Bernie Sanders Wants to Soak the Poor — Just Like FDR

Joseph Thorndike

2/9/2016

If Bernie Sanders wins the New Hampshire primary, it’ll be the best thing to happen to American socialism since Eugene Debs placed fourth in the 1912 presidential election.

Indeed, Sanders has called Debs “the greatest leader in the history of the American working class.” But when it comes to policy, Sanders has been channeling someone a bit more mainstream – and a lot more successful: Franklin D. Roosevelt.

The Sanders-FDR connection is especially obvious around taxes. Sanders, like Roosevelt, has a passion for soaking the rich. He supports heavier estate taxes, higher tax rates in the upper brackets of the income tax, and the abolition of tax preferences for investment income. He has also proposed a controversial new business tax designed to hit Wall Street where it hurts.

This program is not a perfect analogue for Roosevelt's, but it's close enough for government work. Plus, Sanders and Roosevelt share something even more important: a penchant for using regressive taxes to build progressive government.

Shared Rhetoric

Sanders likes to stress the progressive thrust of his tax proposals. “Democratic socialism means, that in a democratic, civilized society the wealthiest people and the largest corporations must pay their fair share of taxes,” he declared in November.

If that sounds familiar, it should: Democrats have been talking about making the rich pay “their fair share” since at least the 1930s (which is why I used the phrase as the title of my book on New Deal taxation). As Roosevelt said during the 1936 election campaign:

Ever since 1776 that struggle has been between two forces. On the one hand, there has been the vast majority of our citizens who believed that the benefits of democracy should be extended and who were willing to pay their fair share to extend them. On the other hand, there has been a small, but powerful group which has fought the extension of those benefits, because it did not want to pay a fair share of their cost.

Roosevelt believed that “ability to pay” was the linchpin of fair taxation—“a wholesome guide for national policy” that should remain “the governing principle of Federal taxation.”

Eighty years later, Sanders clearly agrees. "At a time of massive wealth and income inequality, we need a progressive tax system in this country which is based on ability to pay," he wrote in a policy manifesto for his campaign.

Similarly, when Sanders talks about the linkage between money and politics, he sounds a lot like Roosevelt. "The reality is that for the past 40 years, Wall Street and the billionaire class have rigged the rules to redistribute wealth and income to the wealthiest and most powerful people of this country," Sanders said.

Roosevelt would agree. "Our revenue laws have operated in many ways to the unfair advantage of the few,” he said in 1935, “and they have done little to prevent an unjust concentration of wealth and economic power."

Sanders’s Platform

Moving from rhetoric to policy, we can still detect a strong family resemblance between Sanders’s brand of democratic socialism and Roosevelt’s New Deal. Sanders's plan for raising estate taxes, for instance, has much in common with Roosevelt's 1935 proposal to establish a new federal inheritance tax. Both were framed in fiery terms of social equity and distributive justice.

The financial transactions tax was not part of the New Deal agenda, but it resembles (in impulse if not execution) FDR's plan to tax undistributed corporate profits. Both levies were touted as a way to raise money while also regulating dangerous business behavior.

Most obviously, Sanders's plan to raise marginal rates is clearly derived from FDR's soak-the-rich policies of the 1930s and 1940s. Sanders points to history when defending his plan, insisting that high rates have ample precedent, even under GOP presidents. "When radical socialist Dwight D. Eisenhower was president, I think the highest marginal tax rate was something like 90 percent," he noted.

Regressive Socialism?

Ultimately, however, the most revealing linkage between Sanders and FDR resides not in a shared impulse to tax the rich, but in a common willingness to soak the poor.

For instance, Sanders wants to pay for his plan to expand health coverage by imposing a new 6.2 percent tax on employers. That levy would almost certainly be passed on to workers. Sanders would also impose a 2.2 percent “income-based premium, again to help pay for health coverage. Neither of these taxes is especially progressive. Nor is the smaller payroll levy he has suggested to fund a program of paid family and medical leave.

Sanders has acknowledged that some of his tax increases would affect all workers. "The payroll tax would hit everyone -- yeah, it would," he told George Stephanopoulos on ABC’s This Week. But Sanders defended his taxes by pointing to their associated benefits. It’s no accident that some of his new taxes are styled as “premiums”; it underscores the link between costs and benefits.

This framing would have appealed to Roosevelt, who defended his own payroll tax in similar terms. Roosevelt understood 80 years ago what Sanders understands today: Regressive taxes can be put to progressive ends.

When FDR was devising Social Security, many of his closest advisers urged him to fund the program with progressive levies. But Roosevelt insisted on using a payroll tax, despite its regressive burden. As he explained to one friendly critic:

I guess you're right on the economics, but those taxes were never a problem of economics. They are politics all the way through. We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.

Building a welfare state isn’t easy, especially in a nation with a strong anti-statist political tradition. Roosevelt understood that he needed more tax revenue to pay for his spending. But he also knew that he needed the right kind of taxes – ones that gave Americans a sense of ownership in their new entitlements.

Now, some 80 years later, the wisdom of Roosevelt’s decision seems obvious. Social Security enjoys enormous, bipartisan support, even among conservatives, and efforts to scale it back have proven to be political poison.

But that didn’t stop the Obama administration from choosing a different model for the Affordable Care Act. They crafted a broad-based but hardly universal program and funded it with a ragtag collection of taxes, fees, and cost savings.

On some level, it all made sense – and paid the bills. But the politics were (and are) a disaster. If conservatives ever manage to extinguish Obamacare, its funding mechanism will probably be the proximate cause of death.

Sanders, for his part, seems determined to shield his programs from that sort of fate (assuming he ever gets them enacted, which seems a stretch, I’ll admit). He has proposed the kind of welfare programs that Americans tend to like: universal ones. And he wants to fund them with the sort of taxes that Americans are inclined to tolerate: broad ones, clearly linked to benefits.

Apparently, Sanders has learned more from FDR than just the rhetoric of redistribution. He’s also learned what it takes to build a powerful and permanent progressive government.