- and middle-income Americans, which would also be offset by tax increases on the rich.
O'Malley has proposed what aides estimate as about $2.5 trillion in tax increases over the next decade, including a financial transactions tax and a carbon tax, which would likely be refunded to consumers.
This story has been changed to make clearer where the $18.5 trillion calculation of Bernie Sanders' spending plans comes from. It's also been corrected to say that the Sanders campaign disputes the $18.5 trillion number because, the campaign says, it overstates the cost of their health care plan.