Clinton vs. Sanders: POLICY IS EXCITING!

Views: 4

Channel: vlogbrothers

Words: 1566

Words per minute: 213

Difficult level: Hard

Number of blanks words

2016-04-22 - English

Good morning John.
Taxes aren't any fun.
Figuring out how much to pay isn't fun, filing a return isn't fun, being completely confused isn't fun Having less money isn't fun But this video's gonna be fun.
It's gonna be so fun. Oh man, you won't even believe it; it's gonna be great.
Because instead of doing what everyone else does, and like, talk about candidates as if they are personified ideology and then yell.
We're just gonna talk about the tax plans of two people who want to be president of the United States of America: Bernie Sanders and Hillary Clinton.
But first we do have to talk about the current state of taxes in the US, a bit.
About 60% of taxes in the US are to the federal govenment another 20% to states, another 14% to local governments.
We are only dealing with that first 60%.
That 60% comes from mostly 4 places.
37% comes from ordinary income tax, 33% from payroll tax, 11% from corporate tax, and 5-10% from capital gains tax.
Pause if you want to read it.
Ordinary income tax is a percentage tax that you pay on the money that you get .
Here are, as of April 2016, the current tax brackets.
The phrase "tax brackets" though is confusing.
It makes it seem like if your income reaches a certain level all of your income gets lumped into the new bracket and you pay this higher tax on everything.
That is in fact not how it works.
Everyone pays the same amount of tax for the first 18,000 dollars and so on.
Like, this here hypothetical person who had 250,000 dollars of income they only pay the 33% tax on this last 20,000 dollars This chunk here is taxed to 28% this next hunk at 25 This is what we call marginal tax rates It's a term, just forget it, who cares?
Hillary Clinton has a plan, it's very simple.
Just keep everything the same except add one new tax bracket for all income earned over 5 million dollars.
So whenever one person earns over 5 million dollars instead of being taxed at 39.6% it gets taxed at 436%.
Bernie's tax plan, gotta spend a little more time here 'cause there's more going on.
Everybody pays an extra 2.2% that goes to helping create a single-payer healthcare system in the US and the tax brackets are moved around a bit and new ones are added for between 500 thousand and 2 million, and between 2 million and 10 million and over 10 million.
Simple enough.
We spend a lot of time talking about income tax and for good reason.
It's the money that we use to run the government.
But there's this other kind of tax called payroll tax.
Payroll tax is basically income tax.
It's just for by both you and by your employer, and if you don't have an employer, you pay the whole thing.
And when that happens you stop calling it payroll tax and you start calling it self-employment tax.
But it's the same thing. Though the costs of payroll taxes are for by both you and your employer, they are taxes on your income, and so they are an income tax.
But they are weirdly invisible.
They are either withdrawn from your paycheck before it even gets to you.
Or, even more invisibly, they're for by your employer and you just don't know that that's happening.
I am an employer of employees and for every person I have there are a bunch of taxes that I pay.
So if they're making 40,000 dollars a year even before any of their taxes get taken out of their paycheck I'm actually paying 46,000 a year for that employee Payroll taxes go to pay for specific things and they are things that we all like.
I mean, I hope so.
One of them is the Medicare payroll tax.
It just has two tax brackets: above and below 250,000 dollars and social security Which is a little more complicated.
Get ready!
Social security is designed to compensate you after you retire based on the amount of money you earn throughout your career.
But it will not compensate you for your income over a certain level.
It just stops and it says okay you're probably good enough and we don't need to worry about social security for you so we'll stop taking it out.
That level is about $118,000 so at that point you stop getting taxed social security payroll tax.
It just stops happening.
Clinton's plan, again, leaves all of this alone while Sanders' plan does two important things.
First, it raises everyone's payroll tax by an additional 6.2%. Again, that money going to help fund a single payer healthcare system in the US Bernie's plan also reintroduces the social security tax after $250,000.
So income between $118,000 to $250,000 still doesn't have that tax on it.
So that's it for ordinary income tax, that wasn't that bad!
But in the US we also have a completely different system for taxing money that you made by buying something and then selling it later for a higher price.
Usually that thing is a stock on the stock market also maybe bonds, also maybe real estate.
That kind of income, for complicated reasons, is taxed differently and right now the taxes on that kind of income are based on household income.
Hillary Clinton, this is gonna be a trend, keeps this pretty much the same though she does raise the taxes on medium term investments which are the kind of investments that generally more active stock traders do Bernie's plan starts out by adding that same 2,2 tax that we saw earlier to all capital gains income and then changes all capital gains income tax to the normal income tax level after $250,000 of household income.
And that is it for all of the actual taxes stuff but we still have some more tax policy stuff to talk about.
So fun!
Both Bernie and Hillary have the same plan as President Obama for limiting tax deductions taken by higher income households Hillary would create a $1,200 tax for caregivers and also give tax credits to businesses that set up profit sharing programs and skills training programs.
Bernie and Hillary both want to establish a tax on high frequency financial trading though the way they want to do it is different.
And they also both want to leave the current corporate tax rate alone while trying to close some loopholes that US corporations currently use like setting up their offices in tax havens, stuff like that.
Their plans are different from each other, though, but I'm not gonna get into corporate taxes cause eughhh.
But basically you can see what's going on here.
Hillary is leaving the tax code roughly the same while Bernie is increasing taxes across the board especially for people who make more than $250,000 a year which is about 1.5% of Americans.
He's doing that mostly to create a single payer healthcare system where the government becomes everyone's insurance company.
It's basically Medicare but for everybody.
The revenue generated would also strengthen social security and pay people to go to college.
Now all of this is complicated because under Bernie Sanders yes your tax rates would go up but you are already paying a lot of money in your healthcare premiums, probably, so so while taxes would go up, the goal is that the average person would pay less money over the course of the year in both taxes and healthcare costs.
We know that publicly funded healthcare systems have been less expensive in other parts of the world but we don't know whether that would be true in the US.
The reasons.
The reasons why healthcare in the US is so expensive are incredibly complicated.
So it's impossible to know whether these new taxes would be enough to pay for a universal healthcare system or if additional revenue would be needed.
There are some other criticisms of Sanders' plan: The nonpartisan tax policy center pointed out that costs of starting a new business or growing a business would go up under this plan possibly enough to significantly decrease economic activity . But then maybe having people not needing to worry as much about healthcare or retirement means that the economy is healthier.
I don't know.
Now if you are wondering why I spent a lot more time talking about Bernie's plan than about Hillary's plan, it's because Bernie's plan would involve far, far more change.
And while it's easy to have thoughts about which one of these plans seems better or even more moral in a quick gut check, it is impossible to know all of the effects of these tax plans and smart professional people who think about this for a living disagree all the time on which plan is the best.
In short, I am now going to say something that you will never hear on cable news, uh, as far as which one of these plans is the best plan for people of this country and for the future of this country.
I do not know.
That wasn't so hard to admit John, I will see you with your analysis of Ted Cruz's and Donald Trump's plans on Tuesday.