January 9, 2019

AOC Suggests Raising Top Marginal Tax Rate

Editor's note: We couldn’t be more proud of one of our teammates, Isaac Rose-Berman, who penned his first op-ed this week in USA Today: “How college students can bridge American divides: 'Study abroad' in Alabama or New York.” Please give it a read, and share far and wide!

On Sunday, Rep. Alexandria Ocasio-Cortez (D-NY) suggested raising the top marginal income tax rate to 70 percent for high earners.
CBS News

See past issues

From the Left

The left is excited to be discussing policy ideas, and argues that a higher tax rate for top earners is backed by historical precedent and economic research.

“Politics nerds talk about something called the Overton Window, it's the theory that only a limited number of policy ideas can be discussed at a time. It's a spectrum, and only that which fits within the spectrum can make it into the national conversation. It seems that Ocasio-Cortez is getting her ideas on the spectrum

"We live in a country where 63% of citizens think that our economy is stilted unfairly toward the rich and special interest groups… As more and more Americans feel the deck is stacked against them, they're going to start listening to these ideas.”
Business Insider

“I mean, who thinks [this] makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance… And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history… AOC, far from showing her craziness, is fully in line with serious economic research.”
New York Times

“The top rate was 91% from 1946 to 1963 (the Truman, Eisenhower and Kennedy years), applied to incomes of $400,000 or more. That income in 1956 would be the equivalent of $3.8 million today. Somehow the rich kept working, and the republic did not fall. Indeed, those years included periods of unexampled prosperity and the growth of a strong middle class in the United States.”
Los Angeles Times

“Many critics attempt to confuse people over what Ocasio-Cortez said. Just to be clear: she said that when people earn $10m, the 10 millionth dollar and above should be taxed at a high rate. So unless you earn $10m, she’s not talking about ‘your’ income

“The more intelligent criticism of Ocasio-Cortez is a pragmatic one. The National Review argument is that high tax rates simply can’t raise the kinds of revenue that would be necessary to fund a ‘Green New Deal’. This is, in part, because the rich would circumvent the tax through loopholes and moving money overseas. But this, in itself, is not an argument for not levying the tax: it’s an argument for closing loopholes and finding ways to effectively restrict the international movement of capital.”
The Guardian

“It’s hard to imagine any new tax revenues being maximally effective without a more serious commitment to tax enforcement. The IRS estimated in 2016 that America lost $458 billion every year from tax evasion… Investing in the IRS wouldn’t end tax evasion entirely, but would probably bring in significant funds. Similarly, global tax havens cost [Americans] $150 billion a year in tax avoidance.”

“One can raise a variety of technocratic quibbles with Ocasio-Cortez’s plan (raising taxes on capital gains might be a more effective way of soaking the super-rich; a confiscatory top marginal rate might prove impotent absent a global war on tax havens). But it would not be extreme in its redistributive implications, relative to our country’s past tax practices, or to other nations’ current ones… Ocasio-Cortez’s 70 percent top tax rate is a moderate, evidence-based policy.”
New York Magazine

“The two issues with which he is most often associated, support for a balanced budget and opposition to free trade, put him at odds with both of our major political parties. An old-fashioned, soft-spoken Southerner, he nevertheless held views on so-called ‘social issues’ that would be to the left of the mainstream of the Republican Party, both then and now. He was a fervent supporter of the Vietnam POW/MIA movement in the late '80s and early '90s, but he was not in any sense a hawk. Never mind 2003. Perot opposed the first war in Iraq in 1990… Perot's death should be mourned by all Americans who regret the fact that it is no longer possible to make reasoned, non-ideological arguments about questions of public import, and by the devolution of our political life into mindless partisan squabbling.”
Matthew Walther, The Week

From the Right

The right opposes the plan, arguing that it would harm the economy while failing to earn nearly as much revenue as projected.

From the Right

The right opposes the plan, arguing that it would harm the economy while failing to earn nearly as much revenue as projected.

“The rich in the U.S… already pay an outsized portion of income taxes compared to their earnings. In 2016, the top 1 percent of income earners—those who earned about $500,000—earned 20 percent of all U.S. income while paying 37 percent of all federal income taxes. The top 10 percent earned 46 percent of all income and paid almost 70 percent of all federal income taxes…

“[Moreover] there’s a reason both Republican and Democratic presidents and Congresses have seen fit to cut taxes repeatedly… In the 1920s, tax rates were cut from 71 percent to 24 percent, and the economy grew by a massive 59 percent… President John F. Kennedy lowered the top rate in the 1960s, and President Ronald Reagan lowered it again in the 1980s. Both of these tax cuts were followed by two of the longest economic expansions in our history.”
Heritage Foundation

Furthermore, “in reality, very little money would be raised by the proposal… Save for a few actors and professional athletes, the bulk of income at this level is from capital gains or business income… Without a complete overhaul to the taxation of capital gains, wealthy investors would move to limit their capital gains realizations to avoid this absurdly high rate…the only beneficiaries [would be] high-priced accountants and attorneys.”
Washington Examiner

“If it were really possible to fatten government spending annually by as much as $650 billion (to use 2016 tax data) without killing the golden goose, we have to believe U.S. politicians would be doing so already…  all evidence suggests that the richest taxpayers are the most diligent about mobilizing lobbyists and politicians to finagle the tax code on their behalf… The net result isn’t more revenue. It’s more efficiency-inhibiting economic distortions.”
Wall Street Journal

When rates were higher, “tax exclusions and high income thresholds shielded nearly everyone from these tax rates — to the degree that the richest 1 percent of earners paid lower effective income-tax rates in the [1960s] than today. In 1960, only eight taxpayers paid the 91 percent rate. Overall, today’s 8.2 percent of GDP in federal income-tax revenues exceeds that of the 1950s (7.2 percent), 1960s (7.6 percent), and 1970s (7.9 percent). Those earlier decades were not a tax-the-rich utopia…

Not a single country in the OECD has a 70 percent tax bracket. Indeed, America’s top combined income- and payroll-tax rate already exceeds that of England, Germany, and Norway, and is only 7 points below that of France. Europe finances its generous welfare states through steep value-added taxes that hit the entire population.”
National Review

“There is a reason that other nations in the Anglosphere do not have anything close to [a 70%] tax — even as they spend in a way that would appeal to Ocasio-Cortez — and that is that such taxes do not really do much good… Unlike the United States, those nations do have much higher taxes — on their middle classes

“Democratic aspirants point excitedly at the health-care systems and family-leave policies of Britain or Canada, while promising not to raise taxes on anyone making $250,000 or less per year. This is an impossible, unsustainable combination.”
National Review

“If a dozen drones or missiles can do the kind of damage to the world economy as did those fired on Saturday—shutting down about 6 percent of world oil production—imagine what a U.S.-Iran-Saudi war would do to the world economy. In recent decades, the U.S. has sold the Saudis hundreds of billions of dollars of military equipment. Did our weapons sales carry a guarantee that we will also come and fight alongside the kingdom if it gets into a war with its neighbors?… the nation does not want another war. How we avoid it, however, is becoming difficult to see. John Bolton may be gone from the West Wing, but his soul is marching on.”
Patrick Buchanan, The American Conservative

“NBC and MSNBC embraced Sen. Elizabeth Warren of Massachusetts in the first debate of Democratic presidential candidates Wednesday night, treating her like the star of the show. The debate led off with Warren, who had a huge popularity advantage from the start… NBC anchor Savannah Guthrie started it off sounding more like Warren’s press secretary. ‘You have many plans – free college, free child care, government health care, cancelation of student debt, new taxes, new regulations, the breakup of major corporations,’ Guthrie said, before teeing up an economy question. Guthrie even used Warren’s plan to break up tech companies as the foundation for a question for Sen. Cory Booker of New Jersey… the round-robin final comments also ended with Warren, as Maddow asked her for the ‘final, final statement.’ That let NBC bookend the entire debate with Warren and Warren.”
Dan Gainor, Fox News

President Trump should be happy. As much as Warren is articulate, obviously intelligent, and energetically supported by Democrats, she would also be far easier to defeat than Joe Biden… Considering Trump's economy, the president is well placed to defeat Warren.”
Tom Rogan, Washington Examiner

A libertarian's take

“Why did Modi pick this moment to do something so radical? Violence in Kashmir had been trending downwards for the last year, after all. The main reason, besides President Donald Trump's alarming offer to mediate a settlement, is that he wanted a distraction from India's mounting economic woes. India's GDP growth dropped from over 8 percent to 5.8 percent over the last year, and it is widely expected to dip further. Just as ominous has been the crash in consumer demand. India's usual problem has been an insufficient supply to meet its voracious appetite for vehicles, cell phones, and other similar goods. But sales figures for all consumer goods have posted a precipitous decline, slamming businesses that are dramatically scaling back investments.”
Shikha Dalmia, Reason

On the bright side...

Toronto is getting a free unlimited nacho cheese dispenser next week.
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