Bernie's Millionaire Tax Returns Are In: How Much Would His Own Plan Cost Him?

We know the socialist from Vermont is one of the 1% in terms of income. New IRS disclosure reveals his personal stake in new tax policies on either side.

People who actually work with affluent families know that wealth isn’t a binary quality you either have or don’t. It’s a sliding scale.

And Bernie Sanders’ newly released tax returns show that he’s slid relatively high up that scale in the last decade.

For a committed lifelong socialist, he’s doing well, earning $500,000 last year and sitting on what could easily be another $2 million in marital assets.

That’s easily what we’d call “high-net-worth” or a desirable client. Professionals could add plenty of value shielding his assets from risk and investing them in the most efficient corners of the market.

However, Bernie doesn’t seem to consider himself wealthy at all. And by his math, he definitely doesn’t think people in his position are enough of an economic problem to penalize.

Maybe it comes as no surprise. Bernie Sanders is eager to force people richer than he is to pay a “billionaire tax,” but his proposals leave people like him relatively unscathed.

It’s all about the fine lines in that sliding scale.

Between 1% and 0.0001%

Bernie’s paycheck from the Senate would rate him a comfortable professional lifestyle even after his wife resigned from her $200,000 job running Burlington College.

He’s also 77 and taking Social Security as well as what looks like required distributions from the retirement accounts. If not for politics, he and the wife would both be retired now.

But his books are still selling well, generating $391,000 in royalties last year. That’s enough to take him into the top 1% of earners.

And it’s not even his top earning year. During the 2016 election cycle, he cashed over $1 million in taxable income.

Again, that’s a comfortable professional lifestyle, the American Dream. A neurosurgeon might earn $600,000 a year. A high-powered lawyer or an advisory firm managing $60 million might have a similar income profile.

Hollywood stars would eclipse that salary with a single high-profile TV appearance, but that’s another story. And of course if you’ve got $16 million in Treasury bonds, you’re earning that much in interest.

The point here is that Bernie has made it into the high-net-worth bracket despite (or even because of) his political orientation. 

At his age, I doubt he has much ambition to take his lifestyle to the next level. He isn’t going to leave a vast fortune behind.

Sure, he and his wife have the house on the lake, a condo in DC and maybe $2 million on the books. Easily 65% of those assets are the real estate. It’s a university president lifestyle. 

They aren’t going to roll that $2 million into billions in their lifetime.

I suspect that’s part of what fuels his refusal to sympathize with billionaires. That level of affluence is alien to his experience.

No billionaires live in Vermont. To be a mere millionaire there, you’re living as large as it gets.

From what the historical returns tell us, Bernie’s tax proposals don’t really penalize people like him at all.

If book sales hold up, enacting his vision would leave him with about $20,000 less annual take-home income, largely due to the way Berniecare would work.

His effective tax rate was 36% in 2016 before the tax cuts. It was 28% last year. Running the numbers through his official calculator indicates that he’d pay about 33.5% under his own rules.

That’s no penalty at all. The Bernie Tax pain comes for people who are reliably earning more than $500,000 a year, who end up handing the government as much as 48.5% of their income.

They’re not the 1%. That’s Bernie, university president level wealth. 

They’re the 0.0001%, about two in a million American households today. That’s the segment of society that Bernie is targeting.

He did fairly well in the 2017 tax cuts. His plan preserves most of that windfall.

Estate planning up for grabs

The real Bernie Billionaire Tax is of course on inherited wealth. 

Estates like his would pass on tax free as long as they stay below $3.5 million. Billionaires would pay up to 77% when they die.

Dig in a little and Bernie isn’t a complete stranger to estate planning. The lake house is held in a trust to ensure that no matter how much it’s worth when the kids inherit, they won’t pay an immediate IRS bill.

However, it’s striking how little he participates in the investment market.

There’s no real capital gains information anywhere on his tax returns. Like a lot of politicians, this is practically a black box as far as he’s concerned.

I’ve always been hungry for all tax rhetoric – cuts and hikes alike – to say more about how the plan treats investment income. I’m never satisfied.

For all we know, it’s not even part of his mental landscape. He still does his own tax returns, taking every break the rules allow.

If he wanted to raise capital gains rates, I wouldn’t be shocked. That’s where the real fortunes in modern America come from and how they grow.

After all, anyone with $16 million can earn what Bernie does in perpetuity and pay the exact same tax rate, risk free. 

If they’re willing to take on a little more risk than Treasury debt, they can make even more and pay the IRS less on long-term holdings. At that point, you’re letting inertia do the work for you.

Those are the people who have truly arrived, the ultra-high-net-worth. That’s real wealth, where different math applies.


More Articles