I love the buzz about Alexandria Ocasio-Cortez’ proposing a return to the pre-Reagan top marginal tax rate of 70% on income over $10 million (she apparently said “60-70%,” but the headlines mention only 70% — sigh), especially the analyses that show what could be funded if the government had that much tax revenue, or what the impact could be on an individual. It’s a discussion worth having. But it’s possible to achieve the same goal by — wait for it — moving the goalposts.
I’m just (barely) enough of a capitalist to want to see people keep at least half of whatever they’re able to earn. So I’d like to see the top rate set at 49.5%. But I’d apply the rate to individual earnings over $1 million, or couples’ earnings over $2M.
And by “earnings,” I mean all sources of earnings, whether earned through work, investments, or inheritance. In other words, eliminate the capital gains and estate taxes and tax those earnings just like wage, salary, or fee income (“ordinary income”). Add up your W-2s, 1099s, and whatever other income you had and put the sum on the “Total gross” line. If your adjusted gross (however that’s derived) exceeds $1 million, you’ll still keep 50.5% of the portion over $1M.
The point is, we can negotiate the rates and the brackets. We can also debate what constitutes income and what deductions to allow. The impact of limiting the deductions for mortgage interest and state and local taxes (SALT) won’t be known until people start filing, but that’s coming up soon. We can debate whether those should be limited, or whether they should be allowed as deductions at all. But levying high rates on high income is neither Communist nor Socialist.
Unless you’re calling Eisenhower a Commie, that is.