The Vermont senator and Democratic presidential hopeful also brought along statistics to support his cause.
"It is a moral outrage that the top one-tenth of 1 percent today owns almost as much wealth as the bottom 90 percent; that 58 percent of all new income is going to the top 1 percent," he said.
To that, as with nearly everyone he said, the audience cheered.
Sanders, who is currently a strong rival to Hillary Rodham Clinton in Iowa and New Hampshire, said it's time Americans demand that "government start working for all of us, not just the few."
But Colbert asked him how he expected to go all the way to the White House without forming a Super PAC and soliciting campaign contributions from big donors.
"You don't bring a spoon to a knife fight," Colbert said.
Sanders countered he was getting small donations from hundreds of thousands of individual contributors instead.
"I don't support the agenda of corporate America or the billionaire class," he said. "I don't want their money."
"You are a liberal and you are a socialist, and people call you a liberal and a socialist," said Colbert impishly. "Why will you not accept those two terms as the insults they are meant to be?"
"I prefer the term 'progressive,'" he declared.