The Costs of the Green New Deal
The post Democracy discussed some of the proposals socialists have for the U.S. The main proposal is from the Green Party, called the Green New Deal, but is being picked up by many in the Democrat party including Bernie Sanders, Alexandria Ocasio-Cortez, Cory Booker, Elizabeth Warren, and Beto O'Rourke.
The Green New Deal includes a lot of good ideas but the main problem is someone has to pay for these ideas. Among the ideas are
- Forgiving current student debt
- Free education starting with kindergarten and going through college
- Free healthcare for all (an extension of the current Medicaid program to everyone).
- Affordable public housing
- Jobs for everyone at a living wage
- Affordable utilities from government owned utilities
Who can argue with these things, free education and healthcare, jobs for everyone at good wages, affordable housing and lower utility bills. There all great ideas, especially if you're one the receiving end of these handouts. I got curious however about the costs of these initiatives.
Obviously none of these items are actually free, someone does have to pay for them. That someone is the people that pay taxes, since all of these programs would be either government run or government subsidized. In the post It's Tax Season Again I pointed out information from the IRS indicating there are 150 million people roughly who submit tax forms, of these only 100 million (roughly) actually report taxable income (and pay taxes). Sounds good doesn't it, the costs of these programs will be spread over 100 million tax returns so it couldn't cost each one that much. Think again.
The current outstanding student loans total approximately $1.5 trillion. Spread over 100 million tax returns that would be $15,000 per tax return. Obviously those filing single would pay less and those filing jointly would pay more but $15,000 would be the average. It would be a one time charge since college will be free from here forward.
Data from the National Center for Education Statistics (NCES) and Student Debt Relief indicates there are 19.9 million college students. These students pay an average of $9970 for tuition and books and another $10,800 for room and board each year to attend college. Doing a little math, that comes to $413,323,000,000 annually or an additional $4133 in taxes that would have to be collected on average from each of those 100 million tax returns.
Additionally, the John Locke Foundation estimates that American households spend $27,500,000,000 on school supplies for K-12 education. That adds an additional $275 per tax return.
For the free healthcare, the Urban Institute reports the move to a single payer health care system to provide free healthcare would require additional tax revenues to the government of $32 trillion dollars over 10 years, or $3.2 trillion per year. That adds an additional $32,000 to each tax return on average.
Jobs for everyone at a living wage would be a federal program with public employment for anyone wanting a job. In this instance public employment means the taxpayers will be paying the salaries. Pulling together numbers mainly from the IRS we currently have roughly 162 million people in the labor force representing 63% (work force participation rate) of the population. Assuming everyone will not want or are not able to maintain a job I assumed this program would increase the work force participation rate to 70%, only a 7% increase from what it is today. With this increase we need to fund 18 million more jobs at a living wage. The most discussed living wage is $15 per hour. Eighteen million jobs at $15/hour comes to $552,960,000,000 per year, or an additional tax burden of $5529 per tax return.
Now let's total this up ignoring the $15,000 from each tax return to forgive the student loan since this is a one time charge to the taxpayers.
| Program | Cost per Tax Return |
|---|---|
| Free K-12 Education | $275 |
| Free College Education | $4,133 |
| Free Health Care | $32,000 |
| Jobs Program | $5,529 |
| Total | $41,937 |
That's an additional $41,937 to be paid on average by each tax return. In 2016 the average tax return resulted in taxes to the government of $14,453. This would bring the new average tax burden to $56,390 increasing the taxes paid in the U.S. almost by a factor of 4. Keep in mind these numbers don't include the costs of healthcare and education increasing every year. It also doesn't include other parts of the Green New Deal like eliminating the use of hydrocarbon fuels with a push for reliance on renewable energy sources, the program to subsidize utilities, or the program to subsidize housing making it more affordable.
The belief among socialist is the increased tax revenue can be obtained simply by taxing the rich more. This seems hard for me to believe, so in the next posts I'll try to pull some numbers from the IRS data to see how this would really work.