With Meghna Chakrabarti
Radical? Or the right thing to do? We’ll analyze the numbers behind Rep. Alexandria Ocasio-Cortez’s proposal to push the top tax rate to 70 percent.
Peter Diamond, professor emeritus of economics at the Massachusetts Institute of Technology (@MIT). He won the Nobel Memorial Prize in Economic Sciences in 2010. Nominated by President Obama for the Federal Reserve Board.
From The Reading List
National Review: "Why 70 Percent Tax Rates Cannot Finance Socialism" — "Representative Alexandria Ocasio-Cortez’s call for a 70 percent income-tax rate to finance green-energy initiatives has energized the Left. Yet this is completely destructive proposal. A 70 percent tax bracket would raise very little (if any) revenue, while damaging the economy and sending income and jobs overseas.
"While details of Ocasio-Cortez’s energy proposal are unavailable, former Green-party presidential candidate Jill Stein has proposed a 'Green New Deal' costing between $700 billion and $1 trillion per year for public jobs and clean energy initiatives. That is roughly 4 percent of GDP.
"And when assessing the needed tax revenues, a green-energy initiative costing $7–$10 trillion over the decade should be examined in the context of $42 trillion in additional Democratic-socialist proposals that include single-payer health care ($32 trillion), a federal jobs guarantee ($6.8 trillion), student-loan forgiveness ($1.4 trillion), free public college ($800 billion), infrastructure ($1 trillion), family leave ($270 billion), and Social Security expansion ($188 billion).
"That 21 percent of GDP cost would double federal spending. And that does not even account for a baseline budget deficit rising to 7 percent of GDP over the decade — bringing the total budget gap to 28 percent of GDP.
"Even if taxing the rich could finance a Green New Deal costing 4 percent of GDP — which I will show is not possible — that would use up all the plausible upper-income tax hikes that could otherwise address the remaining baseline deficits and new liberal spending initiatives that total 24 percent of GDP (an annual budget shortfall of $5 trillion in today’s dollars). The middle class would have to pay that remaining tab."
The Daily Beast: "The ‘Tax the Rich’ Delusion of the Democratic Left" — "The Democrats’ incoming House majority—and its Senate caucus of presidential wannabes—are about to face fiscal reality.
"When confronted with how to pay for their extraordinarily expensive policy agenda, the answer of liberal lawmakers, analysts, and advocates is nearly always the same: tax the rich.
"How to close the $12 trillion baseline budget deficit over the next decade (a figure that already assumes the 2017 tax cuts expire)? Tax the rich.
"How to pay for the $42 trillion Democratic socialist agenda that includes single-payer health care ($32 trillion), a federal jobs guarantee ($6.8 trillion), student loan forgiveness ($1.4 trillion), free public college ($800 billion), and infrastructure ($1 trillion)? Easy. Tax the rich.
"How to offset Sen. Kamala Harris’ proposed $3 trillion tax cut for middle- and lower-income families? Tax the rich.
"For those keeping score, that is $57 trillion to be financed mainly through tax hikes on the rich, even after ending the 2017 tax cuts. It would mean more than doubling the $44 trillion in projected federal tax revenues over the next decade.
"It is telling that 'just tax the rich' almost never extends beyond talking points. Advocates never specify the $12 trillion tax hike that would balance the budget. Sen. Sanders’ 'Medicare for All Act' contains none of the promised $32 trillion in offsetting tax increases."
CNBC: "Alexandria Ocasio-Cortez floats 70% tax on wealthy to pay for 'Green New Deal'" — "Rep. Alexandria Ocasio-Cortez of New York says her plan to transition the United States away from fossil fuels would require people to 'start paying their fair share in taxes.'
"That could mean taxing the wealthiest Americans at a rate of 60-70 percent, the freshman Congresswoman told CBS's '60 Minutes' in an interview scheduled to air on Sunday.
"Ocasio-Cortez has put forward a 'Green New Deal' that includes generating all of the nation's power from renewable sources, building a national smart grid and entirely eliminating industrial greenhouse gas emissions. A proposal from the democratic socialist lawmaker calls for achieving those goals within 10 years.
"In the '60 Minutes' interview, Ocasio-Cortez acknowledges that taxes would have to rise to underwrite the necessary investments. Asked for a specific proposal, Ocasio-Cortez suggested the plan might require returning to policies that preceded the overhauls of the 1980s, which significantly reduced the top income tax rate."
Washington Post: "Here’s how Ocasio-Cortez’s tax comments are being misrepresented" — "We should be clear at the outset that the tax rate mentioned by freshman Rep. Alexandria Ocasio-Cortez (D-N.Y.) in an interview with '60 Minutes' was not a hard-and-fast proposal meant to be voted on in the House over the short term. Asked by interviewer Anderson Cooper what a 'fair share' of taxes looked like for wealthier Americans, Ocasio-Cortez offered an example.
"'You look at our tax rates back in the ’60s and when you have a progressive tax rate system,' she said. 'Your tax rate, you know, let’s say, from zero to $75,000 may be 10 percent or 15 percent, et cetera. But once you get to, like, the tippy tops — on your 10 millionth dollar — sometimes you see tax rates as high as 60 or 70 percent. That doesn’t mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder you should be contributing more.'
"That’s a broadly accurate statement: Fifty years ago, the tax rate on the highest bracket of income was indeed over 70 percent. It applied only to income past the first $400,000 or so until 1965, which is presumably what Ocasio-Cortez meant by the 'tippy tops.' "
Gretchen Voss produced this show for broadcast.
This program aired on January 8, 2019.