so let me call your attention to three examples.
The first is from New York Magazine, is by Eric Levitz, and is titled Ocasio-Cortez’s 70 Percent Top Tax Rate Is a Moderate, Evidence-Based Policy. Let me offer two paragraphs from this piece to whet your appetite:
… French economist Thomas Piketty has demonstrated that high tax rates reduce pre-tax inequality – ostensibly, by discouraging rent-seeking among top executives, whose compensation is often determined less by productivity than a combination of social mores and their own audacity: CEOs are less likely to extract an extra $5 million from their companies (instead of allowing their firms to invest that sum in other purposes) if they know that Uncle Sam will collect 70 percent of their bonus. Thus, there is now some reason to believe that confiscatory top rates can reduce wage inequality, while producing some gains in economic efficiency.
All of which is to say: In 1980, taxing incomes above $216,000 (or $658,213 in today’s dollars) at 70 percent was considered a moderate, mainstream idea, even though wage inequality was much less severe, and supply-side economics had yet to be discredited.
Please keep reading. I will point you at the other two, and then offer a few thoughts of my own.
The second piece is from the Washington Post Wonk Blog, and is titled Ocasio-Cortez wants higher taxes on very rich Americans. Here’s how much money that could raise. Written by Jeff Stein, it goes through a great deal of analysis of the amount of revenue that could be raised. Based on current data on taxes, in theory a 70% marginal rate on income over $10 million could raise $720 billion/decade: Ocasio-Cortez’s suggestion for nearly doubling taxes on people earning more than $10 million (that is the title of a subsection of the piece).
Stein also offers several other alternatives for taxation, for example
$3 trillion/decade: A wealth tax on the top 1 percent similar to those in Europe
He notes that many countries put a small tax on large amounts of wealth.
$3 trillion/decade: Doubling income taxes on the top 1 percent
Here Stein notes the following:
In 2016, this richest 0.9 percent earned about $1.7 trillion in taxable income and paid about $530 billion in taxes. These Americans would have to pay an additional $320 billion every year in taxes if the top tax rate went up to 70 percent, according to calculations based on IRS data.
Stein is using things like IRS data, and offering us analyses by various economists, and government agencies. Note these words:
“You can get a hell of a lot of a money from taxing the 1 percent,” said Edward Wolff, a tax expert at New York University.
The Congressional Budget Office also recently estimated that raising taxes on the two highest income brackets by 1 percentage point would net $123 billion over 10 years. That would be for everybody who earns more than $200,000 annually.
The CBO also found that a 0.1 percent financial transactions tax on Wall Street would raise an additional $780 billion over 10 years, while returning the corporate tax rate to 35 percent would raise an additional $1 trillion over a decade. (The Republican tax law of 2017 lowered that rate from 35 percent to 21 percent.)
Of course, Stein and the experts to whom he refers caution that we might not see ALL of these returns, as the wealthy might find creative ways of tax avoidance they have not currently been using, and/or shelter some income overseas.
Finally, there is our favorite Nobel Laureate Economist, Paul Krugman, who today put up a piece titled The Economics of Soaking the Rich, which is subtitled “What does Alexandria Ocasio-Cortez know about tax policy? A lot.”
Krugman references economists like Peter Diamond,
Nobel laureate in economics and arguably the world’s leading expert on public finance (although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.)
and Emmanuel Saez and Christina Romer, to wit:
To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.
Krugman provides some lucid explanations of the economic concepts underlying these assertions, then tells us
What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.
He reminds us of the Republican notion that cutting tax rates for the rich stimulates the economy, then takes that apart, showing us a graph comparing highest marginal tax rates with economic performance, then tells us bluntly
What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.
And I am sure you will enjoy how he concludes this piece. After more criticism of the Republican approach on such matters, Krugman ends with this paragraph:
Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.
Go read all three pieces.
Now for my commentary —
All Republican tax cuts for the rich have accomplished is massively increased the national debt and massively shifted wealth towards the already wealthy. That was true of Reaganomics (of which his OMB Director David Stockman said at the time would create $200 billion annual deficits as far as the eye could see — if only the deficits since then were that small!); it was true of tax cuts under GW Bush, and it is clearly true of what the Republicans rammed through in 2018.
Republican tax cuts have little to do with economic growth, but are intended much more to do two things:
1. shift wealth upwards
2. starve the government of revenue to have an excuse to slash programs they don’t like as unaffordable, programs like Social Security, Medicare, Medicaid, aid to public education, SNAP, etc. etc. etc.
Republican only care about deficits when Democrats are trying to provide necessary services to the country. Deficits never matter when they are in charge, do they?
Far too many in the media are ignorant of economics and also ignorant of history. And unfortunately SOME Congressional Democrats are at least obtuse if not also ignorant on these issues.
We can clearly afford to pay for necessary programs, if only the wealthy and corporations were paying their fair share.
And despite the internationalization of corporate economics, there are ways of preventing total capital flight to escape taxation.
There are detailed analyses, we have a historical record.
Ocasio-Cortez may not be totally correct in all things, but in this matter she has the better of it than do the Republicans who have been pushing their own kind of economics, and it is good that her interview has sparked some serious discussion/analysis in the media. Now will the talking heads and other Dems pay attention?
