“Study after study has shown that as a nation we will save substantial sums of money, and the average middle-class families will save $3,000 each and every year on their health-care bills.”

— Sen. Bernie Sanders (I-Vt.), in a speech at George Washington University, July 17, 2019

“My vision for Medicare-for-all does not include a middle-class tax hike. I’m not prepared to do that.”

— Sen. Kamala D. Harris (D-Calif.), remarks from July 16

Harris signaled in mid-July that she was distancing herself from complete support of Sanders’s Medicare-for-all plan — even though she was a co-sponsor of his bill — when she objected to what she called a “middle-class tax hike” embedded in the bill. On July 29, she unveiled her own plan in a post on Medium — a hybrid version that extends the phase-in to a new system from four to 10 years and allows a role for insurance companies (which Sanders’s plan would bar) to participate.

For the purposes of this fact check, she also would carve out a big exemption for paying payroll taxes to fund the system.

In her Medium post, Harris attacked a proposal by Sanders to levy a 4 percent tax on income above $29,000, saying it “hits the middle class too hard.”

But Sanders insists that the middle class will save money on his proposal. So what’s going on here?

The Facts

Sanders used to detail how he planned to pay for Medicare-for-all — though critics have said his proposals barely cover half of the possible cost — but for this presidential campaign, he has put out a menu of possible options.

One option would require a 7.5 percent payroll tax that employers would pay to help fund the program. Virtually every economist will tell you that a payroll tax paid by an employer largely comes out of the pay earned by the employee, but Sanders argues that the savings on the premiums currently paid by the employer should result in an overall reduction in costs for the employer. He estimates that a company would save more than $9,000 in health-care costs per average employee. (We do not vouch for these numbers.)

Harris specifically objects to this option: a 4 percent income-based premium paid by households.

Here’s how Sanders pitches it:

“Last year, the typical working family paid an average of $5,277 in premiums to private health insurance companies. Under this option, a typical family of four earning $50,000, after taking the standard deduction, would pay a 4 percent income-based premium to fund Medicare-for-all — just $844 a year — saving that family over $4,400 a year. Because of the standard deduction, families of four making less than $29,000 a year would not pay this premium.”

Sanders estimated that this would raise $3.5 trillion over 10 years, but the “typical middle-class family” would save more than $4,400 a year.

(We should note that these numbers are based on pre-2017 tax rates. President Trump signed into law a tax plan that raised the standard deduction but eliminated personal exemptions, so the premium probably would kick in sooner than $29,000 under the new tax system.)

Harris looks at this provision and claims it “hits the middle class too hard.” Instead, she would keep the first $100,000 in income from taxation and instead levy a new tax on stock, bond and derivative transactions. A stock trade worth $1,000 would be subject to a $2 tax, for instance. She claims that “these proposals would raise well over $2 trillion over 10 years, more than enough to make up the difference from raising the middle-class income threshold.”

Michael Linden, a fellow at the Roosevelt Institute who broke down the numbers for the campaign, says Sanders’s original estimate of $3.5 trillion over 10 years may have been a bit too high, but Harris would need to raise $1.5 trillion to $2 trillion to make up for her proposal. “A 0.1% equivalent Financial Transactions Tax has been estimated to raise between $700 billion and $800 billion, and Sen. Harris is proposing to double that rate, which would roughly double the revenue,” he said. (The Congressional Budget Office came up with that estimate for its list of options to reduce the federal budget deficit.)

But notice how Sanders framed his original proposal: This is a way to collect premiums to pay for health care. Medicare currently requires participants to pay premiums. Beneficiaries with tax returns of less than or equal to $85,000 currently pay $135.50, or about $1,600, a year. So for someone making $50,000, that would mean their premiums would be cut in half.

But for someone making $85,000, premiums would go up to $2,240 a year. And someone making $100,000 would pay $2,840 a year in premiums, compared to $2,275 today.

Still, in theory, those numbers would presumably be less than the premiums currently paid for health care outside the Medicare system.

Harris, by contrast, would eliminate the need for anyone to pay any premiums until they make more than $100,000, a level that would protect most American households from additional tax. The Census Bureau says about 30 percent of U.S. households had income above $100,000 in 2017, but adjusted gross income for tax filing purposes could mean all but 20 percent of tax filers would be subject to the premium tax. (Linden says raising the threshold to $100,000 will exempt roughly 50 percent to 55 percent of income from the threshold — on top of the income already exempted by the $29,000 threshold.)

Under Harris’s plan, the burden would shift almost entirely to the wealthy. Not only would they face an additional tax on each stock or bond sale, but their premiums would skyrocket. Someone making $500,000 to $750,000 currently pays about $5,500 in annual premiums for Medicare; that would go as high as $29,000 a year under the Sanders proposal.

(People on Medicare now also pay deductibles and coinsurance, which Medicare-for-all proposes to eliminate.)

Meanwhile, as our colleagues at PolitiFact documented, Sanders’s pitch that “average middle-class families will save $3,000 each and every year on their health-care bills” is not supported by the studies cited by the campaign. For instance, a 2016 study done by the left-leaning Citizens for Tax Justice concluded that workers would gain higher wages as employers faces lower costs for premiums, which in turn would offset the impact of higher taxes. People making $39,000 to $62,000 would see a gain of net income of $3,240, the study said.

But the analysis was for 2.2 percent additional tax on income, under the pre-2017 rates. So it’s not especially relevant in 2019. PolitiFact rated his claim as “mostly false.”

As we have shown before (watch the video above), there are many variables that could dramatically affect the cost of Medicare-for-all and could make it difficult to deliver the promised savings.

The Bottom Line

Readers have to view these proposals mostly as political messaging statements.

Sanders acknowledges that he will raise taxes on most Americans, but argues that all but the wealthy will experience a net gain in income. Harris is trying to one-up him by saying that she would not impose additional taxes on the middle class, even though Sanders’s pitch is exactly the opposite — that the middle class will experience higher incomes and lower health-care costs. She sidesteps the issue of whether most Americans should pay some kind of premium to get their health care, as they do currently under both Medicare and Obamacare.

Her proposal to impose a financial transactions tax would roughly make up for the lost revenue from not imposing premiums on people making less than $100,000 — but there could be gaping holes elsewhere.

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