Let's say you make $1000 taxed at 20%, so you have $800 take-home. You spend $400 of that on health insurance. Now you have $400 left, or 40% of the initial amo

Let's say you make $1000 taxed at 20%, so you have $800 take-home. You spend $400 of that on health insurance. Now you have $400 left, or 40% of the initial amount with a 60% effective "tax" rate. If your taxes increase to say 40% but health insurance is included your taxes have nominally gone up 20%, but down 20% if you consider non-tax costs that were folded into your taxes. As anyone who's moved between countries can tell you, it doesn't make any sense to just consider what the tax rate is, instead you have to think about fixed costs (health care, housing, food, transportation, ...), deduct that from your pre-tax pay, and you're left with your effective taxation as it were. Administrative changes in the government can increase your taxes but have the effect of increasing your take-home pay, that's effectively what Sanders is proposing. There's no flaw in this reasoning, on the contrary you seem to have the fundamental flaw in your reasoning of assuming that the only way for the government to save you money is to reduce your tax rate.