We’ll need a lot more billionaires to fund Bernie Sanders’ ‘Medicare for All’

Here’s bad news for Bernie Sanders (I-Vt.): Turns out that to pay for “Medicare for All,” we’ll need a whole lot more rich people. Today’s crop just won’t come close to providing the vast sums needed for his single-payer plan.

That would appeal to the crusty Vermont senator, who has said billionaires shouldn’t exist, about as much as force-feeding foie gras to an animal-rights activist. 

Maybe that’s why Bernie recently told CNBC’s John Harwood that he won’t be issuing an “exact detailed plan” to pay for his pet program any time soon. He can’t, and neither can anyone else.

That’s the takeaway from the latest report from the Committee for a Responsible Federal Budget (CRFB), which recently assessed whether Medicare for All would require a tax hike on the middle class. Spoiler alert: You bet it would.

Elizabeth Warren (D-Mass.) has danced around this issue for months, assuring her adoring supporters that her single-payer health care system would be financed largely by making the wealthy and corporations pay their “fair share” in taxes, which has to be the defining cliché of this election season.

Neither Warren nor Sanders nor any of the other progressives running for president ever explains what that hallowed share might be. Maybe that’s because they know full well that our tax system is among the most progressive in the world; our rich already pay a very fair share. Specifically, last year the top 20 percent of U.S. earners, accounting for 52 percent of the nation’s income, paid 87 percent of the country’s taxes.

Nevertheless, progressives want them to pay more in order to support even more federal government expenditures, and in particular to pay for the goodies they are promising to voters — paying off student debt, paying for free college and, of course, paying for all health care costs.

But here’s the problem. The CRFB crunched the numbers and found that even the most aggressive tax hikes on businesses and on America’s top earners don’t come close to covering the expected ten-year $28 trillion to $32 trillion price tag for Medicare for All, never mind all the other programs progressives are keen on.

The bad news is this: Even if we raise individual rates on top earners to 70 percent, eliminate all deductions for households with income above $250,000, enact a large wealth tax (or capital gains tax), restore the estate tax to 2009 levels and wipe out the pass-through treatment on business income, the government would rake in only an additional $7.6 trillion over ten years.

Note that the CRFB analysts conclude that is likely an optimistic appraisal. There is no deduction, for instance, for a reduced incentive to work or invest, or any of the other negative consequences that might occur from such a radical change in our tax system.

But what about America’s businesses? Isn’t there a honeypot there?

Turns out, if we double the corporate tax rate from the current 21 percent to 42 percent, close all corporate loopholes, raise taxes on foreign-earned income and slap a tax on financial transactions and on large financial institutions, the best we can hope for is an additional $3.5 trillion over the coming decade.

For those not too quick with math (I’m talking to you, Ms. Warren), those figures add to $11.1 trillion, a far cry from the expected cost of a single-payer comprehensive health care system.

The extra $17 trillion to $21 trillion has to come from somewhere, and the only place left is the middle class, typically defined as people earning more than $25,000 and less than $200,000 (or $250,000 for families).

For sure, the people at the lower end of that spectrum might yet be better off, paying something more in taxes but not having to fork out the cost of insurance premiums or pay some portion of their doctor bills. But not all.

The CRFB estimates that if Medicare for All were financed by a 25 percent tax on income, a single person aged 40 earning $100,000 and today laying out premiums and medical expense sharing of $10,000 would end up paying $15,000 more. On the other hand, a family of four with income of $60,000 and paying $25,000 in premiums and cost sharing would benefit, saving overall some $10,000.

The young people marching in Bernie’s army and the suburban women cheering Elizabeth Warren to the finish line need to do their homework. They should discover the real costs of the programs being proposed by their candidates. In particular, they might find that funding Medicare for All would require a gigantic redistribution of income that could hurt their families’ futures.

It would, more importantly, fundamentally change the incentives we provide to successful people and, consequently, the future growth of our economy.

The United States is a beacon to aspiring entrepreneurs, performers and creators the world over, attracting the most talented people on earth because we celebrate success. We allow people like Elon Musk, the genius behind Tesla and Space-X, and Sergey Brin, the co-founder of Google, to come to America, prosper and to become wealthy. Ambition is a great engine of our country’s growth.

To undermine opportunity in this great nation by imposing giant taxes in order to upend a health care system that satisfies most Americans would be stupid. At one of the Democratic presidential debates, former Rep. John Delany (D-Md.) described Medicare for All as a “pie in the sky” idea; he was right.

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.