Vox’s tax calculator is extremely misleading so we’ve made a better one

Last week, Vox published an article titled “This Simple Calculator Tells You How Each Presidential Candidate’s Tax Plan Affects You.” It couldn’t be more manipulative.

Vox’s Calculator, despite its catchy title, doesn’t show how your overall economic situation might change depending on each candidate’s political agenda. What it shows is a number Vox calls “your tax payable,” which includes things you would never have thought of as part of your tax bill, like payroll taxes your employer pays on your paycheck. or the tax you pay on a bottle of wine. Using Vox’s approach, which relies on a narrow, but largely correct, analysis from the Tax Policy Center (TPC), just getting a raise from your boss would look like a bigger tax bill – a bad new. As a result, Vox’s calculator overwhelmingly favors Trump and Cruz, while suggesting that Sanders’ plan would have a negative effect on the disposable income of the majority of Americans.

This is all a bit misleading. The final take home pay – the amount of money you can spend after the government takes its share and you pay the cost of health insurance – has an exponential effect on your life than your tax rate. Contrary to what is implied in Vox’s calculator, TPC finds that under the Sanders plan, average income is the take-home pay of employees receiving employer-provided health care. increases.

Taxes, in other words, don’t exist in a vacuum — what the government does with those taxes matters a lot.

A key part of the Sanders plan, for example, is health insurance. In Vox’s calculator, your tax rate increases to fund Sanders’ Medicare-for-All plan. But they don’t take into account the fact that your employer will no longer pay for your health insurance. Will you pay more taxes? Yes. But if your employer is currently paying for your insurance, as is the case for about half of Americans, new business savings under Medicare-for-All will flow to you in the form of higher wages.

The impact of this health system would be enormous. The Kaiser Family Foundation finds that the average employer-sponsored insurance costs $ 17,545 for a family plan and $ 6,251 for individual coverage. Under the Sanders plan, employers would pay an additional 6.2% in payroll taxes and individuals 2.2% in additional taxes to fund health insurance. Many Americans come out on top in the calculation once we include this important detail.

Use this calculator to see what your after-tax take-home pay might look like. These are only estimates, however. Please see below for a full explanation and limitations of this tool. *

While Vox’s presentation is misleading, it’s certainly true that Sanders is proposing tax hikes, Clinton will keep things largely the same, and Trump and Cruz are proposing major tax cuts. But that doesn’t tell us anything useful about how much money we’ll actually have at the end of the day.

We caught up with Roberton Williams, the Tax Policy Center data economist, who explained that “what government does with money is not part of the model. The government can throw the money away or spend it on health care and education…. The analysis would be very different if we were the taxman and center of expenditure. Spending – or in other words taxpayer money used to fund shared goods like health care, education, roads, social security, etc. – are completely excluded.

What if you understand them? According to Citizens for Tax Justice, according to Sanders’ proposals, many Americans will not only see their take-home pay increase, but they will also spend less on things like prescriptions and student loans. Under Clinton, things will largely remain the same. And under Trump and Cruz, you will have more money in your pocket on payday, but you will have a lot more expenses. Cruz wants to empty five crucial government agencies, including the Ministry of Education. How much will you have to pay to send your children to school under the Cruz administration? The massive cuts proposed by the two Republican candidates mean that you will pay a high price for lower taxes.

Using Vox’s calculator, a proposal to fully fund K-12 public education and pass those educational expenses on to parents instead would simply appear to be a reduction in the effective tax rate of ‘a household. Let’s just ditch Social Security while we’re at it. Configuring the math to include taxation but not spending ensures a misleading image of benevolent Republicans giving us all money.

We asked Dr Williams if Vox’s calculator matched his headlining claim. He said: “As far as [the candidates’ tax plans] affects your general economic well-being, it is misleading…. we are not saying how it will affect the overall financial situation of people. If you care about the money in your pocket then the Vox Calculator is of little use. If Vox is to maintain his reputation as a clever clever one, he should give it up altogether.

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How we made the calculator
  1. What does this calculator tell me?
    • This calculator is an estimate of your after-tax take-home pay. As you know, taxes are infinitely complex, so many simplifications have been made. This calculator explains salary income well, but it is not optimized for high income people with large unearned income.
  2. Can you explain what you did?
    • Sure! Come into the weeds with us.
    • The calculator displays the net salary after tax. In order to get this calculation, we took the current tax code and added the tax policies proposed by Clinton, Cruz, Sanders and Trump.
    • The estimates are based on the 1040 tax form, so they cannot generate accurate estimates for high income earners with important deductions and details, or large unearned income (e.g. Buffet rule) . The calculator usually handles the high wages policy, but if you have large itemized deductions or unearned income, please note that the tool is not optimized for your tax situation. We start with the current tax policy and change it for each candidate.
    • For Clinton, we
      1. Add a 4% surtax on adjusted gross income (AGI) greater than $ 5 million
    • For Cruz, we
      1. Add business tax
      2. Repeal the credit for the elderly and disabled
      3. Repeal of child care and dependent care expense credit
      4. Repeal of the Alternative Minimum Tax (AMT)
      5. Reduce all regular tax brackets to 10 percent
      6. Repeal the health care deduction
      7. Repeal the national and local tax deduction
      8. Remove the property tax deduction
      9. Repeal the deductions from line 8 of Schedule A
      10. Repeal of the deduction of investment interest
      11. Repeal the deductions in Schedule A on lines 20-23
      12. Repeal the deductions from line 28 of Schedule A
      13. Increase the standard deduction
      14. Repeal adjustments above the line (1030 lines 23-35)
      15. Treat all unmarried applicants as one
    • For Sanders, we
      1. Repeal of the Alternative Minimum Tax (AMT)
      2. Reduce the top ordinary tax brackets to 28%
      3. Add a surtax on taxable income of 2.2%
      4. Incorporation of the AGI surcharge for graduates
        1. These are 9, 15, 20 and 24 percent, depending on the income bracket
      5. Repeal the phasing out of the exemption
      6. Repeal the health care deduction
      7. Repeal the itemized deduction limit
    • Repeal of health savings accounts and deductions for self-employed health insurance
      1. For Trump, we
      2. Replaced the current tax brackets with its proposed 10, 20 and 25 percent brackets.
      3. Married deposit treated separately as single
      4. Increase in standard deductions to $ 25,000 for singles and $ 50,000 for spouses
      5. Repeal of alternative minimum tax
    • Phased-out rate doubled for exemptions
      1. Double phase-out rate for itemized deductions
      2. What proposed tax changes are not included? Please note that this tool examines a 1040 tax form, so some proposed tax changes are not included in our calculations.
      3. Buffet Rule (Clinton’s policy of imposing a minimum tax of 30% on taxpayers whose AGI exceeds $ 1 million)
      4. Excise taxes (such as the financial transaction tax or the carbon tax proposed by Senator Sanders), additional wealth taxes, inheritance and gift taxes
    • Taxes on inheritance and wealth
    • Capital gains tax changes
    • We also do not include parent tax credits for college kids or daycare expenses.

Please note that our calculator is in 2015 US dollars. The Vox tool is in 2017 dollars.

  • The calculator is not optimized for people over 65 on Medicare.
  • 3. Why is my take-home pay increasing?
  • In some cases, you may see your take home pay increase under certain candidates. This can be for a number of reasons.
    1. Under Republicans, your take home pay may go up because your tax rate, the amount you pay to the government, goes down.
    2. Under Senator Sanders, your take home pay may increase even if you pay more taxes. It might sound counterintuitive, but let’s explain. We’ll assume, as the Tax Policy Center (TPC) does, that your total compensation, the total amount you cost your employer, stays the same for different applicants. Health care is a major expense for most employers. On average, if you have a family plan, the total cost is $ 17,545. Part of this amount, $ 12,590, is paid by your employer, while the remaining $ 4,955 is paid out of pocket.

Under the Sanders plan, your employer no longer purchases your health insurance, which is paid through tax. So, we assume (like TPC does) that your employer returns the money they would have paid for health insurance to you, the worker, in the form of wages (after tax, of course). So your tax rate goes up, but your salary may also go up.

We do not record employee contribution to the health insurance premium. Right now, the average family contributes $ 4,955 to a family plan. Under the Sanders plan, that would be money that you no longer need to spend. It’s more money in your pocket. * Although not a policy, TPC and we assume that they become unnecessary and are therefore disposed of due to lack of use. This implicitly assumes that Sanders Medicare for All is enacted.

Esther L. Steinbach

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