Bernie’s Tax Hypocrisy

By Jim Geraghty

Monday, April 18, 2016

Bernie Sanders released his 2014 tax return this weekend, revealing that he and his wife took $60,208 in deductions from their taxable income. These deductions are all perfectly legal and permitted under the U.S. tax code, but they present a morally inconvenient, if delicious, irony: The Democratic socialist from Vermont, a man who rages against high earners paying a lower effective tax rate than blue-collar workers, saved himself thousands using many of the tricks that would be banned under his own tax plan.

With all of his itemized deductions, Sanders’s taxable income was significantly lower than it would have been if he had taken the standard deduction. The deductions left Sanders and his wife paying $27,653 in federal income taxes in 2014, on a joint income of $205,271 — an effective federal tax rate of 13.5 percent. If that seems low to you, your instincts are right: According to the Tax Foundation, the average federal income-tax rate for a couple making $200,000 to $500,000 in 2014 was 15.2 percent. The “millionaires and billionaires” that Sanders is so fond of berating payed, on average, just more than twice as much of their income (27.4 percent) in federal taxes as he did.

On the campaign trail, Sanders’s taxation philosophy is simple: If you can pay more, you should; deductions are not a justifiable reason for a wealthy person to pay a lower effective rate than someone who earns less. His web site declares, “We need a progressive tax system in this country which is based on ability to pay. It is not acceptable that corporate CEOs in this country often enjoy an effective tax rate which is lower than their secretaries.”

With such rhetoric, you might think that Sanders would be reluctant to take every deduction he possibly could. Yet he and his wife took these deductions:

•    $22,946 on home-mortgage interest

•    $14,843 on real-estate taxes

•    $9,666 on state and local income taxes

•    $8,000 in gifts to charity

•    $350 in gifts to charity other than by cash or check

•    $4,473 in unreimbursed job expenses, which according to tax law can include fees such as union dues and travel

Keep in mind, Bernie Sanders doesn’t really like people itemizing their deductions to keep their taxes low. Under his tax plan, people making more than $250,000 per year — a bit more than he makes as a senator, but less than the $400,000 he would make as president — would see the value of their deductions limited to 28 cents on every dollar of taxes they paid. (The Sanders family, which falls in the 28 percent tax bracket, would just avoid being affected by the change.)

The Sanders’s single largest deduction was for the interest payments on their home mortgages. The senator isn’t such a fan of that deduction. In a 1997 book and again in his 2015 autobiography, he called for raising nearly $35 billion in new taxes by capping it at the first $300,000 in home-mortgage debt. In a speech on the floor of the House in 1997, he portrayed the deduction as a welfare payment to billionaires: “[Republicans] don’t talk about a housing policy through the home-interest mortgage deduction, which allows billionaires to get checks from the government when they deduct the mortgage from their mansions.”

Today, Sanders and his wife own two homes. They own a four-bedroom, 2.5-bath home in Chittenden County, Vermont, purchased in 2009 for $405,000. And they own a one-bedroom town house on Capitol Hill, purchased in 2007 for $488,999. They have two mortgages on the latter property totaling $464,550. We don’t know precisely how much debt remains on those mortgages, but there’s a good chance it’s significantly higher than $300,000.

Sanders may have once thought the deduction was an unjust giveaway to the rich, but he appears to have no problem taking advantage of it himself.

The Tax Policy Center found that biggest beneficiaries of the mortgage-interest deduction are people such as Sanders — wealthy by most standards, but not super-rich, living in areas with high real-estate costs. (Places with high real-estate costs often have high property or real-estate taxes, another big federal deduction. Some argue that allowing Americans to deduct their property taxes rewards localities that have high property-tax rates and punishes those that have low ones.)

The home-mortgage deduction has a smaller impact on the tax returns of the “millionaires and billionaires” that Sanders so loathes. In the TPC study, a person making $1 million per year saw his average federal tax rate reduced by only one-tenth of one percent because of the deduction, while someone making between a $500,000 and $1 million per year saw a tax rate reduction of six-tenths of one percent. The biggest winners were those making $100,000 to $200,000 per year and those making between $200,000 and $500,000 per year: Both groups saw their tax rates reduced by 1.2 percent because of the deduction.

What Sanders did, using every option and advantage available under a Byzantine tax code to minimize his tax payment, is a normal practice for many Americans. But it’s also exactly what the targets of his anger do. You can argue about whether or not that’s greed, but it’s impossible to argue that it isn’t hypocrisy. The paragon of liberal purity is not as pure as he’d like the world to believe.