One can have high income and be deep in debt. One can have significant net wealth and have no taxable income. One can spend like crazy and pay no taxes. The ideal tax system would encourage the gradual accumulation of retirement assets over a lifetime (perhaps a million dollars for a couple), tax businesses fairly (Value Added Tax is the world’s standard) and tax all income the same (no tax expenditures) but with lower rates for those with low net wealth (i..e. giving a break to those with mortgages and collage loans).
The author contends that “The inequality of pretax income shrunk dramatically” but ignores that fact that the wealth gap expanded dramatically. The wealthy avoid tax on wealth accumulation thanks to an antiquated Supreme Court decision that prevented the IRS from taxing unrealized capital gains. This does not mean that inverse taxation of wealth and income would be prohibited – especially where those with net worth under a million or two would want to pay a maximum wealth tax (i.e. perhaps 2%) in exchange for no payroll taxes and low, income tax rates (i.e. perhaps 8%).
“Excessive income concentration” is not a problem until there is a concentration of both net wealth and income. Let the young and successful start-ups earn some significant money and let them pay higher income tax rates as they accumulate more than is necessary for a modest middle-class retirement. Both success and mobility need to be rewarded by the tax code.
27
The right is frightened of her. Through the use of social media she has educated her young and old followers about how the middle class was born and destroyed. FDR started the social security system, unemployment insurance, the minimum wage and federal work programs, Socialism at its best. Why did FDR do it? He was pushed from below from people that identified from the one Communist Party, the two Socialist party’s and the unionists. He understood in order to save capitalism from its own destructive nature he had to give the people something back. How did he pay for it? He raised taxes on the wealthiest Americans and corporations to the 70% on the highest tax bracket. Hence the middle class was born, he won four presidencies. He later said his greatest achievement was saving capitalism. After his death the capitalist seized on a divide and conquer strategy, first go after the communist, then the socialists, then the unionists, it worked very well. The Taft Hartley act of 1947 was quickly put in place limiting the powers of unions and the political parties that their leaders could belong too. The corporate oligarchs wanted their power and money back, hence the decline of the middle class. Capitalism in its present form is in the last throes of life. They are now consuming all smaller companies and the middle. In fact they have infiltrated government and are dismantling it from within and enriching themselves on what was once the peoples pride and property, Via privatization.
67
The pressure on FDR to legislate as he did was sinful for the time and is obscene in light of the fact that communism lost, collapsing under its own weight. Now is the time to unravel all subsequent policies that came from that extortion.
3
Apparently you think someone actually paid 90%. Remember the deductions that used to be allowed? Can someone propose a plan where everyone has to pay something? People with no skin in the game don’t care what the government does with other peoples money.
25
@Jackson, easy fix: raise the minimum wage to a living wage. The more people will pay more income tax, and more in payroll taxes.
11
The Time has Come!
There is no need for some to have unfathomable gobs of money. None!
And there is no way that so many in our nation now suffer the absence of basic necessities, which can so easily be shared among all of us — if we simply do the right thing, as laid out so well in this Op-Ed.
We have a society where so many are suffering and a very few hold the cards which could undo that suffering. If we just have the good sense to truly equalize our resources and share them.
Sharing: we learn it in Kindergarten if not sooner.
39
From the socialist time capsule...
*ttps://www.nytimes.com/2012/08/08/business/global/frances-les-riches-vow-to-leave-if-75-tax-rate-is-passed.html
“...We’re getting a lot of calls from high earners who are asking whether they should get out of France,” said...a partner at Altexis, which specializes in tax matters for corporations and the wealthy. “Even young, dynamic people pulling in 200,000 euros are wondering whether to remain in a country where making money is not considered a good thing...
*ttps://www.nytimes.com/2012/12/30/world/europe/french-council-strikes-down-75-tax-rate-on-rich.html
“...Among the opposition on the right, politicians said the 75 percent rate was tantamount to theft, calling it “confiscatory” and insisting that it would drive investors and entrepreneurs out of the country. There have been reports and rumors of as many as 5,000 wealthy French citizens moving out of the country, though there are no official figures...
“...Most recently, in what has grown into a minor national scandal, it was revealed that the actor Gérard Depardieu would be taking up residence in Belgium, where there is no wealth tax and where the maximum income tax rate is 50 percent....
PS
It’s taken them several republics to our two – and they still don’t seem to have it quite right...
4
Blaming inequality on failure to tax ultra-rich is misleading or worse. The growing number of poor is an obvious sign of multiple failed policies.
For last 50 yrs US saw most growth in hi-tech “XXI century” economy where access to well paid jobs increasingly depending on education. This sector is dominated by immigrants because US education system failed to supply enough qualified workers despite sucking tons of money. At the same time more and more people chasing disappearing “XX century” jobs.
3
Why not? The rich have soaked us since Raygun set the table for them.
12
Didn’t Paul Krugman write an article just last week stating the exact opposite thing?
1
Good ol' Socialism!
3
Not a new idea; 90% under Eisenhower which powered an era of prosperity; y'all are too dumb to understand what this means;Alexandraa Ocasio-Cortez smarter than all of you. SHE READS HISTORY, LEARNS THE FACTS, UNDERSTANDS THE MEANING BEFORE SHE SPEAKS. MOST OF THESE WHINING COMMENTATORS SHOULD TRY THE SAME. READ before you THINK and THINK BEFORE YOU SPEAK.
14
In the final paragraph, that would be “steer”, not “stir”.
3
Bravo!
2
Never trust a woman with a hyphen in her last name.
2
Unlike AOC, I am not young enough to know everything.
(Apology for the lift from Oscar W).
3
“We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”
- Supreme Court Justice Louis Brandeis
25
I see data, as I am sure you all have, on income inequality in how minorities, gender, disabilities, age, veterans, and others are treated in the workplace.
After reading a piece like this, it entices me to ask, what is income inequality? And quite frankly, I struggle quite a bit with the way the term is used to direct the reader's thoughts in this opinion piece. Let me explain by saying that I think the definition is:
Income inequality: Unequal income paid for equal work provided to the payer over time.
Here are the Details:
"Unequal income for equal work" - Not all roles deserve equal pay. If you disagree, please just stop reading here and move on. If you're open to real discussion to find the real fix for this, please continue. Open to discussion on how to assess equal work.
"Payer" - The person or entity who is paying.
"Over time" - short term inequities are a universal truth. What is temperature? An *average* heat level over a volume. There are natural variations in the specific temperature of any point in that volume. So it is with income over time, IMHO. Open to some debate on what time frame is reasonable.
I am open to feedback on where this definition could be improved.
However, In summary based on where I sit, this opinion piece has nothing to do with correcting income inequality and muddies the waters on the important work needed to correct true income inequality, especially for traditionally protected statuses like gender, race, etc.
6
That all makes sense, but what about the argument that in a more global economy, higher tax rates will cause those ultra-rich people to move themselves or move their money offshore?
4
Yes, decades after the Cold War with Russia, now we have our oligarchs, and Russia has its oligarchs. Both seem to be cooperating more than we'd ever imagine.
And they have their Russian state media, distorting the news in Putin's favor while the US has its own GOP state media distorting the news in Trump's favor.
The CEO of CNN compared FOX News to Tass, the Russian state media.
Our political propaganda tries say that unAmerican inequality is 'fair, just, and natural'. Many voters are fooled into believing this and haven't marched in the streets to protest---which citizens of most other democracies would do.
But our Democratic opposition party has only fought back weakly. They look great vs Trump of course. But they must compete for big money donors. This warps our politics while the big money race for campaign advertising money keeps spiraling up.
Then the media reports the fundraising horse race like a TV reality show, while it destroys our democracy.
Then the public pays more attention to the highest fund raisers among future nominees, than they do to the lower fundraisers.
This is then reflected in the polls, in a vicious cycle of big money, big media publicity, etc. Policy issues affecting all our lives are mostly ignored.
Proof is our 24/7 cable TV news every day.
This is the reason we're the only modern nation without health care for all --- still.
5
An oligarchic drift? That's what ex President Jimmy Carter said a few years ago ---that America is veering toward oligarchy, because it takes so many millions to run for any office in the country today. Much more more than when he and Reagan ran for office.
The contrasts of history --- as the authors say-- "a country founded, in part, in reaction against the highly unequal, aristocratic Europe of the 18th century."
Our colonists told our colonial English king-- "no taxation without representation."
But today what representation are we getting for our taxes by the officials we stand in line to elect?
By contrast, big corporations and the super rich are getting strong and preferential representation, while paying ever lower taxes.
That's because the donor elites are allowed in our system to finance our elections. So, compared to the 18th century, we have a democracy, where everyone can vote, but the nominees and policies we must pick, are financed by the wealthy elites calling the shots. Thus we are not represented for our taxation.
9
And if we similarly taxed the profits of corporations, we would have fewer mergers and thus more real choice in the marketplace. We would have fewer mergers because many of them would place the new, larger entity into a tax bracket that would make the merger a net harm to the stockholders. This could make for a much more vibrant and innovative marketplace.
7
A brief look at where the taxes in the US come from will revealing a disturbing fact for Ms. Ocasio -Cortez. The bulk of the income tax raised comes from people like her earning 75k-200K. It's simple math. Take all of Bill Gates money and maybe you get $30 Billion once. He probably only earns $200 million so at 90% you get $180 million. Tax 80,000,000 people an extra $1,000 and you get $80 billion. In the end the middle class will pay for all of these programs. Property taxes too high in NY and NY? Whose fault is that? Democrats like Ms Ocasio-Cortez. They are all for taxing the rich until they need the money and then they tax the middle class. Like Willie Sutton said when asked why he robbed banks he said "That's where the money is". Foolish voters who believe this tripe about taxing the rich always learn a sad lesson...anyone who pays taxes is rich to a politician.
15
@Bill What needs to happen is that the capital gains tax rates need to be raised. Income is one thing, but most seriously wealthy people's wealth is gained through that and not a "day job". Your calculations are too simplistic.
7
Wealthy people do not create many taxable events with their wealth. They sell a tiny bit to buy things. Yes, you would get more at 50% than 20%, but the increase would have little to do with the size of their wealth. Many would just also donate a piece to a foundation that would substantially cut down the tax owed at either rate. Only the small players, well under a million, really need that capital gains discounted rate.
4
What do the authors think of the Social Security Tax Income limit? Many think it is too low.
"The maximum amount of earnings subject to Social Security tax will increase by $4,500 to $132,900 in 2019. "
4
As long as there is a cap on SS benefits there needs to be a associative limit on the income subject to payroll withholding. That’s a feature of SS and it’s structure as an insurance plan versus an outright welfare program.
6
The author quotes tax rates but not tax policies. In the 50's, 60's and 70's nobody paid these top rates due to the plethora of deductions no longer available. All of the upper income NYer's and Californians complaining about the loss of State and Local Tax deductions (SALT) should understand the concept. Lower rates with elimination of deductions doesn't always result in lower taxes. Ms. Ocasio-Cortez is the current darling of the Left because she demands higher rates without any knowledge of what the effective tax rates have been.
Taxing wealthy people never made anyone rich. If it would be true there would have been far more wealthier people in the 50's than now. Comparisons with Japan are somewhat entertaining - it is one of the most homogeneous societies in the world.
7
The point of high marginal income taxes is to constrain the immoderate, and unmerited, accumulation of riches. AND accumulation of political power.
Yes, unmerited. But the moneyed elites have to disguise this power grab in a 21st C democracy where citizens vote and we are supposed to have accountability. They pretend if they pile up wealth, it will create 'growth, jobs, trickle down prosperity,' etc. In past centuries the elites didn't have to bother justifying their confiscation of the nation's resources for their personal power. In a democracy they do, and the media amplifies it, instead of proving it false. And dependent politicians can't fight back.
The supeme court legalized the elite accumulation of political power in 2010 Citizens United. The court used a lie--- worthy of Trump --- that limiting mega donor financing of candidates contradicted 'free speech' per 1st Amendment. Any court that pretends this is a corporate-dominated court distorting the constitution it claims to revere, to give huge power advantage to elites.
That's a direct contradiction to American ideals. With Citizens United they give a green light to a moneyed 'arisocracy' like the English barons and earls that our American revolution overthrew.
The colonies cried, no taxation without representation.
That's our slogan in the 21st Century to save our democracy under attack.
7
Perhaps all the attention and coverage given to the woman (who has yet to do much except win an election, which is ok) by the NY Times is simply a diversion away from the more dangerous and radical new members of congress? Other than that, I can't figure it out.
5
Top rates should be elevated. Moreover, uncapping and adjusting FICA is of equal importance as well as recalculating medicare rates. The high mindedness would be better placed taking a page from TR and busting up the state backed monopolies that are squeezing average Americans dry.
2
The woman hasn't even figured out how to open her office yet and she's solved the tax problems of the country with her magic wand. Up, up and on to Europe and Asia..and the Middle East (opps, she messed up that national interview, but no mind). Can the universe be next? How did Stan Lee miss her?
Irony noted.
13
An early sign of the chaos under Comrade Ocasio-Cortez if she ever comes to power.
1
Venezuela has the world’s largest proven oil reserves yet is an economic basket case thanks to Ocasio-Cortezism.
8
@GodIt‘s also because the outside world..and mainly the US always wanted to bring that government down, be it with with economic sanctions or by financing the opposition. Basically the same tactics that have impoverished Cuba unnecessarily for decades.
3
Another day, another AOC headline.
2
I agree with AOC (and thanks to her -- she's got a lot of guts!!), Saez, and Zucman about high marginal tax rates. Joe Stiglitz is saying the same thing.
But i have a question. Weren't the marginal rates on capital gains, including dividends, much lower than on ordinary income during the period of high marginal rates (roughly 1930 -- 1980)? While the highest salaries we more constrained in that period, didn't the ultra-rich retain their advantage through "coupon clipping"?
And isn't the purpose of lower marginal rates on capital gains to spur investment?
To really strike a blow against inequality, wouldn't we have to tax capital income in the same way we tax earned income? Wouldn't we then need more government-initiated investment to compensate?
I wish Saez and Zucman had addressed this issue.
4
@bruce bernstein It USED to be that those capital gains would spur investment. But the "tax cut" passed last year showed that any gains were mostly paid out to investors and not put back into the business. Of course, so many capital gains no longer come from actual production but instead from market manipulation.
2
@bruce Bernstein...There is no need for Saez and Zucman to address anything but taxation of those who have more. Investment is a concept of robber capitalism that leads to all of this inequality. Eliminating ALL investment will help to shrink inequality as the pie is reduced to bare necessities. First the Billionaires. Then, the Millionaires. Then, the Thousandaires. When Society is reduced to a homogeneous slug of ChumpChangaires, we'll all be a lot happier. Viva la Revolutionaire
2
I love AOC, and she's on the right track, but her proposal is far too modest. We must begin increasing the rates at a much lower level, probably at a million bucks, and then work our way up to a marginal tax rate of at least 75% over ten Mill per annum. But we must also eliminate the distinction between the income of the very rich (capital gains) and that of people who must labor for a living. No more low rates on capital gains. And, perhaps the greatest inequalizer: We must do away with the effective 0 rate on estate taxes. One million, tax free to each heir is more than sufficient. The estate tax pass that the wealthy have given themselves through their captive party has already established a de facto American aristocracy. Aristocracies tend to have their heads lopped off; see the French or Russian revolutions. Of course, without getting the money out of politics, very little of the above will happen.
5
@Rick...A million bucks is way too generous. Why should Berkeley profs making $400,000 a year or a 29 year old making $200,000+ be given special treatment when the minimum wage isn't even 15 bucks? $50,000 a year is way more than sufficient to live on. Everything over $50K goes to the government. Period. That's only fair.
2
These guys were educated in France. Enough said!
5
@It isn't working. Yes and their education is working as opppsed to an education they would get in this country.
Of course we should raise taxes on the wealthy. It's as obvious as the need to protect the environment, fund public education, and have a strong social safety net.
But it's too late: America is already an oligarchy, as evidenced by the numerous studies that show that passage of bills is correlated to lobbyist support rather than public support.
3
Coming from the leading incubator of American Socialism this is no surprise. But like all those before them they fail to address what the real problem is.
Yes, the rich can afford to pay more. Personally I have no problem with them having higher tax rates and paying more, even if I was one of them. And I'd think that many wouldn't have too much of a problem with that as well if the money was well spent.
I think the real problem with why so many have a problem with higher tax rates is nothing is being done to address what the real problem is. We don't have an income problem, we have a spending problem. Plain and simple.
Politicians have always used the public purse to buy votes. But what limits the damage is the ability to fund those activities. Starting back in the '60s they realized that no one seemed to care that we were running deficits. Of course that was during the Vietnam days so having a war to pay for raised fewer eyebrows.
After that went away it became apparent that still no one was concerned as deficits continued. After all the US dollar was the global benchmark and the US economy kept growing. So the spending spree continued unabated and everyone keeps buying Treasury paper. Well into a second generation that was raised to expect a lifestyle they can't afford and there is no end in site.
Representative Ocasio-Cortez just is another chip off the old spending block.
8
I haven't yet read the article but was disappointed in the headline. Rather than simply report what a Alexandra Ocasio Cortez did, you contextualize her action in the frame of her opponents. This isn't unbiased journalism. It isn't right.
please read George Lakoff and learn about framing
1
Please why are we taking this person serious. Yesterday alone she spewed the most inane comments. "The World is going to end in 12 years." Being a Billionaire is immoral. Does that include people like Ken Langone and the NYU Langone Health. David Koch Theater as an example. We can go on and on about the contributions of the dastardly Billionaires like Bill Gates and the Charity works he does. AOC is dangerous and the MSM is fawning over her.
7
@joe The David Koch Theater is window-dressing as an entry into high society. Much more Koch money goes into subverting democracy.
1
Wow !!! Sounds great.
Do you really believe the Fat Cats would allow taxation at that rate ?
Never !
Love reading the haters who think since they are older than she is--I'd venture to guess most of the seven hundred commenters here are all older than she--think they have some sort of armchair knowledge and are smarter than she is, etc. We (you) are not. Keep underestimating her, that is her power.
4
Democratic socialism is a form of government in which two foxes and a chicken vote on what to have for dinner.
5
It's hard not to like Ocasio-Cortez and her energetic start but we are only looking at the first weeks of her first government job. My greatest concern is her over-reliance on social media and image. She says things that sound great and her profile ticks enough boxes to satisfy the most progressive voter. But will she have the savvy and the humility to negotiate the necessary compromises when she runs into a room full of Mitch McConnells who have professionally schemed her into a corner? She knows how to spit back at them but can she work a long game?
2
@Erich Richter Mitch McConnell? Let's talk about his savviness and his humility.
@Erich Richter...She's already spitting on folks who are supposedly in her own party. Do you think Pelosi is going to tolerate her anarchy for long? Humility? LOL
1
Her plan isn't soaking the rich, the rich have been soaking everyone else since the 80's
4
Huge Chavez tried to curtail "inequality" and everyone everyone suffered. Taking away wealth, incentives, private property, and economic rights always ends in disaster. Perhaps Maoism, Stalinism and Chavez-ism is not enough lessons for us? Wake up and smell the history - it is so clear.
3
Unbridled elites distort Capitalism & democracy -- a reason to support high marginal taxes. Capitalism's author Adam Smith warned in 1776 of elites' manipulation : “Whenever the legislature attempts to regulate the differences between masters and their workmen, its counselors are always the masters.” See Wealth of Nations, chapter "On Labour."
2
Nice try by the authors, as the saying goes, to put lipstick on a pig. And the lipstick applicators come from the capital of PRC (People’s Republic of California), the silly land of Berkeley itself.
After the application of lipstick, a harebrained idea remains just as sophomoric and erroneous as before.
No way, Jose; I ain’t buying.
4
It is amazing and inspiring to me that this young woman, AOC, has the conservatives so riled up. She is smart and gutsy while the old white males, who call the shots, have become crusty and rusty. Just like the dinosaurs they're are on their way to distinction and running scared.
She is bringing to light how unjust our system has become to those who are poor and at the margins of society and she is being heard.
Thank God for the young. This is good news to the ears of this old lady. Go Girl and keep stirring the pot!!!
6
@SKwriter...Just the other day, that old white conservative male - Whoopi Goldberg - gave Young Che the what-for. Another old white conservative male, Boss Nannie Pelosi, will be locking horns with Oc-tez soon enough. Besides all that, she is 29 years old and has a part time job with great bennies and a guaranteed life time pension - could you maybe find something more appropriate than Go Girl.
It is not government’s role to decide how to redistribute wealth or income nor to right very wrong and ensure that we compete on a level playing field for who gets to set the bar and at what height? The harsh truth is that beyond the eyes of the law, we are not all equal. We vary greatly in intelligence, motivation, ability, aptitude, perseverance, pedigree, humor, pain tolerance, experience, education, knowledge, aggressiveness and intuition. Nature has constructed us that way. Those who can excel at competitive sports, for instance, have earned their positions on the teams on which they play. Those who have the ability to successfully engage in the bare knuckled, survival-of-the-fittest world of business have earned their standing and wealth. Those with an idea and the fortitude to see it through, to build a better mousetrap so to speak, have earned the benefits of the income it might provide. Furthermore, as all other measures are largely subjective, only wealth exists as an accurate measure or scorecard of capitalism. Capitalism succeeds because, like nature itself, it can be cold, harsh and brutal. It rewards success and punishes failure. For every Jeff Bezos, many will be destitute. For every Mike Bloomberg, millions will live paycheck to paycheck, a single large expense away from catastrophe. Some are destined for greatness like Sam Walton while others are destined to punch a time clock and survive at the whims of an employer.
6
No, the 1950s was great because we weren’t fighting and shedding blood over wars that the Dems had started.
3
@Christian Such as the Iraq War? Such as the invasion of Afghanistan? Oh, wait -- the Republicans started those. And we're still there, shedding blood and treasure.
3
We should care, A LOT, for folks who are homeless, who are hungry, who are sick, who lack opportunity. But should we care that some folks (stupidly, imo) have a 30,000 square foot home? Have 30 cars, have 500 pairs of shoes? FACT IS, 85% of the "rich" are self-made. What AOC and others are saying with a high income taxes is, tax the daylights of the those who are willing to work harder, delay gratification longer, save more, take bigger risks, and give more to those less willing to do so. They ought to be working on leveling the playing field, by boosting education, access to opportunities, rather than simply taking from those with ambition and perseverance.
3
Providing for those who are homeless or hungry or sick or lacking opportunity should be an act of VOLUNTARY charity, not the FORCED charity that comes with government confiscation of wealth and income. You should be able to dictate where your donations are used: children’s hospitals or tree planting, cancer research or poetry readings. Politicians and faceless bureaucrats should not have a hand in determining the uses of YOUR money. What funds they do confiscate should be spent like the precious resource that it is. Military spending could be slashed if we returned to the draft and paid conscripts a monthly stipend instead of the incentives we are forced to by the volunteer Army (a soldier at rank E-5 who re-enlists at their sixth year of service with a spouse and two children and living off-base in a cost-adjusted region has income and benefits equal to $50,000/yr in comparison to a civilian). In a draft we could pay them $25/month for essentials, house them in open bay barracks (like we did in WWII) and keep them single.
2
@tomp Self-made like Trump? They give more? Take bigger risks? Hardly. They've gamed the system and made an advantageous system for themselves.
3
@From Where I Sit This must be based on your own WWII service, when you received a stipend of $25 per month, lived in open bay barracks, and fought heroically not only at the Battle of the Bulge but Iwo Jima. Right? Somehow, I think not. For the record -- my dad served in the open-bay barracks days. A meningitis epidemic struck; since prevention consisted of hanging sheets around the bunks, a number of his barracks-mates, young men in their early twenties, with their whole lives before them.... well, they died. Yep, that's the way to do it...
Keep these articles coming. Only a rigorous public discussion of why we need higher taxes will bring light to an issue hijacked by people without an ounce of understanding of how inequality subverts democratic governance and destroys lives.
4
I don't understand why so much is being written about a pie in the sky proposal from a first term congresswoman.
4
Please STOP saying "soaking the rich". Start saying "fair and progressive tax rates". Words matter!
3
@Grisha...What is fair? Who decides?
1
I saw her "world doomed in 12 years" comment. What Alexandria is basically saying is that everyone in the world is going to die if the Democrats are not allowed to raise taxes. Well we've all been warned.
4
We can discuss rates of taxation all we want. But when the federal government is routinely running yearly deficits of a trillion dollars, you can tax everyone at a 100% and it still wouldn't pay for it. The answer lies less in taxation and more in curbing the insane overspending negotiated in the halls of Washington. We can start with the military and work down from there. The more spending we cut the more tax breaks we can give the people who really need it, like the middle class. Why isn't anyone talking about the nation's debt anymore?
4
@Rick Morris Because the corporations got their huge tax cut, and no one or nothing else matters. Funny how deficits are only a problem when they occur during a Democratic administrations - of course, that's not what has been happening during the past 30 years.
Just for clarification: This is not AOC's idea. She brought it to attention but its not her idea.
The greatest side effect of this would be the drastic drop in wealth accumulation among the 1%. Now that $ would be recirculated back into our economy instead of just stashed in the Cayman Islands or wherever they place it. More importantly and proof it would work is when they say "well if anything i make over 10 Million is going to get taxes then i just won't work anymore." GOOD THAT'S EXACTLY THE POINT.
You made your nice fortune now move aside.
Think of all the awful behavior that would be curbed.
No more mass layoffs for a quick bonus, no more forcing your employees to open illegal accounts for that extra bonus, no more price gouging. There's be no more incentives to do any of the worst behavior we've been on the receiving end of. Best of all, no more buying and selling of politicians. No longer can 1 person bankroll a stooge to do their bidding. This is the biggest reason everyone is filling their diapers afraid of this idea.
4
Nobody makes significant wealth from salary or even bonuses. You make it from stock either in businesses you started or from investments made over long period of time. It will do nothing about wealth accumulation. Why would the employers change employee compensation? Any money saved would to stockholders as dividends. It will not even collect much money. Why pash cash for big purchases when you can just take out a mortgage at a few % and keep your payments, and required stock sales, under the threshold? No one will get anywhere close to the threshold. You will nail those lottery winners.
Dear Professors Saez and Zucman,
One of the dirty little secrets of the history of taxation is that between those on the bottom with lower rates who get hit with unavoidable regressive taxes on alcohol, fuel, parking tickets, etc., and those at the top with higher rates who hire folks to figure out how to avoid every possible penny of tax, we have had in the United States a defacto flat tax of roughly seventeen or eighteen percent no matter which quartile or quintile of the population you care to consider going back to the 1930s.
But beyond the lunacy of forever reconfiguring and rearranging the tax code as if it were furniture, the only moral type of tax is a flat tax, in which everybody above the poverty line pays the same percentage of tax whether it's an income tax, an investment tax, an estate tax, a corporate tax, or a consumption tax.
You make more, you pay more. Anything else is organized theft, plain and simple.
Cordially,
S.A. Traina
3
Why is the poverty line the barrier to federal taxation? As long as one can cart a vote for another Sanders or Ocasio-Cortez, they should have to pay the same rates as the rest of the country. It is beyond obscene that 47% of the population can enter a polling place and vote for a platform that promises them free stuff paid for by someone else.
2
So it's fashionable now to say that there is such a thing as "too much" or "the money is in the wrong hands" (Mayor de Blah Blah).
That's an opinion.
But supporting that by referring to income as "unmerited" is not even close to being an empirical argument considering that, as far as we know, the money has been made legally.
Furthermore, in an economy with millions of moving parts, it's ludicrous to claim that income equality/inequality is driven purely by tax policy. The two economists that wrote this column clearly have an agenda and it certainly isn't scholarly because their analysis would not hold up in a real economics journal. It would not be published.
1
I think it was the Bolivian president who said ' In our country, capitalism is a tool to help society. In America, capitalism is a philosophy that rules society. Pretty clear.
1
I have been leaning more fiscally conservative these days but this article has provided some good insight. Surely something to ponder on further.
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I am absolutely for higher and progressive taxes on the wealthy to address income inequality and the hollowing out of the middle answer classe. However, income taxes are both naive and political foolish. Most wealth is achieved via capital gains (which are taxed lightly) and appreciating asset prices (which are completely untaxed until one sells them). Very few people have incomes greater than $1m - except for movie stars and atheltetes. A much better solution is to 1) tax capital gains at the same rate as income and 2) institue a graduated wealth tax.
1
How ironic. The country that proudly overthrew the British King and colonists, to reject artistocracy and plutocratic rule, and which was a positive role model for new democracies, now has some of the worst economic inequality among world democracies.
And as the research of Princeton's Gilens and Page proved, our citizen majority has little influence on our lawmaking vs the small group of elite mega donors who fund our elections.
We are almost like a colonial country again---but our colonizers are our own domestic corporations and wealthy donors---extracting the productivity of millions for their increased profit and power.
That our democracy is not operating is proved by this:
We are the only modern country without truly universal, affordable health care. The rest of the modern world achieved this throughout the 20th Century. Their conservative parties accept it in principle. Our GOP which has dominated our 3 branches, rejects it.
This is the politically unbalanced situation that led to the rise of Trump and his fellow swamp creatures, enabled to rise to the surface, when they should have been kept out of our politics.
We overthrew King George, now we have Tsar Trump the Terrible.
Somehow so many NYT commenters insist on believing that our aristocracy is Republican, when obscene wealth is a bi-partisan problem in our economy.
It's much easier to be Democrat when the marginal tax rate is 30-50% than it is when it is 70% or more. You won't find too many Democrat politicians taking the lead on this idea after their contributions from wealthy supporters dry up.
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Tax wealth not income.
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That would require a constitutional amendment. Not happening.
I don't care what it's about. She's NOT my congress person, and they will not benefit me one iota.
2
She and Bernie should be on the same ticket.
1
Higher taxes, paid by all are needed to restore an economy that serves all well but just insisting that it is necessary is a dumb way to achieve it.
After four decades of propaganda asserting that taxes are unnecessary, it's going to take some serious debunking of the lies before the majority of people will understand that we need higher tax rates to overcome the stagnation in our economy.
One of the things that young people do when they see something that ought to change is just blindly insist upon the change without preparing the ground. It means that they burn up a lot of energy on unnecessarily complicated efforts because they only half understood what they needed to do.
In my first job after getting my degree, I prepared tax returns for the 1975 tax year. The top marginal tax rate for married filing jointly was 70% of taxable income over $200,000. That's the equivalent of a little over $900,000 as of 2017. Those people were not hurting and they were still investing in new businesses. A 70% rate on incomes over $10,000,000 is far from radical.
3
“...restrains all exorbitant incomes equally, whether they derive from exploiting monopoly power, new financial products, sheer luck or anything else” such as hard work, skill, ingenuity, risk taking...
Those rates always were and always will be envy taxes serving as pablum for the masses with no worthy moral underpinning. The code at the time of those rates was riddled with exceptions and techniques so that very few of those very skilled people ever paid it. But the rates were there to appeal to the baser instincts of a political constituency.
G.K. Chesterton wrote in What's Wrong with the World (1910,) "Compromise used to mean that half a loaf was better than no bread. Among modern statesmen it really seems to mean that half a loaf is better than a whole loaf.
Ocasio-Cortez has two things going for her that draw so much attention from both Fox News and progressive voters. First, she has her eyes fixed firmly on the wealthy and our nation's economic prejudices. She correctly identifies the real distributive injustice of today and has a solution.
Second, she wants the whole loaf. Unlike so many middle of the road democrats, she does not start by asking for a half-loaf. Universal healthcare is for everybody, now. Collecting more taxes from the wealthy should begin as swiftly and assuredly as they received their Trump tax cuts. If you go half way, like with the ACA, the GOP will seize it back. Compromise begins by asking for what you REALLY want, because you just may get it.
Tax policy is intended to raise needed revenue, not to redistribute income. The IRS is not Robin Hood; the lower half don't receive anything from the collection of taxes from wealthier citizens. To the extent government programs benefit the lower half, they are created through the budgetary process and taxes fund these programs, While taxes were higher from the Roosevelt administration through the 1960s, few taxpayers, even those in the highest income brackets paid those rates. Before the 1986 Act, the Code was laden with numerous deductions and other devices designed to lessen adjusted gross income. I doubt that we desire to return to the days when tax shelters were rampant and various subterfuges were used to evade these confiscatory rates.
3
If the Fed continues with QE, wealth/income inequity will grow larger.
Without draining the swamp of corruption which is the tax code raising the rates is essentially meaningless. The rich will simply be incentivized to outsource even more of their tax avoidance to their legally compliant (mostly) but ethically challenged accountants, lawyers and other assorted scammers, er . . . , sorry, tax professionals.
Sadly, the general public has little or no awareness of this issue, even though it is the bottom 90 percent which pays for all the tax breaks the wealthy get. AOC will have no more success than Steve Forbes in kleptocratic America.
1
I just listened to the video in which AOC said that billionaires are immoral and the world is going to end in 12 years because of climate change. But what struck me the most, was how may times she used the word "like" in one sentence. I consider this evidence of a very limited vocabulary and shallow ideas. If this is what the left wants in their leadership, then more power to them, but don't expect most Americans to go along with it, to think she's wonderful. Thank you.
9
@Southern Boy: trump is a semi-literate idiot. I have listened to this young woman, AOC, speak, and I have not heard her use the word "like" excessively. However, I am not denying that you might have. But let's talk about trump: He speaks word salad, and when he writes, his grammar is atrocious, and his spelling even worse than that! People who live in glass houses should not throw stones! It is amazing that a trump supporter would attack the speech of AOC, when trump is an anti-intellectual abomination!
The unpleasant reality
The US tax code reflects the priority of the rich whose hired armies of lobbyists insures their interests are taken care of in return for the campaign contributions financing the election of the US political class .
Only reason AOC is able to raise the question is that she , by a stroke of luck, bypassed the system, winning on small contributions
To the consternation of the political elite of her party
2
For weeks we've been treated to pronouncements about the goodness of high tax rates, justified by the high rates of 1950s and how well America did in spite of them. 70%, 90%, whatever it takes to Save Democracy!
Unremembered (or, less charitably, deliberately omitted) is that when rates were so high nobody actually paid that much - dodgy tax shelters abounded, which legislators, both Democratic and Republican, were happy to build into the tax code. Moreover, in the 1950s America stood alone at the pinnacle of economic power; we had the world to ourselves, and workers got fat pay and pension deals.
We sent our middle-class jobs to Asia in return for cheap clothes, cars, TVs, and cellphones. There's no going back.
Inconveniently, rich people already pay more than 40% of the tax bill. Every unbiased analysis shows that taxing them even at 100% will not come close to filling the economic hole that would be created by legislators like Ocasio-Cortez, never mind the economic impact. Government is the most inefficient and corrupt "charity" ever conceived.
Some people think that government is the solution to every problem, the adjudicator of every inequity and the avenger of every injustice. Some believe that the only history that matters is their own personal one. These warriors for economic "justice" may be offended by the shortcomings of the capitalist system but, to paraphrase Winston Churchill, market capitalism is the worst economic system, except for all the others.
5
In the early sixties, 90% tax rates were accompanied by loopholes you could drive 45% of your income through. The rates were dismantled by kennedy's congress and the economy took off. It began to paid for the ill-fated Great Society programs that today seem like they were designed to keep people in poverty.
Dan B. spews the fiction that these social support networks are demonized and "our country's own citizens spew vitriol to the have-nots." 22 trillion dollars spent since 1964 on the war on poverty? What kind of vitriol is that? Roughly a quarter to a third of the federal state and local bureaucracies necessarily depend opon a population of poor people for their own existence.
The poor in this country are not poor because the rich are rich; you could strip the rich down to their respective boxers and girdles and cut a nice size check to each member of the poorest third of the population, and it would sustain theim for a year or two, and what then? The poor have always been regarded by the left as a population to be revered and to be coddled, and to be counted on for votes. It is a vision of co-dependence that is sickening to behold.
We talk about oligarchs (name one) and corruption and not a word is spoken, ever, about an ever increasing Federal government that dwarfs the supposed power and threat posed by Capitalism and the rich.
5
How about we tax "excessive" income, whatever that is deemed to be, for some specific, dedicated reason like subsidizing health insurance premiums of the poor. Or, pregnancy leave for single working mothers. The tax could be a special category called the poor tax. Or, just make the check out to the DNC. Whatever.
Let's discuss.
The very wealthy generally arrange things so that they do not have a very large earned income. Their income, except in years that they exercise their stock options, is usually in the form of dividends and, if they sell stocks, capital gains. So, raising the top marginal income tax rates may not actually concern them greatly, unless it is done in the context of a broader tax reform package, where options like raising the relatively low dividend and capital gains tax rates are also considered. So, I must conclude that AOC's 70% income tax rate proposal is just her first shot in a long battle/negotiation. Or else its just a political attention-getter, which would be sad...
1
A recent analysis published in the NYT's cross-town rival demonstrated that the pre-1980s tax rates did not translate into higher tax payments among the wealthy (e.g., Jack Benny, Ronald Reagan), as there were all sorts of loopholes, dodges, and other means available to them to reduce their obligation. On average, their legal federal tax payments equated to something between 30 and 40 percent -- which seems to be the amount most people are agreeable to paying, while anything higher incentivizes them to take evasive measures (e.g., hide or disguise income, establish offshore accounts, move away, etc.). In essence, high tax rates do little to promote equality and are more of a "feel-good" sop to the less fortunate. By way of illustration, today we learned that some 5,700 millionaires/billionaires migrated away from NY and NJ this past year to escape confiscatory taxes, and the same phenomenon is taking place in California. Is the US next?
5
We see the re-emergence of the class struggle between the low income class and the ultra-wealthy with the first shots fired by Mr. Trump and the republicans who have been all about exacerbating wealth-inequality. The federal workers are working without a paycheck and no one could argue that their contribution to society is small. If we believe that, all of those workers should immediately stop working including the air traffic controllers. This should be followed by sympathy strikes and we would soon come to appreciate the value of our fellow working Americans
Under any increased tax scenario they would shift wealth to family members, reduce their work hours to travel on the yacht, or travel to Aspen for another ski vacation. If one 'earns' $20M but pays $15M in tax, one might be limited in paying another rich person for some self-indulgent purpose. The 'necessity' of having a third large home pales in comparison to food and education. Imagine the unbearable burden of only making $5M instead of $20M. That $15M, could be invested by the our government in research, education, healthcare or could be invested by a company in research and product development instead of someone's large third that sits idle most of the time. This personal 'burden' would only enhance the national economic growth by forcing investment into our country's prosperity.
Raising taxes, using a progressive scale and closing loopholes, is fair. I am grateful Ms. Ocasio-Cortez has this view.
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@yulia
As long as the return on Capital is higher than the growth rate of the economy, the gap will keep increasing.
The difference in the “drift” terms in the two growth rates only moved in the opposite direction between the Great War till the 1980’s. That convergence was killed by Reagan and Thatcher and has become significantly divergent by now. The great Kuznetz unfortunately analyzed that strange period of convergence and became optimistic about inequality (and won the Nobel Prize).
Please read Piketty’s Capital in the 21st Century if you haven’t already. It is all laid out beautifully.
3
Russia's move to a 13 percent tax rate needs more context. I worked there at that time and compliance was probably below 20 percent i.e. less that 20 percent of the population reported their taxes. When the 13 percent rate was implemented entrepreneurs started reporting their income. It was a different time and a different space from where the US is at the moment.
"Alexandria Ocasio-Cortez’s Tax Hike Idea Is Not About Soaking the Rich - It’s about curtailing inequality and saving democracy."
Is your goal that everyone's income should be equal? If not, what is your preferred level of inequality? How, exactly, does a higher tax rate save any government?
7
It reinforces the safety net for others (when not misspent).
2
@hm1342 nobody wants everyone's income to be equal...do you know what the top tax rate was in the 1960s and 50s?...and the country was doing just fine...
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@Woodrow: "It reinforces the safety net for others (when not misspent)."
Reinforcing a safety net is not the same thing as saving democracy.
2
To the extent that higher marginal tax rates also raise revenue, we can help people in the lowest income deciles make more money and gain salable skills as we fund much-needed infrastructure projects.
I'm tired of dodging potholes and risking the need for front-end alignments. I worry about not having enough roads for people to exit the coastline when big storms are threatened.
Even if the extra revenue is small, we can achieve much beyond lessening inequality, a worthy goal in itself.
3
Low tax rates for the rich were supposed to be offset by their cravings to invest and to create demand for innovations which would cause rapid and awesome economic expansion. The result would flood government revenues and give all a share of the fantastic productivity. Never happened. The hypotheses disregarded human psychology and insisted that rational agents would dictate markets and insure the predicted outcomes. Instead, the public debt has exploded and the unfunded upkeep of the commons has left us with a ruined infrastructure.
Now we are in a situation where we must increase taxes on the rich and everyone else to make up for the lost ground. The public has not grasped this yet, so fixing the problem will require unlearning a lot of supply side economics nonsense.
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@Casual Observer
Government revenue has never been higher. Facts are stubborn things.
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@Shamrock
The deficits and debt are becoming greater than ever. The bottom line determines the result not just the gross revenues.
1
The centralizing of authority behind a singular body of government forms a far more dangerous oligarchy than the competition of various corporations does.
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It's really important to understand how our tax system works, especially the concept of marginal tax rates. Raising the top rate to 70% does NOT mean that all high-earner income will be taxed at that rate.
Here's a simple, easy-to-understand animation of how it works:
https://www.vox.com/policy-and-politics/2019/1/7/18171975/tax-bracket-marginal-cartoon-ocasio-cortez-70-percent
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@Elizabeth A thank you...far too many people are clueless about this...perhaps Democrats can educate people...
I absolutely oppose limiting how much a person can make in their own terms but I support a 90% tax rate for the super ultra rich who have an income of $100 million a month or more, and a tax ladder according to income, with those making less than $1,000 a month getting a tax from the government. The author doesn't make his case because the info about Russia and Japan partially or totally omits the growth rate and omits the income growth numbers of the countries the article mentions.
Equally important is not only adjusting the rates, but simplifying the tax code overall. Indeed, the Alternative Minimum Tax was created not to justify a higher rate, but to help make sure that people of higher income were paying something, in view of all the loopholes, deductions and other albeit legal ways people could reduce their tax.
4
Please note that high marginal tax rates have not stifled innovation in the past: The microchip and the personal computer were invented at a time when the top tax rate was higher than that proposed by Alexandria Ocasio-Cortez.
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Prior to 1980, almost all computing was on big mainframes. PCs, cellular phone and Internet grew, creating wealth, after President Reagan’s first term during which rates fell.
In a nutshell: According to federal government studies, about 40% of American families are unable to come up with $500 in cash to respond to an unanticipated expense - without taking out a loan. Which means the majority of American families lack the financial resources to handle a major illness without taking on substantial debt, even those who are ‘fully insured’ - given deductibles and co-pays that are part and parcel of even the most expensive and comprehensive health insurance packages.
Jeff Bezos commands $150 billion in personal wealth. Bill Gates, $100 billion. Fewer than ten thousand people command more wealth than is available to a combined half of America’s population of 330 million people.
Something is wrong with this picture. Yes, there always have been rich, poor and in between. But the current situation in America - with an eroding middle class, a decrepit infrastructure, and loud calls to curtail government expenditures for the common good; while the rich become unimaginably wealthy and insist on lower taxes on income and outright elimination of taxes on huge estates — this simply cannot be maintained for long.
Economic mobility and the quality of life for tens of millions of Americans were at their height between the end of World War II and the Reagan era. We built roads, schools, hospitals, libraries, sent men to the moon and made follege afforSince then, the middle class has been in decline - and Reaganite/supply side tax policy bears much of the blame
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unedited text inadvertently sent. sorry!
Professors of Economics and apparently tax illiterates. The way very high income earners have reduced their tax burdens since the Eisenhower era has been through converting earned income into capital gain income. The tax on capital gains has always been far lower than the highest marginal rate. So even the wealthiest percentile ranking were never paying more than 40 to 45 percent of their income to the IRS. Beyond capital gains, there are also many other elaborate strategies involving overseas tax havens that can be used. In any event, this argument is moot. We aren't going back to 70 percent marginal rates which would be the highest in the world and undoubtedly would damage incentives for generating wealth for society as a whole.
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If the top bracket were 70%, it would probably kick in at somewhere around $1 million. The number of those who earn in excess of $1 million is very low -- a tiny fraction of 1%. And those earners would be taxed at less than 70% for the first $999,999 they earn. As a result, a small amount of earnings would actually be taxed at 70%. So the higher rate Ms. Ocasio-Cortez proposes isn't going to produce much tax revenue, isn't going to reduce middle class taxes, and isn't going to significantly change the overall distribution of income in the US . What it does is to send a message that the wealthy are heavily taxed even though there is little benefit to anyone. Ms. Ocasio-Cortez is onto a progressive tax reform which sounds good to the millennials without much changing their net income.
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But it will decrease ability of the top earners to influence politicians. That is actually the point of the article.
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@michjas
The biggest problem is not just a tax on the super rich that would affect very few people; but that once the principle of high tax rates is accepted, it will creep down to lower and lower brackets. In 1981, the last time we had a 70% bracket, it applied to all income above $108,400. for a single filer, equivalent to a few hundred thousand today. That's a nice income, but it sure isn't ultra rich in NYC.
2
Few donors donate $1 million. The impact comes from foundling the donations. I doubt it would have any impact on political donations. If anything, donors would have greater incentive.
Can we start by changing a regressive tax policy. The medicare/social security tax that stops at $132,900 should be applied to ALL income. As it stands, the lower and middle income persons are most hurt by this.
Why this has remained this way for years just shows the power of the wealthy.
3
@CW 100% correct...that would also go a long way toward solving the medicare/social security "crisis" ( it would have completely solved it if it were done 10-20 years ago)...
@CW. No, it shows that no one is willingly to address the third rail. And if you paid taxes, you would know there is no limit on Medicare.
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@Jackson
I do pay my taxes. I lump the social security and Medicare taxes together in my mind. You caught me being too lazy to get it straight.
Flat tax. No deductions. Easy. Probably 15 to 20%.
Either that or do away with income tax and have a 20% sales tax on everytthig.
The politicians hate it.
Can't sell their influence to the big money.
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Capital is fungible. it cannot be permanently imprisoned or punished and will ultimately go where it is treated best. Jack Kemp had it right, Rep Ocasio-Cortez...not so much.
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@btb
Jack Kemp. That giant of Economics! The Swedes blew it when they didn’t award the Nobel Prize.
Even GHW Bush called it woodoo economics before Barbara threatened him with boiled brocoli for dinner if he didn’t behave.
1
Do the authors (as Econ professors) penalize their students earning top marks by taking away points from the top performers and allocating them to the worst performers? Do they also think admissions to UC Berkeley should be restricted to top performers on admissions exams, or open to all, even the applicants with the lowest scores? Wouldn't these steps also be more equitable and help reduce inequality?
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In response to comments on my post that compared
CEO pay in terms of median workers pay
US : 271 times average workers pay
Norway : 20 times average workers pay
Objections where made that high tax rates in Norway hold the rate down
This is NOT the case
The top marginal tax rate in Norway is 47.5%
That is virtually identical to the US where the top marginal tax rate is 37% PLUS the top marginal State Tax (that does not exist in Norway)
That makes the top marginal tax rate in NYS = 45.8%
And in California = 50.3 %
Again
The difference is cultural - not tax rates
But as Hillary Clinton observed in her discussion with Bernie Sanders (That advocated the Nordic Model)
We are not Denmark
8
Does it mean we are destined to be society of inequality that will be grow until there will be only poor and super rich? Should we try to remedy that, or just accept it by laying down?
@yulia
As long as the return on Capital is higher than the growth rate of the economy, the gap will keep increasing.
The difference in the “drift” terms in the two growth rates only moved in the opposite direction between the Great War till the 1980’s. That convergence was killed by Reagan and Thatcher and has become significantly divergent by now. The great Kuznetz unfortunately analyzed that strange period of convergence and became optimistic about inequality (and won the Nobel Prize).
Please read Piketty’s Capital in the 21st Century if you haven’t already. It is all laid out beautifully.
1
@yulia when have salaries ever been equal?
Look, all progressive Democratic candidates will look to raise taxes on on the ultra wealthy. The question is which will have the guts to raise taxes on the top 15% wage earners (the "professional class"). Past Neoliberal Democrats did not. Candidate HRC stated she would not raise taxes on the "middle class" which she defined as those who earn under $250,000. This is laughable because the medium income for a family of four at the time was a little over $50,000 a year.
If Democrats win the Presidency and the Senate in 2020, they will have only four years to put their policies into place. That level of money will have to come from somewhere.
@James Myrick
250,000 is not rich and no, they will not raise taxes at that level.
2
@Driven $250,000is not rich?
The 800,000 plus Federal employees furloughed by the Government shut down or lack of a budget for next year has showed us something remarkable; Most of our middle class is only a paycheck away from catastrophe. Essentially our middle class is no longer the middle class that formed the back bone of our economy.
The 70 plus % of the incremental tax rate on over $10 Million income would help is getting our infrastructure funded, our schools funded, and other important projects funded.
The marginal propensity to consume is the greatest in this tax bracket. They would spend whatever they were given extra in terms of relief.
AOCs proposal is not in a vacuum but needs to be taken in its totality, by adjusting/lowering the tax rates of the lower 50% of the tax payers and balancing the revenue by raising marginal tax rate on the rich.
One thing we know for sure that we have an immense equilibrium problem between the Have and the rest. If we do not fix it we will have a revolution because public is frustrated and fed up, choice is ours we can do it with laws or else.
2
I'm inclined to agree a lot of points in this piece. Is this the right or only solution for the power imbalance, though? In other words: would not a re-invigorated cap on private and corporate donations and publicly funded elections solve many of these problems?
Inequity breeds chaos in the end. The French and Russian revolutions come to mind. Third world countries struggle with this. It never turns out good for the people. And the rulers face the mobs. We are not there yet, but if the rich soak the rest of us, it won't end well for anyone.
Bring back high taxes on the super wealthy, and use the money to help the rest of us. This will result in a well run country for all of us. Affordable health care, safe government jobs, support for education, infrastructure , etc.
It is time to do the right thing. Fair taxation, please!
2
Let's be real. Alexandria Ocasio-Cortez being photographed is essentially her only involvement in these 2 Berkeley economists' opinion piece.
The case for higher taxes on the wealthiest makes itself. They hired Trump, got corporations off the hook for their original portion of the $22T National Debt Pie, and their heirs & beneficiaries escaped Inheritance Taxes. They deny us our Infrastructure Projects because they demand Republican officeholders provide them with privatization investment opportunities. Similarly, they deny us our most democratic institution, the Public School System. Again, charters are a self-enrichment scheme and control mechanism for the wealthiest individuals' long-term interests.
We don't need to give a rat's.. about the Uber Rich. Even those who might feign a care, they really hold, at the least, a protectionist angle - and more than likely, they will pursue self-serving opportunity at others' expense.
What we must care about and develop IS -- a bi-partisan undestanding of, exactly, how we will apply these funds to FIRST stop "the bleeding" across the board, especially inefficiencies. Then, fix bridges/roads and build new ones.
During stable times, retain some headroom between the interim highest tax rate and the 70-percent max tax rate. Somehow form a bi-partisan coaliton to protect the non-partisan gatekeepers of the "rainy day" trigger to the maximum rate hike.
2
This article certainly makes a strong argument, but I believe these tax rates would restrict our startup culture that has led the US to lead our global software industry.
How do we see them in the light of incentive stock options? It's very possible that someone might get a $20m payday when they sell a startup, or exercise options, but it might be a once in a lifetime event on an otherwise $100k/yr income.
There should be something to limit the tax impact of these once in a lifetime events. Perhaps a $50m lifetime exemption from the higher rates (tax the first $50m over the $10m each year at the same rate as the $1-$10m)...
1
@Charlie
You brought up many other issues when you mentioned the selling of a startup. Who buys the startup? A large mega corporation most likely. Which will limit competition, force consumers to pay higher prices, and also cut jobs so management can acquire more stock options.
These once in a lifetime events (incentive stock options) should not occur as they only go upper management who are already well paid. Instead, every employee of the company should get an equal share of the profits from a sale of the startup and an equal share of stock options issued. All corporations should have an equitable profit sharing plan for its employees (including contract workers).
As for a 50 million dollar lifetime exemption, really! The vast majority of working Americans are lucky if they earn 2 million over their entire working life. Nobody needs a McMansion, a 100 ft yacht, multiple homes, private jets, or any of the other perks the rich feel entitled to.
Income inequality is a very complex issue, and humans can be very greedy. Let’s put some limits on greed and all share in the prosperity of this country.
You don't raise revenues by soaking the very rich, you raise them by soaking the middle class. Every politician knows that. The middle class is where the money is. It's also where the votes are, so careful how you step.
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@Asher B
Thank goodness my children didn’t study economics at Cal. This isn’t economics, it’s political drivel.
Professors Saez and Zucman provide two compelling examples of tax rates and wealth distribution - but they don't really provide the nexus of tax rate policy to the two outcomes because, basically, it doesn't exits. There are other factors in Japan's results (a highly educated, motivated, capable and HOMOGENEOUS working class, an inwards looking growth policy/ideology (they were not exporting Japan's culture or beliefs, just products)) not present in Russia, which was, as a whole, far less educated evenly throughout society (with few highly educated, as selected by central planning), and had an incredibly culturally diverse workforce stretched across 12 time zones, that was far less motivated by a common path/direction to success than Japan. Japan vs. Russia outcomes were NOT tax rate driven as the authors suggest.
But the real question is this: how does a higher tax rate help the bottom half of wage earners if that half of American's already pay NO taxes? Taxing the ultra-rich more only makes sense if the extra tax revenues are wisely applied by the government on programs and policies that reduce income inequality. The problem is two fold: Do we give the unsupervised children at play in Washington even more cash to squander on bloated military spending or farm subsidies or etc.? Even if we can direct money to social engineering programs - to which ones? It just isn't easy to separate those that work from those that are a total waste of money.
2
The downside of applying very high marginal tax rates only to incomes close to ten million dollars in the current budgetary climate is that they do not raise very much money. Until 1963 America was paying the debts of the Second World War and the Korean War. That's why the marginal rates, even on moderately high incomes, were so high. If the federal government is to go on spending at the current rate those high marginal tax rates will have to start to bite at upper middle class rates of income, not just on the super rich. Sooner or later bills need to be paid. Or as Wille Sutton said when asked why he robbed banks, "Because that's where the money is."
What about the GE's and FEDEX's of the US that pay NO taxes? If you want to go where the money is ("Why do you rob banks?" "Because that's where the money is"), try the large corporations that are running at negative tax rates in the US.
1
I feel like 80% of society's woes would be solved by one simple step: Institution of a _robust_ minimum wage. And by "robust", I mean a wage that allows an adult working a 40 hour week to have enough cash to cover - for themselves and one dependent - housing, electricity, food, clothing, health insurance, transportation, and childcare..... We'd need far fewer programs (such as Medicaid, food stamps etc) because the vast majority of people would be able to pay for their own. Our tax dollars could go to help those unable to work and for programs that benefit everyone - infrastructure etc. The ultrarich would be able to hoard less cash for themselves because they would be properly paying their employees (and thereby reinvesting it "in the community"....
4
@GBR all raising the minimum wage does is increase inflation; the evidence for that is clear.
3
In the same vein of saving democracy, I sure hope she's also proposing to tackle electoral spending limits. The amount of time/energy that US elected officials have to spend courting those with deep pockets to fund their campaigns all but guarantees they will be beholden to their big donors once elected.
3
First of all, Medicaid which currently serves 70 million Americans, or more, is a program which is basically free. It is currently set to run out of enough money to pay all the bills in the less than 3 years. Our country is currently almost $22 trillion in debt, and has promised $30 trillion in underfunded entitlement mandates over the next 30 years. Why are current candidates in the Democratic party already talking about having an increase in taxes for new tax cuts or credits, when they aren't addressing any of the current debt and obligations, we have, and the programs that need to be shored up?
3
@MaryKayklassen
Raising taxes on the rich is part of how we pay down the debt. Republicans have controlled Congress for the last 6 years and democrats only became the majority in the house 17 days ago. Give them a couple of months, they have just begun to clean up the mess.
No reforms possible to restore US democracy and equality for which we fought the American revolution until we reverse Citizens United.
Majorities of voters and politicians favor this.
But it is NEVER discussed or debated on TV cable news, or even in the NYTimes op ed pages.
No other world democracy turns its elections over to a small group of financial elites for financing, as we do. And other democracies don't allow the paid political ads that are our biggest campaign expense, needing billionaires to pay for.
This huge difference is never mentioned in our media. The rest of the world is unknown to many Americans even in the internet age---if it pertains to how they finance elections, how they tax and regulate to prevent the huge inequality we see in the 'richest country in the world'.
US media, so proud of it's 1st Amendment freedom, is actually complicit in keeping US voters uninformed on the issues affecting all our lives.
1
What is continually overlooked in these discussions is that the tax code of the 1950s and 60s included a huge number of loopholes notably the deductability of virtually all interest. No rich person needed to pay anywhere near the stated marginal rate.
1
In his book, P.J. O'Rourke, postulates 4 ways to spend money. Send your own money on yourself; Spend your own money on someone else; Spend another's money on yourself; Spend another's money on someone else. Politicians exemplify the latter two options and socialists exemplify it best. Put simply: Should Bernie Sanders, Ocasio-Ortiz, Chuck Schumer, Nancy Pelosi et al have the right to spend others money on themselves and others of their choosing. I think not. To prevent an oligarchy institute a fair Inheritance Tax. The problem is not letting earners spend their own money it is allowing non earning heirs to inherit their wealth. A denial of the concept of "born to the purple" is the best democratic way to insure mobility in the economic and political spheres.
2
Yeah, I'd love to see the faces of all the Silicon Valley billionaires who make so much noise for Left causes and send so much money to the Democratic Party when it looks like they'll be the first to be socked with such a tax... that it's for real rather than harmless virtue signaling good for PR.
Think they'll take it in stride and keep donating?
5
Fantastic Op Ed...we should be hearing a lot more from these two experts. The top 1% now have about 20% of the income and 40% of the wealth, vs. 10% and 25% pre-Reagan, respectively. Enough of this upward redistribution already; time for downward.
Let's not ignore tax expenditures, which are $1.8 trillion per year in exclusions, deductions and preferential rates that allow the rich to avoid paying taxes. The top 1% get about 17% of the benefit (around $300 billion/year) while the top 20% get about 50% of the benefit ($900 billion/year). That $900 billion is roughly the size of our budget deficit.
A prime example is the lower rate for capital gains and dividends, which almost entirely benefits the rich. We should eliminate that loophole for the top 1%. Then higher marginal income tax rates will have the proper effect.
Further, treating dividends and capital gains as ordinary income for the top 1% allows us to tax stock buybacks (the primary upward wealth distribution mechanism, as the top 1% own about 40% of stock and the top 10% own 80%) as corporations won't simply be able to shift to dividends.
3
Our progressives --including Bernie Sanders -- want a capitalist system, but regulated capitalism. Otherwise why have democracy at all?
If elected govt doesn't regulate corporations then the corporations will regulate the elected govt. That's what's happening now, as the swamp creatures have swum to the surface in our politics.
If the wealthy through their campaign donations call the shots in our politics, they can pick and market the candidates who will ensure their power and profits.
Then we the people line up dutifully for hours to elect the nominees they offer to us---after years of media fanfare and hyped ads.
To protect our democracy and living standards, we must reinstate sensible and progressive taxes at rates common in past generations when the middle class expanded.
And our candidates should promote and explain this to voters.
3
One thing high marginal tax rates will suppress, outlandishly high CEO pay. We create more members of the 0.1 % every quarter with stock awards to CEO's.
2
@baldski while this is true for the base salary, you must realize that most of the "outrageous CEO pay" you speak of comes in the form of stock options, not base salary.
People with options will simply retain them, avoiding the creation of a taxable event and then wait for an advantageous time to incur the tax.
It's important to keep in mind that the earnings of the very wealthiest are often more in the form of capital gains than ordinary income. Once you start messing with capital gains rates you hit every retiree with a little money set aside.
5
Sweden tried even 100% tax on the rich; they created out of country entities. If I was rich and being taxed at 90%, I would be very angry and looking for all ways, legal and illegal to avoid it. No one should have to pay more than 45% of their income in taxes. Second, Russia is not a good example, all the very rich stole their way with the KGB buddy system. I do not call this 'privatisation'. I suggest the authors look at what the rich really pay against their total worth, not the tax 'rate'. Let me know if anyone pays more than 20%.
2
Take a look at France's economy and decide if one should take the advise of French economists.
2
You are correct. It’s about soaking just about everyone who pays taxes since simply taxing “the rich”, whomever that is, simply won’t pay for the various social programs she wants.
3
President Kennedy stated this when he lowered the Highest U.S. tax rate from 91% to 75%.
I believe Mitt Romney’s, Federal Tax, as an example....after deductions, ( not counting his “offshore funds” ) was approximately 20%.
We will never know ( in the U.S. ) what a progressive income tax system on high earners and Corporations could produce for this country..... because we haven’t tried for 40 years. The U.S. should also add a V.A.T,
as every industrialized country in the World has, to contribute to Healthcare, Education and needed Infrastructure. Also, raise the 40 year old individual Maximum Social Security income cap from approximately $125,000 to $500,000.
The Reason the huge U.S. wealth inequality gap is rising is the political lobbying, by those who would be affected ,(partly through Citizens United ). Congress has to start listening or our “experiment in democracy”will fail.
2
"[the high tax rate] exerts too heavy a drag on growth in peace time; that it siphons out of the private economy too large a share of personal and business purchasing power; that it reduces the financial incentives for personal effort, investment, and risk-taking," he said. When asked about income equality, he responded "a rising tide lifts all boats," (Address to the Economic Club of New York, 12 December) No sooner were his economic plans in place than the stock market began a new bull market, with prices reaching fresh peaks.
Who was "he?"
a) Reagan, 1980
b) JFK, 1962
c) George W., 2003
ans: B
"Those who cannot remember the past are condemned to repeat it." - Santayana
2
@Connecticut Yankee
And B was wrong. We know this now, because we have a font of evidence collected since 1962.
Your Santayana quote actually contradicts your point. AOC's proposal *is* remembering the past... a past in which we had a strong middle class and low income inequality. That past is when we had higher tax rates on the top incomes.
5
@Connecticut Yankee
And B was wrong as he was in so many other things.
Do you think Bill Gates, Steve Jobs, Sergei Brin, Larry Page, Jeff Bezos would not innovate what they did invent if the tax rates were higher for the top percentile?
Motivation to do intelligent things and succeed is inherent in certain people’s genes. Ask Albert Einstein if you can get access to the Beyond.
2
@Connecticut Yankee
The Revenue Act of 1964 (passed in February 1964) reduced tax rates by 20% across the board. To assert that the tax cut was the cause of a "new bull market" is to fall into the after-this, therefore-because-of-this fallacy. At the same time, there was great increases in expenditures for the Great Society Programs and the Defense Dept. (Vietnam).
War/Social Program Keynesianism is a more likely explanation for the booming '60's than the Revenue Act of 1964.
2
How about we leave it alone? Tax rates are utterly irrelevant. It's changes to the tax code that creates winners and losers.
Americans are smart. Tell us the rules, assure us they won't change, and we will all prosper. THAT would be novel, fair, and progressive.
3
@B
"THAT would be novel, fair, and progressive."
No Way - what would candidates for office use to get votes?
@B
"Assure us they won't change"
That's literally impossible.
And your assertion that by keeping it unchanging we will all prosper reminds me of the underwear gnomes' plans: Step 1, tell us the rules and don't change them. Step 2, ... Step 3, profit.
1
A welcome op ed, and TV cable news shows should spotlight it.
Last night Ocasio was on the Steven Colbert show. He had her explain that she was proposing a 70% MARGINAL TAX RATE. Not on the whole income of the rich, but only above a certain level of their income. The public must understand this to counter her critics.
She also cited the 90% marginal tax rate on the rich in 1950s during the term of GOP President Eisenhower. This was accepted, not seen as left wing.
These tax rates and other policies meant that our elected govt promoted middle class security and upward moblity in past eras. Low cost or free state colleges--- was not left wing but acceptable policy. It worked with our capitalist system. It wasn't 'socialism' as we hear today.
The rich were still rich, but the middle class was expanding and strenghtening at the same time. They had upward mobility so their higher paying occupations led to more consumer demand, and they also paid more taxes to the govt.
Today in the GINI Index comparing countries on economic mobility of citizens, the US is behind many other countries. We once led the world, now we lag.
Why isn't this on prime TV cable news? A perfect election topic for the 2020 Democrats.
6
Virtually nobody paid 70% or 90% rates. What part of history do people find so difficult? These rates are illusory and without loopholes they’re theft.
1
This is the same woman who claimed that unemployment rates are down because people are working two jobs; which has nothing to do with how unemployment rates are factored. And she's the poster child for the left. God help us.
7
@bfree Citation?
It's tough to "raise the lower end", when such a large slice of our taxes goes to a bloated, outsized military budget and when the "upper end" (1% ers and corporations) keep getting tax cuts and breaks.
When is the last time we - as a nation - discussed guns vs. butter? Sure didn't happen at the end of the "Cold War". Remember the promised "Peace Dividend" - that never happened?
7
@Ellen
Please read the article. This isn't about redistributing taxes. This is about promoting income equality before the taxes are even collected.
1
There are at least two problems with this kind of thinking. First, it's all counterfactual at this point- we don't have a 90% top marginal income tax rate, and it's easy to assert the positive impact on inequality that adopting that rate will have. Sure, you can certainly cite post-war US or Japanese experience as evidence for that position, but it is far from conclusive. The post-war context is far different from what we face today. In this sense, there is a far better argument to be made that globalization and automation drive inequality far more than tax policy ever could. To address this, we must stay competitive and draconian tax policies may get in the way of this goal.
A second point that is not addressed is that much of our current economic challenges are derived from the very transfers that these writers so breezily accept. Right now, Medicare costs the tax-payer over 500 billion dollars per year. What about state pesnion costs? What happens to future generations when the simple facts of government finance come home to roost? The threat to the dollar is profound, for example. You'd better believe that any economic crisis will drive inequality far more than poor tax policy. So why aren't progressive talking about that?
Another reason to remove money from the top is that when there is so much money in the speculating class there are not enough investments in the productive sector.
So they speculate in "financial" assets, real or imaginary (think derivatives).
This makes the financial system unstable.
From 1933 to the 1980's there no financial crises. Now they are common because there is way too much money sloshing around the financial system.
2
Green renewable energy will come because of economic realities, fuel is a huge cost that everyone benefits from not paying for and using. History is full of government funded boondoggle's rife with overspending on patronage and outright corruption. You want government involvement, then help build more nuclear reactors that have 21st century tech. You won't need to raise taxes for that.
Doesn't really matter what green initiatives we have when Paris Accord signers Germany is still burning brown coal , and India is constructing NEW coal fired generation plants.
It all boils down to a quote attributed to Supreme Court Justice Louis Brandeis:
“We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both."
5
Estate taxes are the key. The estate tax was originally created to prevent exactly what the article is talking about.
2
Just shifting the tax burden back up the income ladder helps lower income people. If you live pay check to pay check, an extra $200 in your pocket is a big deal.
2
If the problem is that extremely wealthy people have too much power, why stop at taxation of income? Why not confiscate most of their accumulated wealth as well? I'm sure Ms. Ocasia-Cortez would have no trouble saying with a straight face that it's their "fair share".
4
@Michael
Right now that would be unconstitutional, so you can relax.
One final point. There are two aspects that affect the poor and marginalized people and the rich One is income that is address in this op-ed. The other is wealth inequality which tends to be more generational and is a much tougher nut to crack. One loophole the rich use is Trusts and the taxation must be address when it comes to vehicles of generational wealth such as Trusts must be taxed differently than they have been in our society .
What's most important for the wealthy is not making money, it's keeping what they have. They're more concerned with risk than return. They want to secure their structural inequality.
Their wealth funds PACs whose purpose is to increase inequality by supporting politicians and policy that favor corporations and the rich, while also blocking any move toward equality for the vast majority of non-rich People.
Money is what makes them special and they defend this advantage by police power as necessary. The rich believe they are entitled to their inequality and live with the fear that the People will right the power imbalance.
There's no way one can right inequality and save democracy without soaking the rich. The rich are not our friends so let's get to it.
1
@Fourteen
There is always going to be a 1% and they will always have the most money. There will always be a boogie man.
After decades where economic growth was seen to be the driver of our U.S. system, we are now staring at socialism and punishing those who succeed, all at the altar of 'saving democracy.'
There had better be a lot of folks - even centrist Democrats - waking up and smelling the socialism before the next election cycle.
2
Saez and Zucman make a good case for higher marginal tax rates to address inequality of wealth distribution. But to do that is like using a meat cleaver to chop a cocktail wiener. There is a huge difference between wealth created from rent seeking (speculation) and honest capitalist profit. There is plenty of wealth to be had squeezing ground rent out of the economy in a bustling metropolis without any need to tax incomes. So should the marginal tax rate be 90% or 0% for incomes? I say 0% but collect 100% of ground rent. Reward productivity, give everybody an immediate 30% boost in wages, and pay for needed infrastructure.
The New Deal saved capitalism. Without it, the masses were revolting. We are at that point again. As the Scottish economist Mark Blyth points out, it is difficult to defend a low lying beach, like the Hamptons. But, maybe waiting for those struggling to feed their families against the backdrop of looming worldwide famine to buck up and become computer programmers is still a good idea.
3
Saez and Zucman are correct , but their proposal is not politically feasible under the current leadership of the Democratic Party
The staunched defender of having Wall Street Hedge fund managers pay LESS than their federal tax rate has been the leader, of the Democratic Party Charles E Schumer
A list of his top campaign contributors explains why
Charles E Schumer
Top Contributors, 1989 - 2018
1. Goldman Sachs0
2. Citigroup
3. Paul, Weiss et al
4. JPMorgan Chase & Co
5. Credit Suisse Group
It is Wall Street.
Mr. Schumer has , with astute maneuvers throughout his career, hence defended the carried interest loophole, that permits hedge fund managers' income to be taxed at the capital gains rate (23.6%) instead at the top federal rate (37%)
To get re-elected American Politicians need money from donors, and in return, defend need to defend the interest of their donors, lest they find them without money in the next election cycle
Ms. Ocasio-Cortex , who ran on small contributions, could bypass that democracy destroying machinery, as did Bernie Sanders, but they are exceptions to the rule
10
@Woof
How right you are. You got it exactly right.
Let’s get Bernie or Warren elected President in 2020.
Let’s then get rid of Schumer and have either who doesn’t become president become Senate Majority Leader.
Then we are in good shape to improve this nation’s lot.
2
A communist or socialist revolution is now started in America? A new Puerto Rico young lady may change our life styles and American tradition values?
2
@Mclean4
And what is wrong with “a new Puerto Rico lady” (not exactly elegant prose you have there)changing your life style and “American tradition values” (more brilliant prose)?
Our American values included theft of people’s land, extracting maximal surplus value from slavery, treating women as second class citizen, napalming children, dropping the only nuclear bombs ever in Japan, removing democratically elected people with coups (Mossadegh and Allende), abetting Saudi Arabian butchers etc, etc.
Wake up please. Cut the jingoism and try to help make this place worth living.
1
What a gross oversimplification of 75 years of tax policy. The authors act as if the national and now world economy and the U.S. tax regime have remained constants while the only moving variable has been federal tax rates on the upper tiers of income. What nonsense. Comparing systems/rates from 75 years ago is apples and oranges. A few examples. Following WWII the nation had just exited a world war and five years of austerity. So there was unprecedented pent up demand, a switch from manufacturing for war to peacetime and US domination of commerce because of the destruction of competing nations. Another point, during the "golden era" of 90% tax rates the authors mythologize -- there was no meaningful state income tax. Now states like CA and NY tax the highest brackets at 13% or more. Moreoever, the deduction scheme applicable in those decades was entirely different. Sheesh!
3
Mssrs. Saez and Zucman are correctly identified as Economics professors, not History professors. If they were, they'd have to rewrite their article:
"...the top marginal income tax rate averaged 78 percent; it exceeded 90 percent from 1951 to 1963."
If "the higher the better" worked so well, why did it end in 1963? Who was the right-wing capitalist who vetoed it? Turns out, it was a liberal who went by the initials "JFK." In fact, the Commenters here would do us all a favor by brushing up on their History. Kennedy ran on a platform of REDUCING the top rates, under the slogan "Get America Moving Again," (sound familiar?) a complaint that the economy was underperforming in the '50s, NOT running fine as today's liberals frequently [and inaccurately] allege.
So "Soak the Rich" is a great campaign theme, a sure vote-getter. Just make sure nobody does the research, OK ?
2
@Connecticut Yankee
And yet, it is Republicans and conservatives who point to the 50s as "the good old days".
You're arguing against a point no one is making. Nobody cares if it was JFK who made the change, and his campaign theme isn't exactly solid evidence. I mean, Trump ran on a platform of improving the economy. However, the economy was ALREADY improving... in fact, after he took office, improvement SLOWED. That didn't stop him from pretending the economy was terrible before and he "saved" it.
I understand that you think you have a "gotcha", since this is the 2nd time you've mentioned it, but you really, really don't.
@R
Well, you got me on that last point. But let's be fair: if people keep using a falsehood as "proof" that they're right, don't we need to keep pointing that out?
Contrary to ignorant claims that she is a threat to capitalism, her ideas may be its salvation in the long run as well as strengthening democracy.
2
Shifting the Overton window leftward. About time! No wonder they hate her so.
1
Liz and Alex?
Could do worse...and we have...and we are...
1
Can I mention one of my favorite NY Times pieces. Wouldn't it be better for society to tax wealth. The stock value of Walmart keeps going up and those children of Sam Walton have their wealth grow, but pay no income tax on it. That is the real crime of our tax code
https://www.nytimes.com/1976/04/11/archives/tax-wealth-not-income-to-soak-the-rich-it-is-first-necessary-to.html
The US Constitution has no authority to tax anything personal using graduated rates except income. Additionally, the Feds could only tax property using an obtuse formula where the total taxes collected from a state’s inhabitants have to be in proportion to total inhabitants of a state. Billionaires would bail from California and move to Wyoming. Estate tax is not a wealth tax. It is an excise tax on a specific one time wealth transfer to new owners. If a current owner just lets it gain value, the US Government has no taxing authority.
And I forgot to add that you both along with Thomas Piketty and Branko Milanovic deserve the Nobel Prize in Economics next fall. Any two of you if they limit it to two will be great for me to see.
You are the best example of Worldly Philisophers. Professor Heilbroner would have added you in his pantheon with pleasure I am sure.
1
Obama and Hillary would never have dared upset the Apple Cart. Too busy supporting the Oligarchs than committing to voters. Hence...TRUMP! Who went a step further and actually turned the dagger that was already in America's Gut.
Oh well, Dems will save us in 2020 (again!) ....NOT!
1
Utter nonsense...
1. Taxing "income" at one rate while taxing rich folks’ (aka capital gains) at another – while permitting bartering (aka 1031) – which defers any tax indefinitely – till loopholes around family trusts and estates kick in...
With the recent tax “cut”, income-grabbing got even more fine-grained and oppressive at the expense of some licensed professionals....
2. Taxing corporate “income” invites total gaming and mischief...Tax revenue or wealth instead – works at the state/local level (sales, property tax)...
What bugs the equalists on this – they really believe that a rich person should pay more sales tax on a fry-pan than someone else...Just can’t figure out how to make the registers do this – and local gov’ts more focused on solvency than equality, anyway...
Corporations way-OK having income taxed...Any year, they can show almost none, or a loss – or buy a business with all sorts of carry-forward tax credits, for pennies on the tax-credit dollar...
3. After yakking up 70% for a while – equalists have no intention of starting at $10M...$1M much more likely...Just look at NYS and CA millionaire tax brackets...NYS backed off to $5M – but realize that in NYC, someone making $1M a year now paying $115K more in state/city income taxes than if in Houston or Nashville...
This simple, they’d then argue – get a lot more money starting at $1M, than $10M...
> 250K people make > $1M
< 10K make > $10M
You do the math...
4. No more SALT deductions...
2
This op-ed is so refreshing and really surprising. The Times has covered Alexandria Ocasio-Cortez on the front page / home page. That coverage has been so openly hostile and ignored the points made by the authors of this op-ed. It's about time.
2
After reading this article, Donald Trump is looking pretty good!
3
I find it instructive to look at this argument through the eyes of a wealthy man from that past, high-tax era - the former auto executive and Michigan Governor George Romney (father of Mitt) - who David Leonhardt callls "a highly successful and personally decent man who thought that making even a couple million dollars a year was unseemly"
Here's why:
https://www.nytimes.com/2017/09/05/opinion/rich-getting-richer-taxes.html
This lady wants others to work, make money and give it away to lazy bums (ie HER). Unamerican is not a strong enough word for this person.
4
@Pilot What nonsense. Most of the super wealthy (which is what this article is about- the billionaires- for example the Waltons) don't work. They inherited their money and pay at much lower tax rates than the average secretary. Its time for the super wealthy to pay at least the same fraction of their income as the poor and for the middle class to get more of their money back.
Dear Ruling Class,
We want our money back.
Yours,
The People
1
This is the result of class warfare. The 1 percent won!
The 1 percent controls congress via lobbyists, citizens united and the ability to write the tax laws. They have eviscerated any countervailing powers that Galbraith once discussed. The unions are dead. The 1 percent controls the federalist society and it controls the supreme court. Those congress people who are defeated go work as lobbyists!
The middle class has been gutted like a carp. The lower class wants union jobs and wages but they think union are for losers.
The lower class shares many commonalities with poor Blacks and Hispanics. They fill the prisons and are concentrated in failed rural towns with empty factories. Yet race baiting makes them think, as during the civil war, that they are superior to minorities. The 1 percent has been magnificently successful in exploiting this.
They spread media manure (my term!!!) that taxes make the rich work less. The rich don't work and sweat. They risk nothing.
So what is the price of a civilized society that educates its young, builds infrastructure, takes care of is poor and elderly, provides justice instead of prisons? How does it support the general welfare of the nation discussed in the preamble of the constitution?
The 1 percent howls in joyful glee at the myths they perpetrate for their own benefit!
Vietnam Vet
2
I really want to hear someone who made a billion dollars complain that they can not 'make-it' on one hundred million dollars.......tax-it now!!!!!!
I cannot think of a better response to those who favor giving additional tax breaks to the wealthiest among us than this statement by FDR.
"The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have little."
2
With any proposal for high income tax rates, the image created is of wealthy people paying all costs. In fact, the high tax rates in Scandinavia extend to the lower income levels too. Taxes in these countries are the shared price paid for government services, namely, healthcare from cradle to grave, free public education through to completion of post secondary school, and pensions and income insurance. The government is the provider of all these services. A taxpayer earning the equivalent of $50,000 per year might pay 45% of his/her income in taxes, with high rates applicable to the first dollar of income earned.
That may be an attractive alternative for many Americans, but to many others it would not just be unacceptable, it would be anathema, the creation of a welfare state, the end of the world as they know it, and those opposed would fight it, forever. It is interesting to talk about these things , but in the end a waste of time.
Today AOC is advocating a fight against climate change at the level of a WWII effort, which is a popular analogy these days. She doesn't realize it, but this means the equivalent of a war measures act, martial law, the suspension of civil rights, the conscription of labor, the commandeering of factories, war bonds, complete economic disruption. Who knows, this may be necessary some day, the right will pick up on it, at which point you will find her opposing it, with every once of effort she can muster.
Deirdre says, in a most favored comment, "All income should be taxed as ordinary income."
Please people. Stop talking about income. It is WEALTH that is a problem. Corporate tax credit wealth. Trust fund wealth. Foundation wealth. Stock wealth. Real estate wealth. Off shore tax evasion wealth. It's stolen/inherited assets that need to be taxed at 99.9%. Only 26 people in the world will be the most affected and they will still have plenty left. Read the article linked below for the real story.
https://thinkprogress.org/26-billionaires-own-as-much-wealth-as-half-the-world-6948c7e2d411/
1
@njglea
Correct. But guess what Saez and Zucman have written brilliant articles in the topic!
If you haven’t read it please check out Thomas Piketty’s Capital in the Twentyfirst Century and anything Branko Milanovic has written.
We’ll get it right or vanish as a civilization. It is that simple.
1
Most of the very wealthy have what's known as unearned income. So capital gains rates will have to rise to get to them. A 50% rate on earned income above $10M/yr. Is a good place to start. But it should have a sunset requirement if it harms the economy or investment capital.
Corporate executives now make multi-million dollar salaries even before their stock options. I'm okay with them paying more. And we should develop measures to curtail stock options as compensation.
I am a CPA and have been trained to have a heavy skepticism of income taxation. But it's way out of hand.
In the end if people are suffering or struggling while watching some so wealthy they simply live like royalty a day will come when they rise up. It's a common thread throughout history.
I generally agree with this op-ed but do want to make a few points:
1) In the 50's at a tax rate of 90%,only the amount that pushed the income over the threshold was tax at the top rate
2) In the 60's, with a tax rate of 70%, again only the amount that was over the top income was tax at the 70% rate
3) There are many components to income. The one that generates the most income for the rich is stock investment and this is only taxed at the capitol gains tax rate which, I believe is around 25% today. Whatever new threshold we end up at must take into account both of theses issues; The tax rate must correspond to all income not just the amount over the threshold and we must also raise the capitol gains tax roughly to 30%. Another approach would be to eliminate the capitol gains tax entirely and treat investment income as part of the maximum tax rate.
4) if you look at the maximum tax lowered from 90%to 70% under JFK on any income over that threshold and then factor in cost of living adjustment, the amount would not be 10 million or even as stated here 6 million and some change but be around 2-4 million.
5) Part of this reforming of our tax code to be more progressive is to set a low end amount that would subject the person or family to no taxes and then tie any increase in this base income to cost of living.
Finally, I would support a 70% tax on income over 4 million as long it is the entire income and raising the capitol gains tax to 30%.
Lower taxes caused authoritarianism in Russia? It appears that is what we now have here in America. So clearly that is not a relationship.
The US is first in the world in the GDP ranking. Companies like Google, Facebook, Tesla, employ thousands of people in markets that were essentially non-existent 15 years ago. Record low interest rates for the last 10 years and all this new employment is the reason for most recent housing boom.
There has never been a time like the present for all American's to share in these numbers. This is injustice? America's creativity is the reason behind all. It always has been. I don't care that Mark Zuckerberg has more money than I can count. He's earned every penny he is able to legally keep.
I'm certainly not rich but I was working in gas stations until I was 25 until I finished finally finished college at 28. Of course it's not easy, but a lot of people do it. Just how sorry is everyone supposed to feel for people that don't put in the work?
2
Raising taxes to this level won’t give the government a direct increase in tax revenue. The rich will lower their income and invest more in their businesses and in society, which will produce the true trickle-down economy that the right has been claiming they want.
3
MY MAIN THING. I agree with Republicans that America is not as great as it used to be - they have destroyed her.
America's great middle class was the envy of the world. It was built on progressive taxation with top tax rates above 80%.
Ever since Ronald Reagan those taxes have been cut and cut again. I even saw a Democratic ad recently promising tax cuts. Argh!
With little investment into people or infrastructure, The U.S. is now one of the most unequal countries in the world. One man, Jeff Bezos, of Amazon is vacuuming up nearly $300,000,000 a day of the people's wealth.
Right ... no civil service unions in the high growth 40s and 50s ... middle income paid multiple times the taxes as today ... and the Welfare State was smaller. But the ONLY thing you want to go back to is 90% marginal rate.
Inequality is a product of different behavior ... change the behavior otherwise giving people money to behave worse only makes things worse.
2
@Commentator changing behavior by itself will have no impact on inequality because of the Lake Wobegone effect, if everyone works harder we would have the same distribution. We need something to change the pre-distribution of income, and a highly progressive tax rate is one of the policies that has shown to be effective. Yes you do make a good point that the welfare states were smaller in the 40s and 50s but that's a function of mostly an aging society, more than anything else.
Questions that come to mind...
1) How was the U.S. economy different in the New Deal era than it is today (also in a global context) in ways that would impact the debate about income tax rates?
2) What can we learn from recent experiences of other countries with very high top marginal income tax rates (70%+) , such as France under President Hollande?
3) What's the importance of the personal income tax with regard to income inequality and democracy compared to capital gains taxes, corporate income taxes (which were just slashed!!), or estate taxes?
2
To the first point many other countries are producing and selling more and our cost of living is higher. The three largest parts of our expenses are housing, taxes and health care. We can’t keep funding higher priced homes and tenants’ rents by interest deductions, can’t keep raising tax rates(spread them and keep us competitive), and health care(eliminate tax deductibility and lower the middle class tax rate to compensate. We won’t be competitive if we don’t.
There's no need to "soak the rich" in order to curtail inequality & save democracy. We just need better policies.
First, soaking the rich does not mean that inequality will lessen. In fact, when the rich were taxed the highest, the poverty rates in this country were at their highest. What's happened in the past 30 years - due to technology - is that the rich are getting richer but the worldwide poverty rates are at historic lows.
Second, we need better and fairer taxation policy. The reason for increasing inequality is the "carried interest" loophole. An actor making $50M is taxed at the highest rate, but the hedge fund manager making $50M is only taxed at 17% because its considered "carried interest". That's insane right there.
3
Most of the very wealthy made their money the old fashioned way: they inherited it. (Read through Forbe's billionaire list if you don't believe this). These are not the "job creators" that the WSJ claims the very wealthy are. Capital gains taxes need to be made much higher for the very wealthy. We need to have the very wealthy pay at least the same fraction of their income as the average upper middle class (>45%) in taxes- remember Mitt Romney and his $11% tax bill? We also need to raise the inheritance tax on very high inheritances to at least 50%. Otherwise we will end up with the very rich owning everything, and the middle class paying all the bills.
1
When my dad heard someone talk about excessive taxes and heard them gripe about paying them he always said that he was happy to pay his 50% to give back to the Country that had helped him to prosper.
Since then the republican party has made cutting taxes their religion, the cure for anything that ails us. But since taxes have fallen so has that which made America great. Our middle class is being decimated while billionaires are popping up everywhere.
A billionaire is not a natural occurrence in a democracy. In the Europe we rebelled against the equivalent of a billionaire was a king. Followed by his court. Kings are not democratic. We see evidence of that in the current occupant of our White House.
40 years after the New Deal, ushered in by that man the socialist, America was humming right along. Creating a middle class never before seen by using the government to give people a leg up. We were sending men to the moon.
40 years after reaganomics we can't fill our potholes. We can't educate our children. We might not be able to keep our planet from overheating and sending our civilizations to the ash heap of history.
Why, because of all the petty kings, I mean billionaires, who are hoarding more wealth than has ever existed on the planet before.
I would go further than Alexandria Ocasio Cortez, but her ideas are a good start.
Who are America's oligarchs? Look at those that contribute large sums of money to campaigns and what's in it for them? If they come from the corporate world, look at their companies.Yes, they get obscene bonuses for having made money for stock holders. But what about the workers? If that bonus money went to those that actually make up the company, as used to be the case, we wouldn't be having this discussion.
1
My god, such angst over the wealthy. They have an entire congress, the president and the Supreme Court that stand in their defense. Who is going to speak out for the other 90%?
1
Our governments cannot resolve a shutdown, fund social security, or get the subways to run. The consensus needed to find solutions mutually agreeable to all is hamstrung, for reasons ranging from our political system, to the immediacy and shallowness of social media, to the seething anger that populists and opportunists exploit.
These are hard problems that are now baked into our country.
So instead of trying to build consensus around attainable solutions, let's talk about the theory of confiscatory tax rates and how we just need a big bucket of money to fix everything!
The thought that an idea like this could actually command headlines and generates hundreds of comments as if it were either a "solution" or politically attainable is yet another sign that we are witnessing the end of functional democracy.
1
It is in fact about soaking the rich, soaking them back!!!
Our income inequality is so lopsided is ripping the fabric of society. If the 0.5% of the public owns 75% of the wealth, they should shoulder 75% of costs of running the government, it is simple, fair mathematics. We need sensible more steeply progressive taxation to equalize the playing field for everyone else. For these ultrawealthy the only difference will be downsizing their jets and mega-yatchs, otherwise, it will have zero effect in their way of life. We are now living in a society that is getting close to the inequities that existed prior to the French revolution and the modern day "peasants" are getting pretty close to letting the oligarchs how the guillotine works.
1
@james
I have news for you:
The is no American Dream. It is like the Tooth Fairy or Santa Claus.
Convenient myths created to keep children happy in their innocence by bribing them minimally with little gifts and such. We became children for ever in this country that feeds us nonsense by the pound with something called the American Rhetoric. A false consciousness that was commented on by many great thinkers through the ages.
Meritocracy? What does it really mean? If you are disabled or not gifted can you really achieve everything by working extremely hard? No you cannot.
A brilliant and modest man named John Rawls wrote a book called A Theory of Justice in 1971. A just society is one where everyone goes to bed without knowing who he will wake up as and is indifferent to the fact. Beautiful as any Bach Partita, no?
That is my American Dream. May John Rawls Rest In Peace. He was my teacher and someone Americans should know more about.
2
What's wrong with "soaking" the rich?
They have been getting almost ALL the tax breaks for 40 years!
I don't recall this newspaper moaning about soaking the poor and middle class during the last 40 years.
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@Rob (who is the Readers favorite here)
What exactly are you conserving when you are a conservative?
The past and the status quo?
The past that included slavery, robber barons, no welfare, no social security, no EPA, no trade unions, no gender equality, no universal suffrage, no LGBT rights.
Is this what you are trying to conserve as a staunch conservative?
1
They can legislate a fix, or a fix can be found at the ends of pitchforks. History is replete with solutions to this sad, recurring problem.
1
@SteveRR (who quips about Berkeley)
You are so clever Sir!
Thomas Piketty is a Professor at the Paris School of Economics (preciously at MIT), Branko Milanovic at NYU, Joseph Stiglitz at Columbia, Angus Deaton at Princeton and Walter Scheidel at Stanford. You know what they have in common between being brilliant? They care about where humanity is going and don’t like the status quo that is creating a more and more unequal society. Before the sans culottes wake up and level the field like they did many times before, let’s change things peacefully.
I yet have to see any one with half a brain emerge from a conservative university these days. Hayek and Friedman’s time have passed.
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Long, LONG overdue. Too bad it took a courageous politician elected without the help of, and beholden to, the "usual (filthy rich) subjects to say it aloud.
To put it into ugly perspective, Oxfam announced this week that 26 people now own a full ONE HALF of the entire world's wealth! A huge jump from even five years ago. If we don't at least try to stop this daylight robbery soon, it will be too late. Twenty people will own the world and everything in it - including us.
2
Tax them too much and they will leave for other countries. Will any reporter question her on that?
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@william f bannon great others will step in their place for much less pay.
These guys have great ideas, but they do a terrible job of explaining them here.
Progressives have been talking about this for years. AOC did not start this. Let's give credit to Elizabeth Warren and Bernie Sanders....old people I know and not glamorous but certainly more experience than the latest media darling.
1
Articles about the historic high tax rates in the 70 percent to 90 percent range should always contain a caveat - the super-rich during that period never paid the top rate.
https://www.wsj.com/articles/how-wealthy-americans-like-jack-benny-avoided-paying-a-70-tax-rate-11547807401?mod=searchresults&page=1&pos=1
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Whenever high tax rates for the very wealthy are discussed, conservatives object that this amounts to "taking money away from" the wealthy as if they became wealthy in a vacuum by some spontaneous act of wealth generation. I heard Bill Gates father speak about taxes. Gates Sr. said that Gates Jr. was able to create Microsoft because of the taxes everybody paid that went into good public schools that Gates Jr. attended, transportation and communication infrastructure that his company can not have prospered without, fire and police departments that keep the Gates' and Microsoft employees safe and allow Americans to grow up in an atmosphere where learning and innovation can be pursued rather than simply just trying to stay alive, etc. Gates wasn't born rich, but now that he is, he seems intent on paying back through philanthropy, no matter whatever his corporate sins may have been in the past. Interesting that many people with less or even no real wealth will defend the wealthy not paying even their share of taxes but any taxes at all! Look at Trump supporters cheering at his tax scams and unwillingness to turn over income tax records.
The tax hike idea is not a new idea, but it is certainly a valid idea, perhaps more valid today than before Reagan when the middle class started it's decent. The middle class is dying while the rich say "trickle down economy" is the only way to go. In effect we have developed an oligarchy similar to Russia's, which may account for having an oligarch as President and his love of Putin and other autocrats.
This is not a new or radical idea. The tax rate on the richest was 91% under Eisenhower (a Republican), as Bernie Sanders said in 2015, and the economy was great. Dems should call this "Eisenhower-style tax rates" to make the point clear.
Want to see who The Con Don really works for? It's the International Mafia 0.01% Robber Baron/Radical religion Good Old Boys cabal that is trying to take over the world - through financial/corporate manipulation - just as they promised in the 1980s.
The unfettered, unregulated Harmonic Convergence of Greed. Read the article linked below. 26 PEOPLE - not corporations or governments - own as much wealth as over one-half the population of the world. Think about that. 26 PEOPLE can destroy OUR global financial system if they choose. They can start WW3 if they choose.
It is time to tax back their stolen/inherited wealth - not just income... WEALTH - so they cannot use it to destroy OUR lives.
Please read this article and take it viral. WE THE PEOPLE need to know the truth of what we are up against.
https://thinkprogress.org/26-billionaires-own-as-much-wealth-as-half-the-world-6948c7e2d411/
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You might also be interested to know that, according to the article, Trump allies were using a network of tax havens to quietly stash their wealth offshore (according to the Panama Papers). They included the Koch Brothers, casino mogul Sheldon G. Adelson, New England Priots owner Robert Kraft, and Secretary of Commerce Wilbur Ross.
These are the people trying to destroy OUR United States of America. Some of the worst human beings on the face of the planet.
1
I agree completely that income inequality is one of several ticking time bombs in our country. But soaking the rich is not necessarily the answer, unless that soaking is done, and administered properly. For while perhaps taxes were traditionally high...an American tradition, the article implies...an equally American tradition (indeed, embedded in the Constitution and our national character) is the notion of limited government. Unfortunately, bringing in high levels of new revenue will only spur Congress to find new great ideas for spending money and further expanding gov't, and the people's dependence on it.
I'm open to the idea of higher taxes on the ultra-rich IF those funds go to paying down the national debt. Come up w/ a way to both raise revenue and constrain gov't spending, and I'm in.
3
I would presume that some level of inequality is a good thing, but there is an underlying tendency for income inequality to creep higher over time. Thus, we need to assess the level of inequality that is best. We do wish to incent innovation and high performance yet there is a cost for too much inequality.
2
This is a great proposal coming from the right person. A 29 year old who has worked as a bartender wants to tax the rich at 70%. I’m sure that after first making $100,000/ year, she started to realize how easy it is to make money in the US. After she first made $1,000,000 / year, inequality became unbearable. Why wait to be 80 to want some increase in taxing, like Warren Buffett, when you can do it at 29 ? I’m sure that the idea will be a great sell outside the Democratic enclave where Ms. Ocasio-Cortez came from.
2
I have always been a Democrat and always think that tax structure favors the rich but using the same arguments louder because the Republicans are irresponsible doesn’t make them more acceptable. Joe Louis could not pay his back taxes even after winning $1 mil dollars because the Feds not to mention NY took almost all away. This is a losing proposition and it should be because it doesn’t work. The rich ALWAYS find the way around or to benefit from high tax rates. Give a $10 mil painting to a museum and get $4 mil from the taxpayer.
Democrats have a wide open opportunity here to become the party of low tax rates spread more evenly if its thought through. Stop calling ourselves progressive when you want policies of the past. PLEASE. One example is tax all income the same as far as SS and Medicare and lower the rate for employees and employers. Another force lenders to drop interest rates by 40% and make interest no longer deductible. Most of that deduction goes to the wealthy. Wealth tax of 1% starting at median home price. Tax all transactions on the market at .1-.5 %. In exchange eliminate capital gains taxes on assets held for a certain time. Fed Sales tax on all purchases using a card with credit up to median income and credits to buy locally grown food products. Keep the highest rate the same for Fed income taxes and drop the others by 5. %. Cut corporate taxes for companies whose employees own enough stock to have money if form moves out of town. More fair. Low rates
2
How did Trump get so rich? He never worked for a living. He exploited people who worked for him, he stole and cheated. He does not show his tax returns for good reason. One does not get rich with an honest days work, one must take from others. Our plutocrats are the modern Nobility, see the Trump property in Florida, fit for the King of France before the revolution.
1
Yes, yes. Now explain to me what is wrong, exactly, with soaking the rich.
I agree entirely with this statement of facts, but I think it means we must go much further to tax not just high incomes but the accumulated wealth 40 years of distortion has built up.
"a much-needed debate about taxes. But the debate, so far, has been misplaced. . . . It is about regulating inequality and the market economy. It is also about safeguarding democracy against oligarchy. It has always been about that."
Leaving the many oligarchs in place, rich and now unchallenged by any newcomers, really does not fix the problem we've built up.
Higher tax on high marginal incomes only inhibits the rise of more new oligarchs. It does nothing about vast existing distortions that have already done a lot of damage to our economy and our politics.
We have gone backward on this. We've eliminated the wealth tax we had, in the form of the estate tax. What we need is a surcharge every year for a couple of decades on existing wealth, say 10% of everything over $100 million.
@Mark Thomason
You do realize that rich people don't get rich by letting people take their stuff, right? The instant a plan like this starts to gain the kind of traction to where it actually looks like a possibility, the problem with income inequality will go away without so much as a shot fired. The rich people (or at least the super rich) will by and large vacate the US in favor of a better tax environment, and the non-rich can then set their targets down a rung or two and start coveting the wealth and successes of their new neighbors who won't be quite as offensively well off as the old neighbors. Of course, given that the rich pay substantially all the taxes in this country, the federal government would go bankrupt quickly.
Taxing wealth? You mean after the government has already raided all earnings left right and center, they get to come back for an annual bite at everything the government failed to confiscate on the first go around? Great plan!
"Distortions" in the last 40 years. Ha! Government has not distorted anything other than by taking from the able to help the less able. Maybe that's a laudable goal, but if the government simply enforced basic laws and stopped stealing from Peter to pay Paul (in essence a true meritocracy) the rich would be even richer and the poor even poorer. Not saying I'd like to see things headed in this direction, but your views amount to legalized theft, and I doubt they would have any of the effects you think they would have.
Capitalism? We don't get the benefit of our Country's resources, like oil. We are the largest oil exporter, but so what? We get nothing to show for it.
Then there is the untaxed dollars of the church...any church...any synagogue...any mosque.
Tax the wealth at 1 % and spend it on their neighborhoods and charge them for the costs of prosecuting child molesters.
wealth is not finite, and taking it away from people who earn it, whether some socialist arbiter thinks they deserve it or not is wrong. If you constantly give money to people who show a continued inability to earn or manage it, it hurts the country.
2
The most basic premise of the American Dream is meritocracy of the individual not the family, heirs, dynasties, etc, ....
Progressive income taxation and inheritance allows each subsequent generation to demonstrate their merits all over again. Democratically, if you will. Otherwise we have the kleptocratic oligarchic kakistocracy the GOP has been leading the DNC towards.
3
@james
I have news for you:
The is no American Dream. It is like the Tooth Fairy or Santa Claus.
Convenient myths created to keep children happy in their innocence by bribing them minimally with little gifts and such. We became children for ever in this country that feeds us nonsense by the pound with something called the American Rhetoric. A false consciousness that was commented on by many great thinkers through the ages.
Meritocracy? What does it really mean? If you are disabled or not gifted can you really achieve everything by working extremely hard? No you cannot.
A brilliant and modest man named John Rawls wrote a book called A Theory of Justice in 1971. A just society is one where everyone goes to bed without knowing who he will wake up as and is indifferent to the fact. Beautiful as any Bach Partita, no?
That is my American Dream. May John Rawls Rest In Peace. He was my teacher and someone Americans should know more about.
1
This is self evidently true. The United States for its wealth is a pathological country which since Reagan loves to redistribute wealth and income upward. It also worships individuals becoming filthy rich also in many circles called the "American Dream". Its not the dream of curing cancer, or advancing knowledge or many other things, its the unbridled pursuit of money. Median income and wages are at 1970s levels while GDP per household has increased 150%+.
In short, tax all income, including deferred income and capital gains, as ordinary income, with a top marginal rate of at least 50%. To start correcting existing inequity add a tax on financial transactions, and a wealth tax (annually 1% of net worth greater than $5 million, excluding one's primary residence, would be good).
1
Be careful reading what some (presumably conservative) people are saying in the comments. They'll say things like "we will only get ~$30 billion per year in taxes if we apply a 70% top income bracket."
The unfortunate fact for pro-market liberals (ie: most of the non-socialist democrats in congress) is that it's TRUE that the problem of inequality cannot be solved only by changes in the tax code. We also need to make the workplace more Democratic. It simply makes no sense that there is no Democracy in the workplace--we work for at least 40 hours a week; why do my fellow workers get no say in what they produce, where the profits of their production go, how much they pay their CEO, what their own pay is, how much vacation they get, if they get maternity/paternity leave, paid sick days, or good healthcare?
While workplace Democracy would be great--and we should be fighting for it--the fact remains that, in the meantime, a more progressive tax rate would still help shift the burden to the hyper-rich. Is it the end-all, be-all solution? No... absolutely not. We have a lot to do. Don't kid yourself that if we implement a high top income bracket, then we will suddenly see all of our horrible inequality problems solved. We won't. Not even close. But... it's a start.
And the next Congress will reverse it.
Her ideas are oriented around fairness to all and she is trying her best to root out the greedy pigs that wrap themselves in the American flag ie: Republicans.
It somehow just seems wrong that government has the power to take 70% of a person's income - irrespective of how much they make.
9
@joinparis You need to google "marginal tax rates". When you figure out what it means, revisit your comment.
No matter the top marginal rate (25% or 70%), U.S. income tax collections as a percentage of GDP always come in near 20%. This tells you that people always have had, and always will have, ways of avoiding taxes. In the 1950s and 1960s, they had more deductions, and, more importantly, legislators had more ways of sucking campaign money out of (highly taxed) donors. Bottom line: higher tax rates don't work. They just mean more lobbyists.
6
Obscene levels of income inequality, vast concentrations of wealth in the coffers of the ultra-rich 1%, and burgeoning oligarchy American style — the certain death knoll of our democracy in the most fundamental and pernicious way.
Effectively the arguments for meaningful reforms go no where.
No surprise given that the political process that might enact seminal change is beholden to the interests and individuals that control the huge sums of money now necessary to acquire and hold political office at virtually every level of our political structure — but most glaringly at the national level.
The status quo vis a vis actions like the SCOTUS decision in Citizens United bodes for more of the same.
The problem isn't that the very wealthy aren't paying 60-80% marginal tax rate but rather that they pay less than those in the upper middle class, often to a considerable degree. Capital gains taxes should be higher. Tax avoidance through tax havens, for both individuals and corporations, whether legally or illegally undertaken should be curtailed. Trump lowered the corporate tax rate but did nothing to eliminate the many loopholes that corporations enjoy and exploit.
3
We rose to be the greatest country in the world through competition and market driven values. Whenever the government has imposed their will artificially on either supply or demand they have failed.
We do currently have a progressive tax system. The more well-off you are the more you pay in taxes. To increase the top rate to 50% or higher is nothing more than envy and jealousy run amok.
If you want to be highly compensated or be extremely wealthy in this country, all the opportunities exist - for everyone. You just have to be willing to work harder than the person next to you. The rich didn't get rich by someone handing them a big bag of money. They earned it. And by taking it away from them and giving it to someone else is simply not fair or right. Want to be rich? Get after it!
5
Do some homework. The vast majority of wealth in our country is unearned and inherited.
@Tom Baroli Correction: The majority of wealthy people in the world get their wealth through inheritance. However, the wealth grows because of the stock market. The reason for such large gains in unearned income is due to the tax code which gives a preferential rate to unearned income (capital gains). If the US gets rid of the capital gains tax & carried interest loopholes, inequality would be cut by at least 25%.
How about want to eat and stay warm to start for many. Right about high tax rates because they benefit the rich.
I would like to hear the article authors opinion if it would not be wiser and more effective to push the 1% wealth tax proposal instead of going above 50% income tax for the highest bracket.
3
If high income tax rates were the key to nirvana, Britain should have been on Cloud 9 back in 1969, when I learned in an International Economics class, that it had a maximum marginal income tax rate of 78%, plus an additional investment income tax rate of 20%, for a total marginal tax rate of 98%. Instead, it was known as the Sick man of Europe, and young people with any ambition, moved abroad. Small banks based in the Channel Islands encouraged Brits to open up tax-free accounts that would not be reported to the British tax collectors.
When I left upstate NY over 40 years ago, the maximum state income tax rate on regular income was 14% and as I recall, it kicked in at levels above the princely sum of $23,000 per year. Even in 1977, it was not a lot of money.
Tax programs designed to soak the rich have a have a habit of entrapping taxpayers much farther down the food chain within a few years.
4
This is not your mother and father's America. We are, as they say in Star Trek, in the undiscovered country. We are in the third epic change: hunter-gatherer to agriculture; agriculture to industrial; industrial to technology. Comparisons to prior tax history are spurious. The lower and middle classes are being devastated by technology: computers, communications, automation, and artificial intelligence not income inequality. Screwing with marginal taxes rates is as useful as arranging deck chairs on the Titanic. Let's start talking about the real problem: low and medium skill jobs are going away forever. Increasing taxation on the very rich produces almost no money, significantly reduces economic growth, and does nothing to solve the root cause problem: the reduction of economic value of low skilled labor. Unless the problem one is trying to solve is how to get re-elected.
So let's do a little math. I'm Joe Big Bucks. I make $30,000,000.00 a year, love doing all the zeros, millions and billions just never make the point. OK so on the first $10,000,000.00 I pay 50% leaving a net of $5,000,000.00. On the remaining $20,000,000.00 I pay lets say 80% leaving me $4,000,000.00, a net of $9,000,000.00. For a tax rate of around 60%. By the way the money left over on $1,000,000.00 after 80% is $200,000.00, most people would be quite satisfied with that.
Exactly what can't I buy with that much money? An ever larger environmental catastrophe known as a super yacht? An ever larger environmental catastrophe known as a private jet? After the first few years of this I can probably invest 80% of my money and make even more.
Let's not forget the perks of being really rich either. I grew up dirt poor, we never got nothing for free. As an adult I own a small business, my earnings put me in the top 10 - 15% category. But I still have perks. I spend $1,000 at Uline and I get free steak knives, flashlights, a barbeque grill. At Christmas vendors send me gifts like chocolate, not to mention all the things like pens and organizers and such all year long. I can also buy equipment and things and write it off on my business such as a laptop that I answer emails for business on but I mostly use to write crap to the NY Times. The list goes on and on. I can't imagine what it is like for the .1%. I really, really want a Hollywood gift basket.
1
@Norman it's great you have what you have and you are happy with what you earn and what you buy with your money. But what gives you the right to make those decisions for others? If I want to work hard and make $1 billion dollars and keep it all to myself, that's my right.
As an aside, the vast majority of non-profit organizations that feed the hungry, shelter the poor, clothe the unfortunate, are funded by people who have made a lot of money. Start taking away their money and giving it to the government and you will also be taking it away from the hungry, poor and less fortunate (indirectly).
3
@Scott because you live in a society and benefit from that society. How about we do away with all the police, courts and military, how long do you think you will have your billion dollars, or your life for that matter. The wealthy are able to be that way because of society.
Had emergency surgery recently, great experience here Upstate. Emergency room to myself, ambulance to bigger hospital. I didn't do anything to create that, the larger society did. As Obama said you didn't build that, neither did I or you. Maybe some wealthy person donated a nice chunk, probably to get a wright off on their taxes but it's not Bob Rich Person Medical Center it's Sullivan County Medical Center. May you live in poverty for the duration.
A question: while a progressive income tax looks good in theory, does anyone really think that the ultra-rich (those who would actually be impacted by such a system) will really pay taxes at these progressive rates? Isn't it more likely that these same ultra-rich will pay tax advisors to structure their income so as to maximize tax avoidance? If so, this structure will score political points but won't result in any real results. Ultimately, when the scheme fails to achieve its stated goal, the limits will be lowered until people who can't afford to pay for tax avoidance will get screwed. Again. Isn't the problem still loop holes legislated into existence with the help of special interest lobbying?
3
We have had a regressive tax code (meaning the poorer you are the less shields you have from direct and indirect tax burdens and less access to all the many upsides--for example, carried interest) and wind back of unions for many decades such that real WORK cannot promise a family a basic secure lifestyle. The last decade of neo-liberal leaders have ushered in a system that protects at all costs the privileged class of asset holders and family dynasties at the cost of health and dignity for a growing underclass of hardworking ordinary people who simply chose the wrong parents. The 1% hold sway over everything it seems now. AOC asks for a step in the right direction. It's just the beginning of what we need to correct our completely lopsided economic system which derides labor in favor of inherited wealth. This is hardly a revolution but a nudge back towards the tax brackets seen in most civilized first world european countries and once seen in this country too.
" From the 1930s to the 1980s, the United States came as close as any democratic country ever did to imposing a legal maximum income. "
Sorry, but Great Britain did a much better job of that from the 1940s through the 1970s. Theirs peaked at 99.25% in the 40s, and gradually came down to around 90% in the late 60s on earned income. Even as late as 1974, investment income was being taxed at 98% with the combined tax rate and investment surcharge.
This was not a time of great growth in the British economy; many feel that the high tax rates was one of the causes of the slow growth. If this is what we are aiming for in the US, then go eight ahead.
5
@mikecody, Many British moved to places like Monaco, tax havens.
3
@Ryan Precisely. On would think that Economics professors would be aware of this fact, but either they are ignorant of history or are willfully suppressing data that does not go along with what they want.
At what income level would these higher rates kick in?
From 1946 through 1986, many deductions were available to reduce the tax bite on the super-rich. If we are raising rates to 1950s levels, would we also restore tax deductions to 1950s levels?
4
@Tony, my boss a retired colonel actually paid less tax by investing in a plane that could fly over the poles and then deducting the amount directly from the tax he owed.
One idea that no one talks about. How about ending most taxes at the federal level. Since we are a Monetary Sovereign nation we can print our own money to fund the federal government. Taxes should only be local and state.
1
When I think of the 1950's and 1960's in America, it feels as though we had a financially more equitable society. The kids I played with in my Brooklyn neighborhood did not seem to have any more or less than I did. I don't remember knowing anyone who lived their lives in a way that was tremendously different than
the way my lower middle income family did. Things seemed, for a lack of a better word, fair.
It makes sense to discourage the collection of wealth beyond a certain point to avoid gross inequality. However, I am not certain that will solve the larger problem.
We would do well to consider that, thanks to the internet and the ubiquity of smartphones, the gilded lifestyle is known and marketed to everyone nowadays. Being secure in your own little neighborhood doesn't cut it anymore.
At this point in my life, I know plenty of people of means who live quite modestly. Unfortunately, I also know many people of modest means who are living according to the unsustainable (except for the very few) model great wealth is supposed to promote.
'Champagne wishes and caviar dreams' are not for everyone..but they sure make for good marketing.
3
AOC is the future of American Democracy! She must be the next President of the United States. Bernie on steroids, and 50 years younger, what a winning combo. Bravo AOC!
@Robert M. Koretsky
Wait until next time. This election needs a sure win, which excludes identity politics.
I am showing my ignorance but I do recall that in the Eisenhower years I believe that the "rich" payed a high rate of taxes, something like 60 or 70%. Having not paid enough attention, I wonder what caused these rates to be lowered to such an extent.
Reagan administration partly because of bracket creep due to huge inflation. Tax rates increased on people making the same in real dollars
"Mr. Saez and Mr. Zucman are economics professors at the University of California, Berkeley"
Of course they are...
6
@SteveRR
You are so clever Sir!
Thomas Piketty is a Professor at the Paris School of Economics (preciously at MIT), Branko Milanovic at NYU, Joseph Stiglitz at Columbia, Angus Deaton at Princeton and Walter Scheidel at Stanford. You know what they have in common between being brilliant? They care about where humanity is going and don’t like the status quo that is creating a more and more unequal society. Before the sans culottes wake up and level the field like they did many times before, let’s change things peacefully.
I yet have to see any one with half a brain emerge from a conservative university these days. Hayek and Friedman’s time have passed.
1
Raising taxes seems a bridge to far for our current leaders, they can't even keep the government running. The key to solving inequality is not redistribution but distribution. Capitalism has taken over a position of dominance in our government but it does not belong there. Economics is a tool for society, society should not be the result of economics. A just and equitable society should be our national cornerstone not capitalism. We must redefine capitalism to our needs. We have let capitalism become a process that rewards only the investors and we must redefine it as a system that rewards all stake holders equitably. Organized labor should be standard not marginalized, an hour of work should be rewarded fairly for all people no matter the color of their collar.
1
One saves democracy by stealing money from people who earned it? Stick to economics professors
8
Rep. Ocasio-Cortez is absolutely correct saying cutting taxes on the ultra-rich and wealthy corporations slowly creates an oligarchy and causes the fall of a democracy. This creates less income from taxes for the government thereby starving the government and preventing it from using taxes to create meaningful programs for the public, such as infrastructure investment and education. Furthermore, the wealthy have found a way through Citizens United to allow large sums that were given in tax cuts to filter into the electoral system, by buying politicians who will carry out their policy of favoring the wealthy causing income inequality.
3
I think her idea is certainly worth considering. I would be even more impressed if she (and those like her) went after the past and present criminals in the financial "industry."
4
So glad that this conversation has finally started. US’s income tax for the very top is obscenely low. Go anywhere else in the world and you notice our lack of efficient and updated trains, roads, schools, healthcare, etc. Unless you’re in the top 0.1%, the US is a third world country. Every time I ride BART from SFO after flying back from Japan, I am reminded by how old, dirty, dingy, and smelly the trains are. The wealthy need to pay for their fair share. Taxing them at 70% or 80% wouldn’t hurt them. More money for infrastructure and social services would go far in helping the lower end.
4
The American people have lost their country by giving away the power of their money to private, corporate ownership.
5
But that’s not the fundamental reason higher top marginal income tax rates are desirable.”
Stop talking about “Marginal Tax Rates.” They are misleading and really don’t matter – other than a talking point to be abused and misused by Elected Politicians.
“Effective Tax Rates” which, for most corporations and the wealthy, are substantially lower and is what generates tax revenue is what counts!
We must find a way to hold self-interested and self-enriching Elected Politicians, government officials, their staffers and operatives from both parties personally and financially liable, responsible and accountable for the lies and half-truths they have told US, their gross mismanagement of our county, our $22 T and growing national debt (106% of GDP), and our $80 T in future, unfunded liabilities they forced on US jeopardizing our economic and national security, while benefiting themselves, their staffers, their party and special interest donors.
3
The new wealthy are hoarding money and it’s a sickness.
1
@Tom Baroli hoarding it? which is it, they waste it on yachts, or they are keeping it in vaults? money circulates in the economy even when it is in a bank. it is lent and invested. what should they do with it? give it away? they already do, where do you think the majority of charitable giving comes from. this concept that rich people are taking too much of a finite pie shows a childish level of economic understanding
3
Might be time to stop acting like AOC is some kind of the future of the Democratic Party. 12 years until the end of the world due to Global Warming and we're worried about how we are gonna pay for it? Really? That's the person you are touting as the New Democratic Party? She doesn't understand basic concepts and utters complete and total nonsense on a regular basis. Enough of pretending otherwise.
6
Thanks so very much NYT for allowing this opinion piece to be printed. I am so very grateful, I just can't believe it. First Krugman and now this. How wonderful it is to know you are standing up for regular people and for Democracy and what is fair and healthy for our country.
And thankyou to the authors for such a clear and concise and dare I say uplifting piece! I hope the corporate Democrats who serve the ultra wealthy and big corporations pay heed as well. Yes they will have to give up the bribe money, and actually serve the neglected masses but gee they can once again look themselves in the mirror and like what they see, rather than hem and ha and count their ill gotten millions.
And those uncorrupted Democrats, how wonderful to have more fellow workers to join you in your service to the people.
I wrote a play called the Prairie Girls, it was inspired by the Little House on the Prairie Book by Laura Ingalls Wilder. At the first Rehearsal I had us read aloud The Declaration of Independence. We all cried. I am just about crying now thinking of all the workers who have not been heard for so many years finally being heard. "All men and women are created equal"
2
The Democrats should run on MAGA, meaning back to the higher tax rate days when America prospered the most.
2
LOL.. The title sounds so profound yet so meaningless. Rich do get soaked, no matter what you say. So this is a prescription to save democracy? You got to be kidding. Nominate someone who could beat Trump and win the 2020 election, that's the way to save democracy. Put someone up from the far left, we have four more years of Trump and a lot more erosion of democracy.
6
And what is wrong with soaking the rich?
3
However well-reasoned, this is little more than a nice pipe dream, at least so long as lawmakers remain in the pocket of the Koch brothers and their ilk.
3
Ocasio-Cortez is a Marxist. She doesn't even understand that she is a Marxist. Which is funny, actually.
She plays word games, using oxymorons like democratic socialism, with absolutley no recognition whatsoever, that the two concepts are antithetic.
And that's the problem, with the Millenial bunch. They have no substance to back up their words. They skipped those ethics, economics, and philosophy classes. Instead they read Krugman and Clinton and Obama.
They failed to read opposing views such as The Road To Serfdom, which would challenge them to reason through their ideas before blurting them out.
She can't explain the economics behind her need to redistribute wealth. She just wants to do it. Because that will eliminate inequality. Because, it just, will.
She can't explain her antipathy towards people who have done well. She just has it. Because, well, they should not have a lot of mioney when other people don't.
Because it isn't fair.
So she will become the Fairness Police.
This person, is dangerous, but only because the media will coddle her instead of pick apart her myriad inconsistencies and fallacies.
If she were an old white man, she wouldl be sidelined just like Bernie Sanders.
Why everyone is cutting her slack is beyond me.
6
@Objectivist Was Eisenhower a Marxist? He had much higher marginal and effective tax rates than AOC has proposed...
3
@Mark P, But, he had more deductions.
Because people hate her for no reason. Hate is blinding. They attack her for dancing? You have some valid points but hate obscures them too often(not directed at you)
@TDi’d (who is not surprised that the authors are professors at UC Berkeley)
Maybe it is time to learn to go beyond cliches. Are you satisfied with the L shaped distribution of income and wealth? I have news for you then, unless you are a highly educated AI specialist or a wiz Wall Street arbitrage trader or cosmetic surgeon you are going to be cooked soon. Or your kids and grandkids will be.
Time for redistribution (Sanders) and of course predestribution (Warren). Otherwise read up on your 1789 or 1917 histories.
2
I know people in the top, top bracket; the REAL Donald Trumps. Most are not criminals and many are good people. They will, however, spend what they can spend, even though they also give huge amounts to charity through foundations and other philanthropies.
Seriously, these folks are not going to suffer a death blow if their taxes are raised. They will still travel on private planes, winter at a spa in the Caribbean or other warm, hip destination, summer in East Hampton or the Mediterranean, send their kids to the top independent schools in NYC and Ivy League universities, and so on. Some will continue to maintain homes on both the West and East coast, with maybe a condo or two elsewhere.
We are talking about big bucks (and low profiles; I know these people via mutual friends and business contacts). So is Ocasio-Cortez.
Yes, there may be panic attack among some of the very wealthy if tax rates are hiked. They will, however, adjust, and with very few, if any, changes to their lifestyles. No one is leaving the US. Their families are here, and they are sophisticated and well-traveled enough to know that the US is best
So let’s do it.
1
@RCT and look at states like NJ, if you hike my taxes, i am leaving not just NY but the US and you look for a place that values my work ethic, and does not take it and give to the poor to perpetuate a voting block. not much different than the Roman's bread and circuses.
2
The reason high incomes disappeared with a high tax rate is because good lawyers and accountants can plan for wealth to be accumulated other than as taxable income (I.e in stock, left within the company, etc). It does nothing to prevent people who generate value from accumulating and keeping most. We should and do tax high earners and have progressive tax rates. That’s fine as long as we don’t ask for free college and free health care and are not willing to chip in according to our means. Bill Gates and Mark Zuckerberg are rich only because people willingly give them money for what they get in return. Their wealth comes from what they have provided to others. We never want to break that.
2
Tax loopholes and shelters meant that not many people actually paid the 90% rate.
Yet despite government efforts, there is no silver bullet that can stop promoters from cooking up new shelters, says William C. Tyson, professor of legal studies and business ethics at Wharton. Whenever a new regulation is imposed, “people just start looking for new ways to get around the tax law. Before 1986, these shelters were rampant. There are not nearly as many of them now because the law has closed up so many of the loopholes. It’s just that there is still some room to squeak through…. People are really creative.”
If you consider corporate taxes, taxes on dividends , capital gains and personal income tax, the wealthy are probably paying close to 75% in taxes. No amount of tax planning, can reduce these taxes to below 60%.
To make a dent into the national debt, which is now at 80% of GDP, taxes have to be raised and benefits cut, by about 3,000 dollars.
Western European nations who offer universal low cost health coverage, have higher taxes at ALL levels.
While raising the rates on the wealthiest serves the purposes noted here, and is worthwhile, simply raising the rates isn't enough. What is also needed is to couple this rise with a lowering of rates on long term investment, and in things that promote the creation of good paying jobs for American workers.
We also need to raise the taxes on short term capital gains so that CEOs who now rake in most of their compensation by this aspect, and therefore are driven primarily to cut costs - meaning jobs, wages, benefits - will instead look to change their compensation to being based primarily on salary, not quarterly returns. This will incentivize them to grow their companies, not just their profits.
If all we do is call for raising taxes on the rich, it will be labeled as anti-capitalist, and anti-American, and while false, will gain traction with certain voters. Rather, we need to use capitalism, as it once was from FDR until Carter, as the vehicle to spread the wealth it generates to the widest number of people, according to their relative contribution. It's capitalism with a conscience.
I applaud AOC for driving this push back against the oligarchy, and urge others to take up the cause that underlies ALL forms of inequality.
2
Thanks for this article. I'm almost ashamed to say I have never quite seen this before and I think this insight should be more widely spread, in fact, very widely spread: The real trickle-down effect is that lowering taxes on the rich actually lowers incomes on the less affluent rather than raising them. Now the facts on the ground make much more sense. Lowering taxes on the rich actually increases poverty. We've been sold a bill of goods.
1
The bigger issue here is that even if you taxed all the billionaires 100%, you wouldn't have enough to fund the kind of programs she proposes. Her ideas are born of youth and idealism, not practical reality and maturity.
Liberals have to understand that to be truly successful, they have to be moderate in their changes and financially sound in their funding.
I still wait for the politician who will map out for me how we will pay down a $21T debt. My personal favorite is taking the government to zero based budgeting. this would make all departments justify their spending or not get it.
9
From my own experience I can draw the conclusion that decentralized education also generates inequality. Most countries around the world provide the same public education from kindergarten thru high school and have public colleges. Our decentralized educational system disfavors the average American and it is the starting pount of inequality.
The way I see it, either inequality is addressed or we will turn into a society similar to my native country in South America where a very small segment of the population owns most of the wealth and a very large segment of the population struggles to get by.
Lets party on!!!
2
I an an independent, leaning conservative, and agree that the tax code needs work. I would leave the income redistribution idea to the ashcan of history, and focus on revenue for investment (repair crumbling infrastructure, create opportunity zones - including for green tech, rebuild public education, etc). In that way, we raise all incomes, even if it requires higher marginal tax rates. We as a country become more competitive, creating a smart, tech savvy workforce and having infrastructure lubricate commerce rather than impede it.
1
It’s a simple piece of logic: if executives aren’t benefitting that much by paying themselves $25 million instead of $10 million (since so much would be taxed), they will instead reinvest those funds into their companies.
More money for capital investment and expansion, more money to compensate employees, more money to hire more employees. Companies unwittingly assist the government in reducing income inequality.
This is part of why the post-war boom, well, boomed.
3
By stopping illegal immigrants from coming into the USA we can also lower income inequality. Millions arriving penniless increase economic inequality on the low end.
7
Credit the oligarchs for honesty.
Since 1980 they promised the middle class a trickle down of their hoarded wealth and indeed a trickle is what they delivered.
And the workers drank the Kool Aid trickle and loved it if the elections of the past 40 years are any sign.
Saez has tried long and hard to educate the middle class but apparently red meat trumps a fair share of the pie.
3
"Not About Soaking the Rich", Oh, isn't it? The real complaint here doesn't seem to be about how poorly most people are doing--most people aren't doing badly, it's about how well a few people are doing. That's mainly continuing liberal-media-enabled envy fueled by leftist bitterness at losing the 2016 election, the flames stoked by self-serving Democrat rabble-rousing.
6
Standard issue, envy-besotted, socialist clap-trap.
“Democracy” simply means that the people get to vote. Your neighbor’s income has zip to do with your access to the ballot box.
Here’s the rub: “That few people faced the 90 percent top tax rates was not a bug; it was the feature that caused sky-high incomes to largely disappear.”
Proof positive that high taxes do not redistribute income or wealth, they destroy it.
But it is far better that wealth be “concentrated” than that it not exist at all. Better that ONE be rich rather than that ALL be poor.
And, WADR, who are YOU to say that wealth or income is “unmerited”? Who gets to decide how much inequality is “extreme”?
(Too, maybe, just perhaps, the post war growth was in spite of stupid tax policies, not a result thereof. When the rest of the world was in ashes or wearing rags, we could get away with stupid policy. Times have changed.)
If leftists were truly concerned about inequality, they’d do something about it: by sending illegals home and closing the border to unskilled legals. Voila! Instant labor shortage, with the resulting higher wages, and no more importing of huge numbers of poor people who skew statistics downward.
This represents nothing more than a primal scream against freedom, because freedom, which rewards talent and effort, produces results the authors dislike.
If history is a guide – and it is – it teaches that politics based on envy never ends well. What's the area code for Caracas?
5
The top 10% of earners already provide 80% of the federal and state income taxes collected in the United States. The authors and Ocasio-Cortez want to gouge them even more. This is not only anti-free enterprise, it is against everything America has stood for since our nation was founded. Work hard, make money, and enjoy the fruits of your own labors. Do not let these socialists steal what you have earned on your own.
7
Alexandria needs to stop talking and start listening. Reading up on economics and fiscal policy and seeking learned tutors in those subjects would help as well. Simply catering to her base is the flip side of Trump's catering to his. She should show herself better than that.
5
The policy desire to reduce the current level of economic inequality is sound, but a simplistic ratcheting of marginal tax rates is more a political selling point than effective tool. There is evidence that we have reached a harmful level inequality in the U.S. But first question is which form of economic inequality should be addressed: wealth or income. I would argue wealth as a target first largely because it's much more inequitably distributed but also because it's less disruptive if done at point of wealth transfer i.e. gifts or death. More importantly, as authors admit, very high marginal rates probably won't increase tax revenues. They conveniently omit the well documented fact that very little income was ever exposed to top rates of the past as ordinary income was converted in capital gains. While the marginal rate makes for great political fodder, its the average rate which would need to be addressed. The top 5% of earners pay an average rate of 25% even though the marginal rates for most of their income is much higher. Again, the focus is always on a high income rate when its the low capital gain earnings through which most of the economic inequality is realized. Lastly, while top earners seem like a free tax resource we need to remember that the top 5% already pay 60% of all taxes and an income of well below $200k would land a working family in that category.
I don't have a answer to the inequality problem, but sky high marginal rates is not it.
For all the respondents who worry about reduced incentives to innovate or the inherent unfairness of redistribution, why have none of them addressed what it means to keep half of our citizens without improved lives for 40 years. A democracy which ignores half its population and can’t promise that the next generation will have it better than the last one, can’t endure. Ignoring this doesn’t make it go away.
5
We're already are an oligopoly. Obama and the Holder Justice Department didn't go after the people who caused the financial crisis. That proved that both party establishments are beholden to money.
There's no hope on the Republican side. I hope the progressives can get some traction.
4
Look at it this way: the top 20% of earners in the United States pay 87% of all income taxes. 45% of Americans pay no income taxes at all. That leaves 35% of Americans paying the remaining 13% of all income taxes.
The socialists claim that concentrated wealth is harming America when it's actually that concentrated wealth that makes up the vast majority of this country's tax base. The challenge is to get those 45% who pay no taxes at all included in the tax rolls and out of government entitlement programs. Once that is achieved and all are contributing, then the discussion can begin about adjusting the tax rates on the high earners.
9
Fact is: The effective tax rate on high incomes is far lower than the rate the middle class pays. Pass through constructions, classification as capital gains, and other loopholes have made the current system unjust. If the rich paid their 40 to 50% (incl. state and city taxes) as the upper middle class employees do, we would not have this discussion.
2
@Kurt Pickard
When you still have Republican controlled states paying a minimum wage of $7.25 per hour, please tell me how these workers would pay taxes after rent and groceries?
Would you advocate the poor do what those of us in the military did in the 60s, sell our blood which we called "vampire liberty".
I find it hard to have any sympathy for those who make ten million dollars or more per year. I am more inclined to support those who live on the streets, many of whom are veterans who have served our country.
Are you a veteran?
2
@Beyond Repair
The fact remains: 20% of taxpayers make up 87% of the federal tax base. You can't deny or deflect that. Realize this is so and accept it.
1
There should be a 99% tax on political contributions over $250 more or less per year.
"elevated top marginal income tax rates...hurt economic growth" Lowering top marginal tax rates has done nothing to improve the economic growth of the rest of us for decades. Indeed, it has hurt society as a whole. Economic growth for a few people at the top is meaningless if there is increasing economic contraction as you go down the economic ladder into the desperate class.
Authoritarianism's reason for being is supported by the oligarchs to conserve their ill got gains.
3
Higher tax on the ultra-rich would only add rouyghly 30 billion to governmen tax revenue. That number would have little impact on a macro scale.
The higher tax would have greater influence on their behavior (charitable contributions, starting new business, etc.), and could very well lead to an exodus of the ultra-rich making the U.S. less innovative and competitive on a global scale.
4
Progressive taxation as proposed by AOC and FDR in the 1930s is the right way to go for now to reduce inequality and increase democracy.
However, we should have a national debate about money creation and the reemergence of public banking rather than staying with a debt-based privately owned banking system.
In Verhagen 2012 "The Tierra Solution: Resolving the climate crisis through monetary transformation" (www.timun.net) it is suggested that a public banking system could be a way to deal not only with inequality and oligarchy but with the looming climate catastrophe. With such monetary/financial system as a basis a global governance system can be built up with a federal global bank and a balance of payments system that accounts for both financial and ecological (climate) credits and debits.
Declared an outstanding economist and climate specialist about this carbon-based international monetary system with its monetary standard of a specific tonnage of CO2e per person: “The further into the global warming area we go, the more physics and politics narrows our possible paths of action. Here’s a very cogent and well-argued account of one of the remaining possibilities.” Bill McKibben, May 17, 2011
@Frans Verhagen: The FDR coalition was destroyed by the Democratic Party's leadership.
The details behind my statement might not be so pleasant or acceptable to liberals and progressives.
1
The United States reached the height of its power during the late 1940s though the early 1970s, when marginal income tax rates were between 50% and 90%. The grown-ups of that time knew some things that today's plutocrats and their pseudo-populist Republican tools have forgotten: a successful nation must tax itself to pay for the things it needs and wants, and it must encourage economic justice for all. Without those things we will slide into feudalism and eventual collapse.
2
A recent article at reason.com includes the following:
"A 73 percent rate, the optimal rate calculated by Diamond and Saez in 2011, is a combined rate (not just a marginal federal income tax rate, as Ocasio-Cortez seems to be proposing) that assumes we eliminate all deductions and exemptions. If we presume instead that the current deductions and exemptions continue, and high earners were as responsive to tax rates today as they were in the '80s, then the supposed optimal combined tax rate falls to 54 percent. After state, local, sales, and other taxes are taken into account, this translates to a top federal income tax rate of 48 percent—much higher than today's rate of 37 percent, but nowhere near the 60 to 70 percent rate advocated by Ocasio-Cortez."
https://reason.com/archives/2019/01/09/do-economists-agree-a-70-percent-top-mar
This is quite a bit different from Saez's piece today, or perhaps he's oversimplifying things.
1
How much of the ultra-rich's value derived from income? If it's from stocks, it's not income until it's sold, so how do you tax away the inequality? AOC's plan is to tax income over $10 million at 70%. There are probably about 2,000 people in the country that earn that much per year and the high rate only kicks in after the $10M mark is reached. Plus the tax won't touch their net worth, so they'll continue to have the outsized influence they already have.
Since the new income inequality is derived from stock ownership rather than income, as it was in the 30s-80s period, shouldn't we be focussed on how to address that?
1
You’ve failed to mention the impact of the estate tax as a limiter on wealth accumulation
3
Anyone who looks at the curves of income and wealth distribution today compared with say 1960 must conclude that the trend cannot possibly persist. It must and will change. Hopefully that change will come about through measures such as Ms. Ocasio-Cortez suggests. The alternative I fear is the progressive deterioration and likely eventual destabilization of our society. Those at the top should consider whether they will benefit in that scenario.
1
I completely agree progressive tax policy is the not-so-subtle secret to a vibrant economy and a successful democracy.
Of course, Republicans don't advocate democracy. Neither have Democrats in the past 30 years or so really. Small-d democracy more or less died when George H.W. Bush was voted out of office for balancing the budget. That was the moment when all of Reagan's bad ideas calcified across the entire political spectrum. Democrats became moderate conservatives and Republicans became completely detached from reality. I need only mention Bush 43.
Remember, Clinton would not have been elected president if not for the third-party campaign of a wealthy business magnate, Ross Perot. A point Democrats tend to cast aside when shunning independent voters for their future electoral defeats. If you think about it, Democrats haven't fairly won an election with a traditional establishment candidate since FDR. Even FDR wasn't exactly traditional either. Bobbie Kennedy might have been the exception but someone shot him.
When evaluating seemingly outrageous tax policy, the reader is wise to remember both sides are on the wrong side of history right now. AOC is not only right but she's also fighting against a bipartisan compact 50 years in the making. You should consider her detractors extremely prejudiced regardless of party.
By the way, I agree with a higher top marginal tax rate but soaking the rich feels good too.
1
In a world of limited resources - why is a maximum income unreasonable in a time when truly astronomical levels of wealth are unsustainable and quite obscene while other's go without the basics of survival to labor to increase the wealth of those at the top.
The wealthy exploit society by redistributing society's wealth to themselves, the society they have benefited from astronomically while not paying back into the system they benefit from so much. Besides, how much exorbitant wealth is actually earned, legitimate or legally made?
Redistribution is gushing up (not trickling up) to the wealthy.
Education is supposed to be such a positive for society yet leaves graduates in lifelong debt to those at the top who benefit from a highly educated poorly paid employee in debt for life and little choice.
What's wrong with redistributing healthcare for all from those who have more healthcare than they could use in a million years? "Redistribution" is really clawing back what has been taken from society's wealth - like cancelling the recent $1.5 trillion tax cut giveaway for nothing. Don't the wealthy realize they depend on society for their wealth?
Free market capitalism can break, just as socialism can break (Venezuela). But socialism works a bit better elsewhere and excellently in Scandinavian countries where happiness is the highest in the world - why is that? America's free for all market controlled by the oligarch-state who control our government and democracy is broken.
Many commenters are grousing about "unfair" taxation of the rich. As a (now retired) teacher, my salary was fully exposed to federal and state taxes. This is true of all salaried employees. The very wealthy enjoy substantial tax relief on capital gains. 69% of all capital gains go to the wealthiest 1%. How is it that the sweat of working people is worth much less, dollar for dollar, than an inheritance check?
1
Why didn't you buy stock and get the same benefit?@Jeff
2
@Jeff and you have a pension that is state tax free, lifetime health insurance and could never be fired. i work in the private sector with none of the above. higher risk higher reward (or loss)
1
Economies are based on the flow of money and billionaires are bottlenecks. Give them another million and it will sit there, awaiting some determination of what to invest it in. Or more likely who, since at that point the only things left to buy are people. Give a dollar to a million people at the other end and they will immediately put that money back into the economy, and the local one around them.
I say "give" because it is a form of giving. Why did all that money come to them? Because of government: paving their roads and keeping their planes safe to distribute their goods; making the numbers they report trustworthy; educating the people that work at their companies; etc. The more you make, especially at these top rates, the more you've relied on the government (meaning all of us) to make it possible.
Finally, by having these high top rates, you completely change the incentive structure. It's better to build a good company that makes you a million dollars every year for 10 years, than one that you can manage/fool enough people to get you 10 million dollars one year and then crash and burn leaving investors holding the bag. And there's no point giving outrageous salaries to executives if the board knows it will just go straight to the government, so maybe the rest of the workers can get their fair share.
2
This argument is so full of holes. The authors acknowledge that US growth from 1946 to 1980 was a period of US economic dominance. But their comparison with Japan for roughly the same period is bogus. Of course Japan would show rapid growth following a war devastated economy.
In addition they fail to point out that few if anyone paid the high rates in place in the US in the postwar period. In fact studies have shown that when the nominal rate was 91% the effective rate paid by the top 1% was only in the 35% range.
And finally, the authors don't address what would happen to innovation if the government claimed 70-90% of, say, Jeff Bezos' wealth.
4
If you think people like Jeff Bezos are driven by making $100 billion as opposed to merely being rich and successful you’re living in a dreamworld. People set out to be successful. Success is what society determines it to be. Innovation will not come to a grinding halt If we vote in democratically Alexandria Cortez Ocasio’s tax rate.
Are there no Swedish or Danish Innovators? Did you think Richard Branson got depressed and stopped innovating because the tax rates in England were so high?
2
@John C not sure about the danes or swedes but if you did a little research, you would know that Branson was convicted and jailed for tax evasion. additionally, he surrendered his british citizenship to avoid these taxes, so your argument is terrible.
https://en.wikipedia.org/wiki/Richard_Branson
1
As long as we have a budget deficit we should increase marginal income tax rates on high incomes. We should also reinstate the Estate Tax to its original form and use it to help pay for the revenue gap needed to cover social security.
2
Let us also remember that when tax rates were so high, there were loopholes and deductions galore. The rate people actually paid was far, far lower - to say nothing of rampant tax avoidance schemes. And, as the Brits learned, there is a point at which high rates affect productivity and innovation.
Is the argument that we should redistribute wealth or level the playing field to allow people the ability to compete fairly? We know that the wealthy and their offspring have untold advantages in this country, ranging from the ability to buy influence to help with writing college essays (to say nothing of the lure that parental money has to college admissions officers). The problem with increasing income inequality is only part of the issue. Fairness in everything from education, to health care, to political representation is equally important.
1
Also: A sovereign (Treasury combined with the Federal Reserve Bank), like the US, that:
a. issues,
b. borrows in, and
c. floats
its own currency, can NEVER run out of cash.
3) The sovereign, like the US, can:
a. issue currency to spend and buy anything the economy produces,
b. up to the productive capacity of the economy (adjusted for turnover/velocity),
c. without creating inflation.
@Francisco Flores: " c. without creating inflation"
Sorry but there will be some inflation somewhere in the food chain. It's just a matter of who is impacted and what sort of political voice they have.
During the marvelous post-war years there were those who were hurt by the economic growth as their wages did not keep pace with inflation.
Like I said, someone will get hurt.
Higher marginal tax rates are meaningless if they are applied on a Swiss cheese tax base. For exemple capital gains were once tax exempt from income or were only partially included. It was easy to convert dividend income into capital gains, thus avoiding the effect of high marginal rates. Only simultaneous tackling these issues will work.
2
Why don't you make it clear exactly what marginal tax rates mean? I suspect many people don't understand that if I make a million dollars plus one dollar and the marginal tax rate is 70%, I am not paying $700,000 in taxes at that rate, but only 70 cents on the $1 earned over a million dollars. For the average Joe this is a big difference in understanding that the rich are not being soaked by the big mean government.
4
I agree that this is never explained. It’s just that unfortunately when people hear the words higher taxes they both like a herd of freighted sheep. Thank you GOP for creating such hysteria.
1
@John C Well of course the idea behind higher taxes fro the rich is that the middle class and below would pay lower taxes . That i believe can be sold.
I don’t think it’s high incomes that are eroding the social compact. It’s divorce rates, drug addictions, and an evolving economy in which the lack of a college degree essentially traps you in a job that does not support you or your family. The top of the top earners have largely built companies which are revolutionizing the way the world does business and lives. Would you support everyone having an iPhone but not allow the free market to set compensation for the man who invented it? Would you use Instagram but not let the market reward those who invented it? The high salary of any individuals is really irrelevant - it matters much more what bottom earners are making and how we can boost their income (and the skills needed to earn that income).
7
People are not equal; they differ in their talents, skill sets , intelligence, opinions , and all other aspects that make them individuals.
The only form of equality that should apply is the application of equal civil liberties afforded to law abiding citizens. It is up to the individual to build his life, for better or worse, through free choices made; It is not up to the government .
10
This is the most thoughtful and well written opinion on tax policy that I have heard in a long time. The problem today, I think, is that both sides of the aisle in our political structure have gotten on board with Reagan's policy. The Republicans outwardly (one has to give them credit for being unashamed and in the open) and the Democrats, agreeing so behind the curtain, and pretending to be "for the people" (think Clinton repealing the Glass-Steagall Act). Perhaps FDR was the last President who truly wanted to see everyone lifted up economically and democratically. The sad part of this is that the oligarchy has infiltrated our political system and the public has lost confidence in our government. Without a fundamental change in our government (the first and foremost being term limits and the eradication of Citizen's United) I'm not sure how even changing the tax structure could begin to address the real problem. I don't know if AOC is the answer, but I'm ready to believe in someone who can save this beautiful idea of a country.
2
It is past time for this important conversation. Wealth, or “property”...doesn’t it exist because of the conscious or unconscious decision of all uf us,—the tribe, to allow it? We collectively agree that I can call something “mine” and deny you and everybody it’s use. My claim is protected, thank you.
Just as there has been a compact over the existence of property, hasn’t there always some kind of agreement over the size of any individual's claim? Flawed agreements have sometimes given way only after violence, witness the Civil War and the French Revolution. The danger of this resolution is what the authors are warning is possible, blood in the streets. In the interest of furthering this conversation I propose that a billion dollars be the upper limit of a property claim that we protect, i.e. tax wealth and income in a way that makes it increasingly difficult for extreme accumulations.
Whether it’s the AOC 70% marginal rate or other mechanisms, we have to make changes. Yes, the very rich will have to give some of it back. But let them keep a billion. No need to shed tears.
And if these oligarchs don’t become realists soon, the base of their grand empires will crumble. It is crumbling in the inflation of housing and displacement of people in Seattle, San Francisco and Portland leading to city wide homeless and other problems.
As for the argument that higher tax rates are “punishing” enterprsing capitolists, saving their bacon is more like it.
Using one specific example illustrates the situation.
I cannot believe that the founder of Oracle, Larry Ellison, would suffer by any measure on earth or be punished in any meaningful way by paying more to keep the infrastructure ( human workforce, transportation and city environments) that make it possible to build and run his company, healthy and vital.
Larry owns an entire Hawiian Island, Lanai. He, individually, owns a racing America Cup sailboat team that is one of the most expensive sports in the world. Higher taxes would not even touch the edges of his ability to fund these.
As reported in the biography of that zealously keen capitolist, Steve Jobs,in conversation with Ellison:
“Larry, you do not need any more money.”
4
Many thanks for the article. Today's tax policies create a class of wealth that is not competitive. It undermines incentives of competition and problem solving ("pie in the sky green projects"). I believe Saez was also one of the authors of the article that caused Buffet to ask his Office Administator how much she paid in taxes. Thanks for clarity, accuracy, and information we need to make decisions.
2
Finally some honesty from the left. Our country, initially founded upon ideals of individual liberty and personal accountability, has been easing into a state of fearful collectivism for decades. Now, with the generation raised by helicopter mommies and participation trophies gaining power, an increasing number of Americans want the government to step in to shield them from competition and market forces. Seizing upon that growing weak-mindedness, know-it-all progressives want the power to dictate who gets what, what's fair, and who has too much.
This may be the closest you will ever come to having progressives freely admit that they want to confiscate your money through taxes simply because they don't believe it's fair that you should have it. They know best about how the world should work and demand the power to assign their preferred values to what others have earned and achieved. As one who grew up upon the belief that free market capitalism and economic liberty were the source of our prosperity and among the best features of American life, I am saddened that we have fallen to this point. At a time in history where the rest of the world is aggressively competing for prosperity and capturing much of the wealth that once existed here, we are turning toward leaders who promise trophies just for just for existing.
We were once the envy of the world, but we no longer have the societal strength and competitive fortitude to lead. Imagine America as a LDC.
7
Nonsense, there is no competition, this is cronyism, and income tax, once considered a patriotic duty to be boasted about, is a dirty word.
1
The only person who has benefited more than the American oligarchs from the recent tax cuts for the uber wealthy is the russian oligarchs.
If the republicans could have found a way to only give tax cuts to their wealthy supporters and the russians they would have done that
A bit of review of the past shows that under Eisenhower's 91% top marginal tax rate, we had enough money to build fine colleges and universities, a national interstate highway system, good public schools and airports, an improved power grid and strong military, intel and space programs.
Since Reagan cut the top marginal rate in half, we have gross income inequality, huge deficits, ailing entitlement systems, old public transit, bad schools and crumbling roads.
Which formula worked better?
3
@Occupy Government and how much was spent then on public pensions. bloated bureaucracy and ever increasing government agencies, combined with a lack of economic competition in the world since the rest of the world was essentially in ruins still from WW2 and china didn't exist as an economy. You need to look at the complete picture.
1
When people talk about the 'American Dream', I think they are mostly referring to the opportunities of the postwar period. Why was it so good?
In the 1950s, a typical CEO made 20 times the salary of his or her average worker. Last year, CEO pay soared to an average of 361 times more than the average worker (source AFL-CIO’s Executive Paywatch)
In 1954, the lowest rated of tax was 0% and the highest, 90%. Back then, paying taxes was considered patriotic.
Moreover, capitalism was working as it should, which basically means that no one company dominated an industry. To look at the S&P 500 today, only 50 or so of the original firms exist, some have gone bust, but most have been bought out.
Of course, we should raise taxes on the rich! And they should be happy to pay, not only is it for the good of America, it is America, that gave them this opportunity.
But we must also end the Oligarchy / Cronyism which has invaded our Free Market Economy like a cancer.
4
If we decide to trim the boundaries f American incomes, the resulting reorganization of almost everything might prove to be so messy and hard to keep track of. That gives opponents to this brilliant plan plenty of room to fire back and say that this plan is a disaster.
Wouldn't it therefore be better to do a more gradual snip here and there, to raise taxes over perhaps five years?
Money is power, and so much money is power to control everything, state, local, federal--then judicial. So far, the 2nd Amendment does not allow an individual to keep a military arsenal or fifty million rifles because of the threat to public safety and to the government, nor should an individual be allowed to keep fifty billion dollars because of the threat to buy our politicians and government officials and interfere with our lives, liberty, pursuit of happiness and domestic tranquility. I'm all for a 90% tax on the super rich and a maximum wage on Americans because right now the mega rich have too much control on US.
3
It's an important point that's being made - that income inequality may violate some kind of social contract. Still, as economists, the authors don't seem worried about assigning causation of growth patterns to tax policy without considering other factors that might be as or more important. For example, it's not a stretch to think Japan's economy would grow quickly again, building from scratch.
The same with inheritance taxes. Passing vast untaxed wealth from one generation to the next encourages economic royalty. First though the IRS has to be repowered to go after rich tax scofflaws which now plaques the system. That alone would raise billions of dollars. Now the IRSs job seems to be to go after people who claim relief because they don't make enough money to pay for their taxes and to support their families. Redistribution of wealth is seen as class warfare by the Citizens United crowd who use their money to control the political system. The unfettered uses of money by the rich was a controversy when JFK won the presidency with J K Galbraith arguing the concentration private wealth was seriously effecting the public good.
2
I would love to see a good synopsis of this piece take root in the coming campaign. All too often what comes of the millions of spent dollars during a campaign are one-liners, 30 second spots, shallow assertions and debates with precious little significant content.
2
With any luck, every candidate considering a run will read this excellent column and take heed of it. It would also help if he/she read with care the words of Martin Luther King.
People do vote their pocketbooks, but also - in these fraught times - many voters will be looking for fairness and a sense that we can be more than an oligarchy.
3
It's extremely important for people to understand what's meant by "marginal rates". If, for example, the highest marginal rate is 70%, it applies only to the part of someone's income that's in the highest bracket; let's say for example $500,000 or more. So in that case, the first $500,000 of their income after deductions and credits would be taxed at lower rates, and only whatever additional income they had after deductions and credits would be taxed at 70%. If you made $1 million, you wouldn't pay $700,000 in federal taxes, which is what a lot of people probably think. Given how many ways there are to reduce taxable income, someone has to be quite rich to have a taxable income large enough to pay the highest marginal rate on a portion of their taxable income. People who are that rich aren't going to be put on the street by paying the higher marginal rate, again, on only a part of their taxable income.
3
America is currently composed of oligarchs, vying for power over policy. They influence everything in ways you would be surprised, including “independent” articles about political rivals, think also of the use of a broad American definition of “privilege” in lawsuits in order to protect dubious business practices (Australia and the UK have narrower definitions in order to curtail attorneys working for banks just rubber stamping everything as privileged). Monopoly powers have led to the average American paying twelve times the price for utilities, car insurance and cable TV, when compared with the average European. The banks have swooped in to fill the gap between stagnant wages and ever increasing household bills, using credit cards with horrific interest rates (soon to be even more
Horrific when the Fed raises interest rates). Honestly you would be amazed at just how enslaved people here really are, unless they are one of the oligarchs.
3
Yes, raising taxes on the truly wealthy, as opposed to the upper middle class, makes a lot of sense. It's silly to have the guy making $600,000 and the guy making $60 million a year in the same tax bracket.
Taxing capital gains the same as earned income would also strike an enormous blow against income inequality.
4
Personally, I'm a flat tax guy.
If a person earns twice as much as I do, it seems that they should be paying twice as much tax.
I don't care how much a person earns, we all have the opportunity to chose professions that pay well [I'm a teacher, for the record].
If you earn ten times my income, pay ten times the tax, etc.
Seems fair to me.
The notion of penalizing people for being successful doesn't jive with me. Earn twice as much, pay twice as much.
10
@galtsgultch
Imagine an apple represents the money Person A has to take care of a family of four. The government comes along and takes a third of the apple. The family struggles, starves and stagnates.
Imagine a watermelon represents the money Person B has to take care of a family of four. The government comes along and takes a third of the watermelon. The family does not struggle or starve or stagnate a bit. In fact, they all continue to live a life of wealth and privilege for generations to come.
If the first person's tax burden hurts -- and it does -- then the second person's tax burden should hurt, too. At least a little.
1
Since half of the country pays no federal income tax, and another third barely any, it is predictable that this crazy idea gets majority support. But there’s no putting lipstick on this pig- of course it’s a means of soaking the rich, no matter how preposterous the theories you devise to explain it otherwise. But as the old saying goes, pretty soon you run out of other people’s money, and Communists, or socialists, or whatever you fake name the AOCs of the world can’t invent an economic model that redistributes the fruits of people’s labors to those who park on the sidelines. Thank goodness prosperity is coming back to the middle class owing to the Trump economy; hopefully it will mark a comeback of innovation and entrepreneurship rather than class warfare that she promotes.
5
You can color it any way you want but the idea of 70% taxation at any level of income is ignorance manifested. Moreover, it is the public promotion of this kind of extremism that fuels anti-progressive right-wingers and loses those in the middle. Someone needs to have a quiet chat with Ms Ocasio-Cortez because she seems capable of doing much damage to the Democratic cause.
8
The real question is whether it will eventually raise taxes not just for the very wealthy but the middle class as well. Some of these Socialists think that anybody but the very poor have too much
6
Alexandria may yet save this democracy from becoming a true klepto-plutocracy, by cutting down the odious deep inequality currently in force. Andf a progressive income taxation is just 'what the doctor ordered'. And several of the richest individuals (i.e. Buffet) happen to agree to be taxed at a higher rate than their secretary's. And while she is at it, how about tackling another odious remant of'slavery' this country was born with, segregation. Witness the seemingly unsolvable institutional violence, the segregation in housing and jobs, health care and education. Go Alexandria, go! Enough of elitism and privilege payable by the least among us. And out with the crooks 'a la Trump' (he being also an 'outstanding' liar, racist, xenophobe and misogynist).
Excellent. Take that slap across the ideology!
I mean this is all very fascinating, but you wrote this, not her. I have no idea if this is what she thinks. It's like the people who concoct ideas to fill in plot holes in movies, they are writing the plot for the author. It's all well and good to do this, but don't pretend that was the authors intent, they didn't say that.
2
I totally agree that next to climate change inequality is the biggest issue civilization faces. We are at the point that we might as well just let the top .01% get together and decide who will "rule" us as elections will increasingly become a side show.
The idea of merit where some actually believe the deserve some ridiculous incomes in the 10's of millions per year has always seemed crazy. I would add that the Republicans are selling us out.
1
You are right. AOC's tax scheme is not about "Soaking the Rich." Her scheme is about eventually Soaking the Middle Class because that is where the real money is - from tens of millions of modest income white and blue collar workers who do not have money to spend on tax lawyers - but I'll bet my next modest paycheck that AOC, now that she is Congesswoman, has hired a sharp lawyer to shield her what is likely no longer a "modest" income.
5
Well, if she said it, it must be true. What an original thinker she is! She is a saint to us. Forget about how different the American and world economies are from what they were it was in the 1950's or how easily a high marginal tax is to evade.
5
America is a wacky place. You have a billionaire like Warren Buffet telling people to raise taxes on people like himself for years, and who always seem baffled when he keeps getting tax cuts. Then you have people making $40,000 a year fighting to the death against a marginal tax on income over $10 million.
5
The inequality of pretax income SHRANK dramatically - not shrunk, which is the past participle.
2
The rich never paid this amount. Then, as now, there are lots of loopholes to shelter money. Lots.
It is still quite amazing to see how the extremely rich in the USA are able to convince the have-nothings that they should not be duly taxed on their bizarre incomes. Their propaganda machine, foremost Fox News, really does a sensationally good job.
2
What this op-ed fails to mention are the myriad of deductions that were available when the top tax rate was 90%. The Tax Reform Act (in 1986) eliminated deductions for loan interest (other than mortgages) and passive losses on real estate - both refuges for the wealthy. Net/Net tax receipts as a % of GDP has remained nearly constant (between 17 and 20%) since the early 1950's, even as the top tax rate has dropped for 90% to 30%. When the top tax rate was 90%, there were 24 income brackets and, by some reports, cheating on taxes was far more common. Providing tax deductions is driven by political sacred cows, i.e. the home mortgage interest deduction or green energy subsidies for electric cars and home solar. Every time tax reform has been tried, such as by lowering rates and reducing the number of brackets, deductions creep back in because of politics and special interests.
What concerns me more is that some companies (e.g Walmart, McDonalds, Tyson) employ large number of unskilled people that, due to substandard pay, require food stamps, Medicaid and other government programs to get by, in effect the taxpayer subsidizes these companies. Tax policy may be a more effective level than raising minimum wage by fiat and jacking up the top tax rate. Redistributing wealth through government taxation and spending would seem to be the least efficient way of addressing income inequality.
3
'Punishing' marginal income shouldn't be the way to a more equitable, democratic country. Much easier access to, or dare I say it, perhaps even free, college-level education, in addition to national or cheaper health care, personal safety, and the ability for citizens to vote without harassment will get us there. And a huge one: get rid of all the tax loopholes!! That alone will largely negate the need for anything 'marginal'. Also a cap on political contributions, which we already have.
1
It depends on what income level the top group is. If a family is making $300000, having 70% taken means a different thing then if they are making 300 million. If you are making 300 million for example, you should not be able to pay a lesser percentage amount then the family making $300000 or $100000 just because you can have more deductions or structure your pay to avoid taxes. Look at who has benefited from the economy the last 20 years. It hasn’t been the middle and working class. They haven’t had a meaningful pay raise until just recently. Let’s just have a system that is fair for everyone.
2
I am far from a socialist but I do believe the rich are way too rich. This results in a concentration of money in a subset of people and thus the monies are taken out of the system.
1
The way the tax system is written there will be a loophole for the truly rich- and if there isn't they will hire lobbyists to create one. The ability to move money off shore and establish tax free shelters or simply dump it in Swiss Banks - Remember Mitt Romney? These pie in the sky ideas sound wonderful but they aren't practical. Lastly, think of the end game.. "Finally the rich are paying their fair share.." What would that look like for the rest of America? California alone has $275 billion in state pension liabilities - You can tax the rich at 150% it won't put a dent in that. Throw in Medicare, SSN, and the rest -- we can't tax our way out of this mess.
1
"caused sky-high incomes to largely disappear" - this statement is misleading. A more accurate statement would have specified "taxable incomes". A simple way to avoid high tax rates is to invest in leveraged real estate, structured to produce unrealized and non-taxed capital gains. Higher marginal tax rates might help a bit, but a 90% inheritance tax seems simpler.
1
The experience of Sweden, where the top marginal income tax rate is 56%, is that higher rates have only resulted in aggressive tax avoidance. Sweden has also done away with easily avoided estate, gift and wealth taxes but still has a budget surplus. Payroll taxes and national sales tax are essentially more or less hidden from the individual taxpayer's view. Withholding, even for interest, is automatic and doing ones tax returns is very simple. The tax authorities even provide you with a proposed return already filled in, since they essentially already know what you should declare. The Swedish tax authority has tried to take much of the psychological anguish out of paying high taxes, including removing the painful suspicion that other people are getting away with not paying their taxes. Because other people ARE paying their taxes.
Sweden is a very innovative country. Sweden actually has MORE billionaires per million citizens than the US has, but general income distribution is more even than in the US.
Trying to reimpose a 70% marginal tax rate in the US is a dumb idea. It will only lead to aggressive (and successful) tax avoidance and inflame feelings and most likely lead to political defeat.
5
@Tim Platt great comment. It's all too easy for folks to ignore the psychological effect on economy that would result from a 70% tax rate...at any level. It really is the antithesis of American capitalism.
2
Not only does skewed income distribution tend society toward oligarchy it is inefficient from a rational traditional economic point of view. As a college professor I know students are shying from fields like civil engineering because society does not want to pay for roads and bridges. Many of the best and brightest go into finance. Skewed income distribution will skew automobile production toward a few Rolls Royces rather than thousands of Volkswagens. Why do students choose to work for the few wealthy? Ask Willie Sutton - ‘Because that’s where the money is.’ We need more of the money to be in the hands of most of the people or we will continue down the road to serfdom.
2
Oh, side bar: all income should be taxed for social security, the arbitrary cap at $128K needs to be abolished.
3
@Bailey
Then you have to raise the pay out at the other end. As it is SS is already like welfare as those who pay in the least get out the most.
1
@Driven No you don't. There is nothing wrong with helping the most vulnerable people (who "pay in the least") in the later stages of their lives. Call it whatever you want.
Basic error: Confusion of statutory with actual tax rates. Various tax preferences, "tax expenditure subsidies" is the technical name, lower the amount of taxable income and hence effective tax rates.
A clear and cogent presentation. However, returning to a more progressive tax policy must be accompanied by removal of all the various loopholes, corporate structures, and special tax benefits that are available only to those who can afford very skilled accountants. Good luck with that, as there are powerful forces who will fight to the death for these kinds of special consideration.
A simple and powerful start would be to remove the current ceiling for medicare / SS withholding limits, which are arguably the most regressive part of our current tax policy.
5
All very good points, but professors Saez and Zucman do not address a key point. What is the total value of all the public support that the ultra-rich rely on to get and maintain their fortunes? I think that it is probably quite high. In other words, a 70 percent marginal tax, rather than an inequality management policy, might actually just be them paying society for services rendered.
1
@PJM
Yeah right - the super rich use the public services they largely fund less than the average person. That line of reasoning actually goes the opposite direction.
3
@PJM
Bill is right. The rich do not use more public services. They use less, but pay for most of it.
Two problems:
1. During the period of 90% tax rates there were international capital controls that made it difficult for wealthy people to move their assets out of the country, and made it hard for foreign firm to sell in the U.S. None of this is true today.
2. Rich people have absolutely no sense of patriotism today. (That's why everything is made in China, like your iPhone.)
Combine these, and I can assure you that a 70% personal income tax rate will cause the ultra wealthy to move out of the Unites States and form/operate their businesses elsewhere. We would also see a huge expansion of foreign financial markets and a shrinkage of U.S. financial markets. (Among other things, this would make New York a poor state.)
4
An important editorial. Do we really want to prevent the US from becoming an oligarchy? Is it already an oligarchy?
One lesson from Obamacare applicable to future social policy making is that no matter how good the reasons are for raising taxes on the wealthy, these are never good enough to persuade enough wealthy people and Republicans to go along. So the real issue was always inequality and political power.
I have an idea lets make AOC's salary equal to the average salary Americans earn in a year, which is $50,000 per year. Then do the same for everyone that makes more than the average American salary. So, all Americans will be limited to $50,000 per year, everyone is equal and the Government tells all Americans where to go to school, provides for all health care, provides for pensions etc. Everyone is equal. Sounds GREAT doesn't it
2
@herbie212 - Does it sound less GREAT than what "free enterprise" (so-called) has brought us to now?
In reading articles and opinion columns such as this one and Mr. Krugman's about the history of US progressive taxation, it's a good thing that I was actually born during that period and can separate the fact from the fiction.
It's true that the US had tax tables that taxed income at very high rates, 90% in some cases BUT nowhere is there any mention that the tax laws had numerous tax deductions. Tax deductions that, in my parents case as an at best lower middle income class, did take advantage of to further lower rates. Mortgage/Credit Card interest, Medical payments, Charity, etc were all used and used widely by lots of disparate incomes. This also caused a wide gap between the "published" tax rate and the "actual" tax rate. Wealthy individuals/families almost never paid anywhere near 90%! Of course, this is also where the Alternative Minimum Tax came from.
In the 1980's, the idea that was sold was a lessening of the published tax rates (and, in all fairness, the actual tax rates) at the expense of eliminating many of these deductions. I always worried about that approach because it would be difficult for Congress to increase rates past 90% but much easier to do so at 35% (and in fact that's what's happened).
So the 70% that AOC is proposing can't be compared with what was present in the past. Her idea is to make the published and the actual tax rates the same. Which is fine (as a debating point) but don't suggest this is a return to the way it used to be. It isn't.
4
Nope. Raise the minimum wage. Less govt. assistance required, bigger tax base, doesn't touch the third rail. Let the people earn what they deserve. We shouldn't need SNAP when working full time.
2
The WaPo did an article about Ocasio-Cortez the title mentioned that she knew more than she was being credited with.
In essence it broke down how the progressive tax rate system works in spite of the common myth promoted by those whom it suits starting with reagan, that 75% tax rate means you pay $75M on $100M income. It doesn't.
First of all the progressive rate means that you pay the lowest % on the income for the first level tax rate, then the income above that the next the next % tax rate. Basically as income level rises you still get the benefits of the lower progressive tax rates.
They provided a break down that demonstrated in the case of someone who met all the highest bars at each level they would still only be paying 67% if the rate were 70%.
Before de-regulation the tax code also provided incentives for business to build factories and hire people for long term benefits paying jobs.
2
@magicisnotreal
My citation is mistaken. I was referring to an Michael Hiltzik piece in the LA Times.
https://www.latimes.com/business/hiltzik/la-fi-hiltzik-aoc-taxes-20190107-story.html
A “Wealth Tax” is needed to cover the costs of national defense. We “socialized” the costs of war beginning with Vietnam and have been at war ever since it seems.
1
An extremely powerful argument--well written and cogent.
But why has this not been discussed more? Republicans have mastered the messaging game. Currently, their message is immigration. It's a non-issue. It has limited to no negative impact on the United States economically. It's racism cloaked in economic jargon. And yet it dominates the airwaves.
Democrats need to stop being reactive (see Warren's DNA response to Trump as a perfect example), and define the turf upon which both parties play. They need to turn the conversation from immigration to talk of the "middle class" and economics for the everyman. Until they can find a message and relentlessly promote it, they will lose. And identity politics is a perfect example of how NOT to do this. We need to get back to bare bones economic issues of the old Left. Unions. Minimum wage. Middle class.
That is the path to an ascendant democratic party.
2
The value judgments that underlie this article by the two UC Berkeley professors include the unexamined notion that equality of material wealth is a desirable goal. It is desirable, of course, to those who dehumanize and hate people who can be seen as somehow better off than they are, as it has been throughout American history. But there is a component of envy in the focus on material equality that some of us find repellant.
Everyone should have equality in the eyes of the law, but we are not all equal in talents or goals and should not have government-created equality in the results of our individual efforts.
3
Just before enacting a truly progressive tax structure, it would make sense to get money out of the political system.
And about whom to vote for; judge them by the enemies they make.
1
In a world of family offices, private foundations and myriad ways of hiding and shifting wealth, this is more a publicity stunt than a serious proposal. Does the congreswoman think that the ultra-rich receive monthly paychecks? Let's start by eliminating loopholes, such as the carried interest, rather than grandiose words that accomplish nothing.
3
We have Milton Friedman to thank for our current ridiculous tax mind-set. The ultra-wealthy and the politically powerful (often one and the same) know that trickle-down doesn't work. They just sell it to the rest of the American people. It benefits them and most Americans are too undereducated about economics to know the fraudulence of it. That aside, we have a private, for profit, corporate, so-called Federal Reserve and yet Article 1, Section 8 of the United States Constitution states that the United States Congress shall have the power "To coin Money, regulate the Value thereof, and of foreign Coin..." The American people have lost their country by giving away the power of their money to private, corporate ownership.The Fifth Amendment protects individuals from being required to file a personal income tax return. The legality behind taxing Americans' labor income, that is their monthly check from working a job, is indeed more questionable than most Americans are aware. Legally, the United States is really only suppose to be taxing profit from business. We do it just the opposite of how it is set up. Read our founding documents.
1
The authors are making a false equivalence comparison without historical context. To say that Japan grew really fast during 1950-1980s even with progressive tax policies misses the point. The point is not that progressive tax policies had no impact, rather it had negligible impact. After the destruction of world war two, war torn countries are ripe for fast growth. Look at Syria today, it's growing faster than China. In Japan, the growth would've look a lot less impressive if you extend it to 2010s. Cherry picking your data to justify your analysis is unethical and immoral.
5
In response to the 70% proposal, the GOP are going gangbusters in lying and misrepresenting how marginal tax rates work, and falsely asserting over and over to their voters that the proposal means all income by all people will be taxed at 70%. Scott Walker, most notably, has tweeted this false assertion many times. I hope that AOC and other Democrats will finally be brave enough to openly state the obvious: the GOP figures it's OK to lie, and they do it every waking day.
1
Ocasio-Cortez has been elected at the right time. The mood is shifting, even at Davos.
A storied investor and billionaire has sent a write-up to all attendees at Davos that is doing the rounds saying that the turmoil in many countries is caused by growing inequality and that countries and corporations are over-leveraged and he worries if this may lead to financial panic.
Great time for the pendulum to swing left.
However I worry that in America everything is taken to extremes. So we must watch that does not happen or in another 40 years we will see the resurgence of the same philosophy of low taxes, with a different name.
"She’s reviving an ethos that Ronald Reagan successfully repressed, but that prevailed during most of the 20th century."
While Ronald Reagan was "repressing" with his tax slashing for the most wealthy he was doing several other things. All destructive.
- increasing military spending
The combination of this and cutting tax revenue from the wealthiest had a predictable results: our yearly revenue deficit went into the stratosphere and the national debt almost TRIPLED in just eight years.
Yep, the total national debt to the point of Reagan's election (1980) was $900 billion.
Less than a trillion. 204 years since our founding as a nation.
In just eight years of his "tax cuts while increasing spending" policy, the nation's debt went to $2.5 trillion.
The budget cuts (to try to close the gap) that ensued, kicked the middle class in the gut. Less funds for everything from education to road maintenance and a host of other life-quality effects.
- homelessness became a "thing."
I'm old enough to remember the news stories of the explosion in this scourge as budget cuts for support to the most vulnerable took their toll. The beginning of "balancing the budget on the back of the poor." Except now, after 40 years of wealthy tax breaks, the effects have hit the middle class as well.
- polical power purchased
Amazing how the wealthy use their wealth to buy politicians who maintain their wealth!
Who knew?!
Truth:
We can democracy OR concentrated wealth.
We can't have both.
2
Professors, thank you performing a vital public service. The current concentration of wealth penetrates, and poisons, our political life at many different levels, including making access to our elected officials as stilted as the wealth distribution curve.
the examples of Japan and Russia do not really support the position. Japan economy was going to succeed because of the total destruction of their country and the ingenuity and social construct of the people. They were hard workers looking for the longer term through their history. While the high taxes imposed may have stopped an oligarchy from arising in the near term, Japan today has many mega corporations.
Russia never had a chance. Not because of the relatively low tax rate, but because of the continued corrupt government control and the defeated attitude of the Russian people toward government. When I lived and worked there between 2005 and 2009, I was amazed and dismayed at the defeated attitude of the their citizens. I asked them why they did not save money and work for the long term. I was told why should we, someone (government) will eventually find a way to take from us as they have done so many times before.
2
Is it about constraining inequality or more about governments need for money?
SOcial engineering via the tax code is a theoretical construct that can hide the wastefulness of government spending; its important to do more than just raise taxes, one must direct the money toward a goal of less government, deficit spending and streamlined government.
4
The income pendulum has swung about as far as it can in one direction, and will soon head back the other way. Social Democrats, such as Ms Ocasio-Cortez, are beginning to be heard in the proper context; as advocates of a more balanced system, not as lunatic Communists bent on taking your house and forcing you to let party member comrades live in it.
Citizens United was not the cause of the grotesque income imbalance cited in this column, it was a symptom of the natural capitalist drive toward oligopoly, the concentration of wealth and power in an ever smaller group of individuals and corporations. Historically, this kind of concentration is resolved in one of two ways: either by nature --- the plutocrats can't accumulate additional wealth if the rest of society is so impoverished it can no longer produce anything of value --- or by force, either legislation that redistributes the wealth or revolution that confiscates the wealth.
We are not a revolutionary country. We long ago gave up the idea that overthrowing the king or seceding from the Union or overthrowing the government was a good way to change things. At the same time we've become a complacent country, easily distracted by shiny objects and impossible populist promises. We've lost our sense of balance and equality.
Ocasio-Cortez is not the political messiah. She is a harbinger, the first sense of a return to balance and equality.
3
Senator Moynihan once quipped that the Republican ideology was tantamount to feeding the horse in order to feed the sparrows. What has changed is not that the diet of the sparrows has increased, but that the wealthy have managed to game the educational system by creating a glass floor below which their less than qualified offspring cannot fall. An excellent example of this unearned privilege is the elevation of Judge Kavanaugh to the SCOTUS. He neglected to remind the Senators that he was a legacy admission to Yale, whose admission offi neglected his episodes of public drunkenness that would have disqualified a less well placed candidate.
1
There is the tax rate on the books and there is the tax rate that is collected. When IRS enforcement is cut--or put on hold as is the case with the present "shut-down" we can only expect the collected tax rate to decline even more relative to the tax rate on the statutes books.
1
Fantastic article. It reinforces the point that much of our national dialogue misses the point on many issues.Has anyone ever proved that trickle-down economics has ever worked? (Remember when G.H.W. Bush called it voodoo economics?) A very high top marginal tax rate is a tool to protect and preserve democracy and not just a way to collect revenue from the top .01 percent...well said. The question is...can the Republican Party be brought back into the democratic fold to help ensure our democracy thrives? Or have they already gone over to the dark side of oligarchy - the winner takes all mentality? Unfortunately I think they are too far gone.
4
The other important requirement of both fairness and equitable distribution is to tax all income equally.
The current system of treating investment income differently than earned income not only leads to income inequality but it is an inefficient tax which shapes market activity by placing a non-market incentive on certain types of economic activity for certain entities.
Note that it doesn't even treat income from the same activity equally; for example holders of 401Ks don't get the same benefit as holders of the same investment owning it directly.
The result is that a lot of activity goes into redirecting earned income into investment solely for tax benefits, as when a group of doctors form a corporation and buy real estate. This also miss prices these investments.
There is a justification for assessing long term gains based on inflation, but this should be done by adjusting the investment basis on a standard schedule of inflation on the actual period the investment is held, and the adjusted income should be taxed at the same rate as ever thing else.
Likewise, inherited wealth should be taxed as regular income to the recipients as well, perhaps with an option to spread it over several years, but there is no reason to treat it differently than lottery winnings.
If some specific type of economic activity has substantial side benefits to society, it may be appropriate to encourage it in the tax code, but such benefits need to well targeted, specific, and transparent.
3
Thanks for this article; very informative. But to decrease income inequality, is it not also important to close loopholes, increase the estate tax and change the capital gains rate so that the returns to working are at least as great as the returns to choosing the right parents? I'd be curious about the relative influence of these factors too.
Also, regarding Russia, how much of their economy, and the oligarchs' income, is ever taxed at all (versus earned on the black market)? If the latter is a large portion, would increasing the top tax bracket really help?
1
If you look at states with higher tax rates you'll see that they are losing high income people.
Similarly, if you create punitive tax rates, high income people, and high income corporations will find ways to move income overseas to wherever lower tax rates can be found.
We should reward people who create jobs and build companies, not punish them.
9
I disagree with your viewpoint.
Paying taxes is not a punishment.
Paying taxes is a civil cooperative responsibility that sustains the infrastructure of human workforce, city facilities and transportation that is the foundation for all commerce.
We have a choice to see tax revenue as a greater good...which when spent wisely and collected ethically....is the foundation of civilization.
Or one can see social investment, taxes, as a crimp on the advance of I, me and mine.
I am a librarian in Ohio. You can imagine the small size of my income. Nonetheless I find the following statement in the article terrifying, "The point of high top marginal income tax rates is to constrain the immoderate, and especially unmerited, accumulation of riches."
Who believes that it is the government's job to determine whether the accumulation of riches is "unmerited?" Does no one else find that a chilling prospect?
I'm safe right now, because my income is tiny. What if I won the lottery? This standard could be applied to me. Just because I've worked for 40 years, does that mean I would merit, or not merit, "the accumulation of wealth?"
The very verbiage is un-American. This is supposed to be "the land of the free." that means free to get rich if you wish to and can. Or not. But free.
8
When the system becomes so distorted that the wealthiest among us can have undo influence over government policies, it is time to reign them in. Understanding a progressive tax system means understanding that no one is trying to turn billionaires into paupers. You seriously believe that it is more important to facilitate obscene accumulation of wealth by a few than expect them (like everyone else) to pay their fair share? Our democracy is threatened by the accumulation of power via the accumulation of wealth. This needs to be changed or we are doomed.
2
@Kris Bennett we have one of the most progressive tax systems in the world, at least at the federal level. Almost half our population pay no federal income tax, and the top 20 percent pay for 80 percent of our federal income tax. I don’t know any country that has a mores progressive system.
5
Thank you
"A common objection to elevated top marginal income tax rates is that they hurt economic growth."
It depends on what is driving the economy.
Post-War America's economy was driven by the manufacturing sector. It not only provided jobs, it provided well paying jobs to semi-skilled labor.
As an example in the 1950s over 90% of the vehicles sold in the US were assembled in the US. Currently that figure is about half of that - automation notwithstanding. You can find similar or more extreme situations for just about all durable goods sold in this country. That's a major hit driven largely by our consumer choices.
Keep in mind the manufacturing sector not only provided assembly line jobs but also skilled trades like electricians, pipe fitters and fabricators. Unionizing burger flippers won't bring back that prosperity. A resurrected WPA program would provide some dollars for circulation and I guess the increased trade deficit could be offset by dollars coming back into this country to purchase Treasuries and Manhattan real estate makes up for this in Krugman-land.
BTW, the middle class started losing wealth in 1973. But using 1980 does make for a better polemic.
"But redistribution alone will not be enough to address the inequality challenge of the 21st century..."
Perhaps the NYT's progressives will start with desegregating NYC's racially segregated public school system. After that has been achieved you can preach to the folks in flyover country.
2
TO STEFAN: What is so pie in the sky about preventing a few people from having so much money they can buy the government or be so large that the rest of us have to protect them from going broke for the sake of the economy?
5
All enlightened democracies rely on very progressive income taxation to insure the health and welfare of its citizens, including their vigorous participation in an expanding economy. If the term "socialist" describes a country in which some pay over 50% of their income to the government, be sure it has its share of millionaires and billionaires who do not feel constrained in the least.
2
More undocumented aliens? No problem. Let’s just increase taxes to pay for them and redistribute the wealth to them, instead of addressing head-on the practical solutions to the problem.
More unemployed? No problem. Let’s just increase taxes and redistribute wealth to them, instead of addressing why three generations of certain segments of society have failed to take advantage of educational and employment opportunities.
Educational failures? No problem. Let’s increase taxes on the people that have prospered because of their hard work and determination, instead of addressing why we pay billions to educate students who don’t want to learn.
Yes, let’s continue down the road to a welfare state that the Obama administration put us on, and destroy American work ethic and culture while we are at it. Yes, let’s become the next Greece and Italy.
It is time to put an end to the socialist policies that the democrat party is so desperately trying to foist upon us.
6
With all the high-tech savvy in the world, and algorithms that can send micro-targeted ads to your computer screen, choose your friends, and land space probes on comets, you would think an algorithm could be devised that would would convincingly demonstrate a flexible, equitable and sustainable economic model of wealth production and sharing ("distribution" seems to be a dirty word to some.) This, as well as simulations of what exactly needs to be done by when in order to prevent the worst outcomes of our present energy models, should be the most fiercely pursued technological challenge of the age. Elon? Jeff? Warren? Laurene? Anyone??
3
The author argues that the high marginal rates in effect before 1980 are associated with strong economic growth, but doesn't recognize that those rates were largely fictional. At that time, the tax law permitted liberal use of shelters to avoid payment of the nominal tax rates -- the current limits on the use of passive losses and losses from activities that are not at-risk didn't exist.
The result was a large group of highly compensated executives and professionals with little or no taxable income, and demonstrates little about the effect on incentives of high marginal rates that actually need to be paid.
4
What is critical is how this debate gets framed. Liberals focus on income inequality as the problem. The real problem is not inequality but stagnating wages for the middle class and the poor. Taking money from the rich does not inherently solve the problem and the revenue collected would not make the slightest dent in the incomes of the middle class. A far more productive initiative is to focus on ways to increase the incomes of the middle class and the poor. There is no simple answer to this problem and it might require some pretty radical solutions.
2
As retired progressive, democratic socialist, conservative liberal... I find this article compelling and long overdue. Why did it take so long?
As an add-on to this theory, check out billionaire Nick Hanauer's Ted Talk arguing this same case in an equally rational manner.
5
Very high marginal rates only encourage uneconomic investments . Rather have a lower rate ( say 50%) and no deductions for anything and all income is earned income. Deductions are basically subsidies for wealthy and are attempts by a government to manage the economy. 70% tax rate sounds great unless you can deduct half your income. Then it becomes 35%. If it's all capital gains and dividends, then its 15%.
I def support higher rates on the ultra-high earners, but won't they just find loopholes to exempt their income somehow?
1
Glad to see these heavy weights come out and support this. This should be a key plank for the Democratic platform in 2020.
3
How did Trump get his infamous tax cut bill passed, with mny Dems voting for it? With almost all arguments, taxes and economics seem to be more complicated than many other issues. Added to that the ridiculous trickle-down plans, from Reagan with Stockman who later opted out of being the inventor of that plan, to the current president and his amazing economy. Things seem rather more grim now with the shut-down exacerabating many individuals' incomes. And the old gambit of taxing those who are simply wage-earners, not investment earners, w/o inherited wealth to buy back stock or buy other stock, or other ways to increase wealth from money, relatively tax-free. The primary job of accountants from when I had them was to lower one's tax bill to Uncle Sam. The GOP now the party of the careless, carefree spender of public funds, with the added insult of a $5 billion plus "wall" to be added to our border w/Mexico. Knowing our dear leader's own penchant for bankruptcy(plural), stiffing workers, negating contracts, what is our future for a more equitable union?
I completely agree with opinion piece. However, I'd like to add another argument in support of a more progressive tax system: Taxes are the royalties we pay on the value we extract from the investments made by previous taxpayers.
We all benefit from public investment in roads. However, a retail chain like Walmart benefits multiple times over, because the existence of those roads subsidizes every employee that works in the store, every truck that ships goods to the store, every customer that spends their money at the store. So if you own shares in Walmart, you are extracting a larger share of the value generated by those roads than the average person who does not.
Google, Amazon, Facebook, Netflix, etc. would not even exist without the internet, which was originally the product of public investment. And the explosion of the market for smart phones was heavily dependent on GPS, another product of public investment.
And all the value created by an efficient and safe system of air travel, which is subsidized by public investments in infrastructure, security, air traffic controllers, etc. accrues primarily to the people who can afford to use air travel.
Value-based pricing is becoming all the rage in health care; why shouldn't the same principle apply to taxation?
2
I appreciate the honesty. We aren’t taking the money for its need for government purposes, we are taking it solely because someone made too much. While I think that reasoning is ludicrous, I appreciate the honesty.
2
“From 1930 to 1980, the top marginal income tax rate averaged 78 percent; it exceeded 90 percent from 1951 to 1963. What’s important to realize is that these rates applied to extraordinarily high incomes only, the equivalent of more than several million dollars today. Only the ultrarich were subjected to them...”
I’ve lived through it, 1956-1980, It’s wonderful, compared to now. (Above)
“The merely rich — the high-earning professionals, the medium-size company executives, people with incomes in the hundreds of thousands in today’s dollars — were taxed at marginal rates in a range of 25 percent to 50 percent, in line with what’s typical nowadays..”
And not much change for middle earners (above).
And the benefits? Assuming it’s not squandered on warfare, are...
1. Minimal cost healthcare
2. Competition, remember that? Fair pricing - all segments of society = more jobs because more are ABLE to compete
3. Funded school systems
4. Funded infrastructure
5. Positive change regarding climate change.
See how far your dollar goes when it’s not going to the 1% ?
2
It’s frustrating that redistribution through taxes always seems to center around marginal rates. This is not how the uber wealthy pay taxes in the U.S. To nail the problem, we need to eliminate special treatment of capital gains and anything to do with stepping up tax basis (see death and real estate). This will truly address the problem. And while I’m at it, why is the carried interest rule still around?
If A.O.C. did some homework on taxes, she would really be onto something.
1
One of the unfortunate effects of constantly telling ourselves that "America is the greatest country in the world" is that we become convinced that we have nothing to learn from anybody. I've talked to fellow Americans who actually bristle and become outraged at the suggestion that we should look around other countries as a way of improving our own. But on issues from infrastructure to environmental policy to tax policy, we really need to look around. Our economic system has become a grotesque example of "winner-take-all" that is rarely seen anywhere else in the developed world.
5
Very few billionaires need incomes higher than 10 million a year. They will simply do what Jeff Bezos et al do: keep the salary small and accrue your gains to unrealized capital gains. Take a mortgage on any property you want to buy, probably at near 0%. Very few properties exist that have 20-30 year mortgage terms that exceed $10 million. The only people paying the tax will be the lucky saps that win the lottery. State taxes will take the hit on salaries kept below the threshold. You might not mind paying a state tax of 10%, but 70% is ridiculous. If you do need to sell stock to buy something right away, offset it with a donation to a foundation. All the supposed fans of the 90% rate forgot no one ever paid it. The tax case law of 40’s-60’s is full of successful work arounds,many by actors, highest salaried people at time, including Fred McMurray.
1
@Michael Blazin
Then fix the system. Close the loopholes.
1
Meaning what: force people to take higher salaries, forbid donations to charity, tax people on things that have no official value until sold? Not very well reasoned responses.
@Michael Blazin
You could have come up with many other examples and charitable donations was among those you chose to bring forth your argument?... Because the ultra-weathy are evading taxes by donating excessively to charitable causes? See Andrew (Bronx) comment below for one possible idea. The underlying principle I support is to treat all income (i.e. capital gains especially) as equal with regard to tax rate and eliminate any special deductions that the ultra-wealthy are so adept at taking. These are ideas - any alternative to "we shouldn't bother trying because this is how it has always been."
It's time to put an end to the myth of trickle-down economics, which has little support in fact but has so saturated our culture that too many people treat it like their religion.
9
How does taking money away from rich people and putting towards pie in the sky green projects help the lower half of the income distribution? You don’t flatten the income curve by taking away money from the top. You solve the problem by raising up the lower end.
134
@Stefan
This is how: You prevent them from using their money to elect candidates who will make laws--like the recent tax reduction--that give them even more money to elect candidates that will make laws that give them even more money to elect candidates that will....
Instead, WITHOUT that money in the hands of, say, Republicans, candidates from the party that actually tries to use government to improve the lives of the rest of us, like, say, AOC, they have a chance to get elected and try to do just that.
Get it now???
166
@Stefan This is a lame argument. The "lower end" as you condescendingly refer to them can't get up when Citizens United has assured that "rich people" as you refer to them can continue to keep their feet on the throat of those without economic resources by tilting all the advantages of the system towards themselves and their families. Generational poverty and Trumpian idiocy are the outcomes of this kind of policy. As long as rich people can outspend those with more modest outsets, they will continue to assure inequality in our society. History proves it and elitist whining doesn't change that.
126
@Stefan
Did you read the article?
If it is dumb for a corporation to give a highly paid employee an additional $5 million, when the employee will have to pay (say) 90% of that to the government, yielding him an additional $500,000, it may decide to use the money in a more effective way, such as paying the low-paid employees a higher salary (which could incentivize them to work more effectively), building more facilities, etc., all ways that don't end up putting most of that money into the hands of the government.
This, in fact, has the effect of "raising the lower end" (your words).
That's the way it used to be. I remember it. Maybe you are too young.
249
All true. On the other hand, what’s so wrong with soaking the rich? We have a lot of needs in this country - trillions in infrastructure modernization, to start with - and the richest benefit most from all public works.
How rich would Trump be without roads, police and fire protection, communications infrastructure etc? How rich would Zuckerberg be without the public Internet and electrical grid? They SHOULD pay the most. And so should all of us who have done well in life. “Self-made” is a delusion.
5
I think one barrier that needs to be addressed is America's strongest religion: Capitalism. Any semblance of a restraint on the free market forces is considered sacrilegious in a country that prides itself on greed and materialism.
The demonization of social support networks and those who benefit from them is another obstacle. It's truly staggering how often our country's own citizens spew vitriol to the have-nots.
289
@Dan B
Both that free market championing and that demonization of the poor come from our founding Calvinist/Social Dawinist ethos, which many of our libertarian oligarchs still pay lip service to, even if they've forgotten some of the religious underpinnings.
26
@Dan B Progressive tax rates do not put a curb on capitalism, you can still have free markets. You just have to give back a larger share of the benefits. As to your second point, the demonization comes from the very party that is accumulating the wealth.
24
@Dan B "Any semblance of a restraint on the free market forces is considered sacrilegious in a country....."
Except when it comes to importing drugs from abroad; or when fossil fuels are preferred or the more economical and less polluting renewable fuels.
Given that this newspaper recently published an exhaustive analysis of the tax shenanigans that contributed greatly to the current President's wealth/ability to appear wealthy, can we at least all agree to make a serious effort to collect even the lesser amounts owed by the very wealthy under current law?
412
@le
Amen. If you simply enforce existing tax laws and regulations, the highest tax rate could be 17% and still achieve the same amount of taxes collected. The tax system must be enforced to avoid rewarding the cheaters. Higher rates, without enforcement, will give us the Trumps of the world.
12
@le It would be better to find a way to eliminate income taxes. It is a very inefficient way to fund the government. A general export tax and national sales tax would most likely eliminate the need for payroll and income taxes. We may end up with both. Our government has some bad spending habits.
1
@le
Revenue enhancement was only a tiny party of the reason to increase marginal tax rates. The biggest one is to put the brakes on large accumulations of wealth. Oligarchs are the problem.
I agree, though, that it is obnoxious to have wage income taxes at highs rates than non-wage income types. I would reverse that.
4
Changing the top marginal tax bracket for earned income, while a start, is not good enough. It doesn't address the rates on unearned income.
Dividends, returns on investment, capital gains, bond interest... most people do not gain a substantial portion of their pay from these forms of income. These are primarily income for the wealthy. Yet they have been taxed at rates between 15-20% in the past several decades. Contrast this with earned income for the median family, whose top marginal tax rate is 22%, plus about 8% for Social Security and Medicare taxes.
If all income were suddenly taxed at the same rate, people paying only capital gains taxes would over double their tax payments to the federal government.
If the goal is to reduce wealth inequality, we also need to address the inequality of taxes between earned and unearned income.
5
All income should be taxed as ordinary income. Lower rates for investors and business owners is immoral. It is driving inequality, stagnating wages and rewards contraction.
Lower rates for the wealthy starves the treasury and leaves no funds for education, infrastructure or healthcare as they keep a larger and larger share of the pie.
511
@Deirdre
YOU MUST TRY TO LEARN THE FACTS! TRY THESE:
The Tax Foundation finds that a 70% tax rate on incomes over $10 million would increase federal revenue by less than $30 billion a year over the coming decade—a pittance compared with the more than $800 billion deficits expected this year.
9
@Bob, That's $30B more than we have now.
48
@Deirdre
I've heard rumors that some wish to speak of facts. OK Did the Tax Foundation study consider how much a 70% tax, taxing all income as ordinary income, i.e., earned and capital gains the same, would raise in revenue? Did it address whether such marginal rates would be fairer or more moral? Did it consider whether such rates would encourage the capital markets to invest in business expansion (instead of trading and repackaging existing financial assets) and higher wages? Because those were the points I at least understood you to be making and I agree with you. Did it consider whether such a tax would reduce inequality or revitalize democracy? Because those were the points this article was addressing and I agree with those too.
33
A strong middle class does not just happen. In most times and places throughout history, there has been no middle class -- just a few very rich people (who mostly were rich because they were "to the manor born") and gazillions of literal or virtual slaves and serfs. There have to be policies in place to allow a middle class to develop and flourish: access to a good affordable education, societal care for the old and infirm so it doesn't financially devastate families, a living wage, worker protections and reasonable workplace policies, freedom and ability to pick up and move, public health and safety, and, yes, a progressive tax code. At the rate we're going -- where fewer and fewer people have more and more of the money and power -- the middle class will disappear. I do hope the Democratic party can help middle class people see that they do not enjoy this status through their own efforts any more than most rich people are wealthy through their own efforts. The middle class are beneficiaries of a system of imposed and encouraged equity and that this system is slipping away. We need to do something about it.
3
The issue here is political power. When a person becomes ultra wealthy, how much enjoyment can additional money bring? How many bathrooms can you use in one day? How many kitchens? How many mansions can you sleep in? How many rooms in a 30,000 sq. ft. house can you even use?
No, the entire point of low taxes for phenomenal incomes is to create the establishment of a wealth aristocracy which is exactly what the Republicans want. This gives them a small group they can cater to for enormous political funding.
Just as important to their plan is the elimination of the estate tax. This is the big lever of power. Eliminating this tax allows dynasties to form. Those are real aristocracies. People, by virtue of their lineage, get to rule the nation through their inheritance. Again, this is exactly what the Republicans want. This is the essence of trickle down, supply side economics. The money doesn't trickle anywhere. It stays in the pockets of the super rich.
This all started with Reagan. He wanted the upper crust to have the power. His victory for them and the GOP, is that they have convinced the working class that such policies are good for them too. They most certainly are not. Now we have Trump, who has managed to convince the "left behind", that we need a wealthier, wealth aristocracy and they fell for it.
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@Bruce Rozenblit
Nice points, with which I agree. However the insurance policy for wealth preservation is as you pointed out, 'political funding'.
The voters putting a representative into office should be his/her primary concern not the source of campaign contributions. Higher taxes on the ultra rich, because they can afford it, could go into a pool that would fund qualifying candidates.
Make a choice; support democracy or capitalism.
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+
+
7
@Vanman Thus we need to get rid of the Citizens United decision and start the public financing (with strict limits on amounts) of elections.
34
@Bruce Rozenblit They aren't happy until they own the moon. You don't understand. It isn't about bathrooms or houses, it's about power and greed and insecurity and scarcity complex.
30
Set the top marginal rate as high as you want, until there is fundamental change in the structure of politics, the interests of a select few will continue to be favored regardless of how much tax they do or don't pay. I don't believe that the problem is as simple as some people having more money than others, but that there is significant inequality in representation as well.
It is also arguable that changing the tax code will mostly be a boon to the accountants and lawyers whose services will go towards finding vehicles to help their clients avoid paying the top rates; just because the top rates are high does not mean people will (or did) pay them.
As a staunch conservative, I can't believe that I find myself agreeing with two economics professors from Berkley. But there is no denying that the current tax code has undermined our democracy, stifled competition and innovation. Thanks to AOC for focusing a light on this critical conversation.
817
@Rob Good point. So now explain why you remain a staunch conservative.
41
@Rob So why are you a staunch conservative? Maybe it's time for you to consider what you think is conservative is not what it is in reality today and need to find your tribe. You might find that progressives are more the torch bearers of Lincoln than any of those holding office as a republican claiming to be protecting conservatism today.
41
@Rob
I would say that Rob *is* a genuine conservative - in the mold of Eisenhower, under whom such high marginal tax rates existed, but not like those who currently call themselves “conservative “. Rob’s concerns address the common good; they are mine as well.
63
From each to each. This has never worked.
1
I may need to see a therapist today.. I just an opinion ny Krugman that I 80% agree with. I am one of those Republicans you all like to shame. And I don’t pretend to understand all the tax ramifications. I was an English major. I understand words, not numbers so forgive me if my question seems really stupid. I actually understood his reasoning for a progressive income tax and why it can better everyone. My question is dont a lot of the very wealthy people live off investments and principles, etc and dont have an actual “paycheck “. So how do you get their money.
@KCE
Good question about the importance of investments in explaining the gross inequality of the wealthy.
What to do?
First, the way to limit such large investments is to reduce the income of the extreme wealthy, so they have less to invest in stocks, etc.
Second, have a higher capital gains tax.
Third have a more reasonable estate tax that limits the ability to perpetuate such extreme wealth.
3
Hi KCE,
That's a great question. Investment income is taxed just like regular income in most situations. Now, because the tax code is extremely complicated and because the IRS has a (relatively low thanks to the Republican administration) budget with which to pursue Federal Tax Evasion crimes, we are unlikely to see a large percentage of this income actually taxed.
The situation is doubly bad when you consider that the kinds of people that earn that kind of money from investments can also just keep all of their money off-shore.
But neither of those things mean that we should not tax them. We should still tax them--we just have to also write laws that make it more difficult for them to off-shore, and to evade taxes--and also to increase the budget of the IRS for the purpose of pursuing white-collar tax crimes.
1
Consider a progressive PROPERTY TAX as well.
Share the wealth.
See for a full discussion.
Capital in the Twenty-First Century
Capital in the Twenty-First Century
by Thomas Piketty and Arthur Goldhamme
2
This is a political gimmick, it's revenge taxation. It's based on the assumption that once the government takes the extra income, that it can efficiently distribute it. It also does very little to actually address the root cause of today's structural inequality -- the oligopolistic landscape across many industries. Real leaders would be looking to enforce anti-trust legislation and break up behemoths like AT&T, Google, etc. More competition would be beneficial for workers, consumers, and would lessen the concentration of wealth and power. Instead, we get 29 year old baristas-cum-congresswomen who are more interested in promoting and cultivating their social media presence via sensational tax schemes.
4
@B
Hi B,
Alexandra Ocasio-Cortez agrees with you that we should break up these ridiculous monopolies. I think you have more in common with her than you think. She's simply chosen to concentrate on taxation first. If she stays in Congress for a long time (and I think she will), I'm sure she will focus on monopoly-busting at some point.
I'm with her on everything except her position on disbanding Immigration and Customs Enforcement.
2
This is perfect proof that the political stance of the NYT and a large percentage of their readership are bleeding heart, re-distribution liberals. My family started with nothing but through continued hard work over three generations have acquired a comfortable living for all our family members. Do I want our hard earned dollars re-distributed? Of course not!
Most of the comments I have read regarding this article tug at the very bones of capitalism. When did socialism become a political party in the US? Did Bernie Sanders write all these comments?
2
@Steve
Nobody is talking about taking away hard-earned wealth from families. The issue is about extraordinary wealth (which of course goes along with extraordinary ability to influence legislation). The whole notion of "marginal tax rates" to tax most of the income of people at a modest rate. Only when the earnings (not wealth as such) gets extraordinarily high is a high tax rate imposed on that extraordinarily high portion of income, and only on that portion.
Too many upper middle-class families get hoodwinked into thinking that the issues about extraordinary wealth are the same issues that affect them.
The Warren Buffets do not seem to be so worried about very high marginal rates. Don't worry for them.
2
@Steve
Good for your family achieving the "American Dream." But if the first of your three generations hadn't lived in an America with a highly progressive tax code and lots of policies to promote and protect the middle class, you might not be where you are today, no matter how hard you worked. Upward mobility is much more difficult now. Many people today work very hard but cannot get ahead because there's no living wage, no affordable education, no affordable housing, no public transportation, no affordable healthcare, etc. Why is this? Too much income inequality and economic oppression.
1
The review and proposal are so lacking in insight and analysis as to be comical. Points and questions:
1) the top 10% of taxpayers already pay > 50% of all the income tax, so stop with the “they are not paying their fair share”
2) the bottom 50% of taxpayers pay NO income tax - that’s right, NO share at all
3) if the income over $10 M was taxed at 70%, how much extra $ would actually be collected?
4) why not go to the tax simplification idea
A) 5 or 6 brackets
B) No deductions for anything. No local, mortgage, Child dedications - everyone takes responsibility for how and where they live! Every income earner is treated as a single (marrried people don’t pay any less or more for being married, so the penalty for being single is this eliminated)
C) All income treated the same. Interest, gains, hedge fund profits, W2 - all the same
D) Everyone pays a little bit at least
E) Can be filled out on an index card
F) And the brackets are;
a) income < $40K - 2.5%
b) income $40-70K - 7.5%
c) income $70- 100K - 15%
d) income $100K-$1M - 30%
e) income >$1M - 40%
f) income > $5M - 50%
g) income > $10 M - 52.5%
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@Andrew
A response to the point that the poor pay no tax -- this is an example of how middle class folk support the wealthy. What do I mean? Walmart pays its workers below a living wage. Instead of supporting labor unions or a higher minimum wage, which would force Walmart to pay what they should, we pay enough taxes so the poor, who cannot afford to pay taxes, don't have to. So you should complain about corporate welfare and not about hard-working poor people. Walmart's low wages are supplemented by our taxes. The poor are simply pawns in this game.
1
@Andrew I assume that your comment that 50% pay nothing at all needs a little updating. That group pays sales taxes, gasoline taxes, highway tolls, property taxes (whether they rent or own), a greater share of their income for Medicare and Social Security than those who earn $200K or more. The federal government is not the only government that uses taxes to provide needed services to all. So when you deflect the argument that half pay no income tax you may be technically correct, but they do pay a large chunk of their income in taxes.
I think a good campaign chant for the next election should be "SAVE AMERICA"
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Professors at UC Berkley...'nuf said
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@TDi'd
What do you mean?
Maybe it is time to learn to go beyond cliches. Are you satisfied with the L shaped distribution of income and wealth? I have news for you then, unless you are a highly educated AI specialist or a wiz Wall Street arbitrage trader or cosmetic surgeon you are going to be cooked soon. Or your kids and grandkids will be.
Time for redistribution (Sanders) and of course predestribution (Warren). Otherwise read up on your 1789 or 1917 histories.
AOC was elected to Congress by a handful of people in New York City who do not represent the interests and concerns of all Americans. Her demands to socialize, no to communize, America are extreme and must be defeated. AOC does not represent what America is about, nor what America was founded upon. Does she even know these things? Resist Ocasio-Cortez. Resist!
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None of this matters because according to AOC the world is ending in 10 years.
1
At last. An article that calls a spade a spade: Democratic policy is rooted in resentment and class envy.
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Don't liberals read ANYTHING??? Like say, FACTS???
IF you did, you would know that for 2018, households in the top 20% will have income of about $150,000 and they will pay 87% of income taxes, up from about 84% last year.
By contrast, the lower 60% of households, who have income up to about $86,000, this tier will pay NO, READ NO, net federal income tax in 2018.
5
Correct. If you are in the top 10% of wage earners (that includes all doctors, most nurses, all lawyers, most engineers, etc) you ABSOLUTELY are paying more than your share. The liberals think the share of your income being paid should be more, they know your share is already huge.
1
Excellent article.
1
I agree with AOC on her progressive taxation.
However, I dislike her extreme grandstanding. She is inexperienced AND her grandiose style hurts the image of Democrat moderates. She is most interested in her own publicity, seems to me.
She will be used as a "tool" by Republican strategists to scare Independents to vote for … other Republicans at the polls.
Since liberals only comprise 20% of the population THAT is a big deal if Democrats want to start WINNING elections.
Ralph Nader told us Al Gore was "no different" than George W. Bush. And Sanders followers told us the same with Hillary Clinton and Donald Trump.
I cringe whenever I see AOC in the news. Cringe!
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And let us not forget the US government needs the money. We are going into the hole at the rate of a trillion dollars a year. This is when we are having good times, what happens when we have bad?
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A legal maximum income is a massive infringement on freedom and the American dream. Leave it to the left to want to set a cap on human potential, and not realize or care what they are destroying. This will be a fight to the bitter end.
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DRS, did you and I read the same piece? Did you ignore the argument about oligarchs out do you simply disagree with our?
@Steve
Forgive me. It should read, "...oligarchs or do you simply disagree with it?"
Taxing the rich isn't a moral quest it is an economic imperative. In capitalism wealth all goes to the top. The system is designed (rigged) to make that happen. When too much money accumulates at the top there is no more demand and the economy stalls. Redistributing the wealth keeps demand up which keeps supply rolling which creates profits for the rich.
Trying to justify economic and tax policy by appealing to morality is a fools errand, the rich don't care and the poor hope to become rich themselves someday. We have to show how higher tax rates on the rich benefits everyone, including the rich themselves.
7
So economists from Berkeley (!) are trying to rationalize away confiscatory taxation as something other than forced redistribution. The underlying facts remain - someone needs to pay for undisciplined progressive largesse, there aren’t enough rich people in the world to satiate this sort of progressive greed, and the underlying assumption for this sort of policy is that “success” is always ill-gained.
3
Democracy or plutocracy. Hmmm, I don't know. Can I think about it a minute?
In the meantime, do please understand that the leadership of BOTH the Republican Party and the Democratic Party in the US have long since made their choice--the same choice by the way--and that choice wasn't democracy. That's why our representatives in Congress don't vote for policies the majority of the population clearly want; that's why we have the inequality you see all around you in this country; and that's why our cancer-ridden political system spews up a disease like Trump in reaction to the abandonment of democracy in favor of the representation of the interests of the plutocracy.
Democracy or plutocracy. The choice has already been made. Your confusion as to how things could be going so wrong in the US stems entirely from the fact that you don’t know this.
1
Despite all of the logic and evidence which argue for progressive taxation, the difficulty it faces is hinted at in its name "progressive." And no, that is not nonsensical, trivial or superficial.
Thanks to Republican smearing vilification going back to Reagan there is a bias against anything bearing the name "progressive." Like "liberal" and "compromise" Republicans have poisoned the word "progressive" and associated it with anti-Americanism. Too many Americans now have a guttural revulsion to anything labeled "progressive."
Which brings us to the heart of the issue: Americans need to get beyond their gut revulsion to anything "progressive," a response which Republicans have trained in them, like Pavlov's salivating dog, to be educated in the facts which support progressive taxation.
But that's the challenge. How do you capture the attention of Americans who have been trained by Fox and Fools to shut their eyes, put their hands over their ears and chant "socialist" every time someone says "progressive?"
If you could get Americans to listen to and weigh the facts they would easily support a progressive taxation. But that's a big "if." It is so much easier for Americans to grasp Fox and Fool's simplistic charges that "progressive" is anti-American than for them to spend the time needed for Democrats to make the case for progressive taxation.
A.O.C. and others need to find simple words and offer relatable examples to reach Americans before they go Fox and Fool on them.
So high tax rates are 'an American tradition'? Are you kidding? Yeah..and so is slavery for that matter.
Look, for better or worse, we live in a capitalist society where people are 'allowed' to become wealthy. In fact, many immigrants have come to America with nothing and made fortunes, from Andrew Carnegie(Scotland) to the many dotcom and biotech millionaires and billionaires we have today. Believe it or not, it's not a bad thing.
Even at a flat tax rate across all income levels, the wealthiest people will still pay vastly more dollars in taxes than us regular folk(like me). Rich people are not evil people, they're just rich and should not be disproportionately penalized for it. And that's exactly what these authors advocate. But then, given that they are from U.C. Berkeley, I guess it's no surprise at all.
5
Institutionalized greed destroys the institutions of democracy while maintaining its alluring and beneficent edifice. Witness Trump's appropriation of the MLK Memorial to justify himself against charges of racism. Reagan's trickle down was another form of faux populism in that it too justified a robbery with a promise of redistribution that never materialized. Plutocracy is slight of hand. Democracy is "Hands Up".
1
Oh please, don't make me sick. It figures that a piece like this would come out of UC at Berkeley. If you want to live in a socialist or communist country feel free to move. Free markets and capitalism built this country. It's also true that we must provide for those of our citizens who need assistance. It's a matter of both, not one or the other. Ocasio-Cortez (AKA, the mouth that walks) seems remarkably uninformed on a variety of issues. Her main concern appears to be aggressively pushing herself into the spotlight. She appears to be much like Trump in that she shoots her mouth off before giving intelligent thought to what she says. To those enamored by her statements, you can achieve nirvana now by moving to one of several European countries, all of whom are significantly dependent upon the United States.
4
Soak ‘em. Drench the greedy locusts where they stand.
AOC isn’t talking about the middle class or even the moderately wealthy, this tax rate would only affect a tiny fraction of Americans and it will neither break them, keep them from affording their opulent lifestyles, or prevent them from providing silver spoons to their spoiled seed.
None of us like paying taxes, but any of us would rather give up 70% of 100 million than 30% of 100 thousand. They have nothing to complain about, and if they want a lower rate they can get a job at Forever 21 and try getting by on minimum wage.
Most Americans are ponying up more than they can afford while the wealthy pay less than they can spare.
5
How can the NYTIMES allow so called experts to publish such misleading data. In 1981, the last year we had a 70% bracket, it applied to taxable income above $108,400 (single filer), a few hundred thousand in today’s dollars. That’s right, not multi-millions. The suggestion that high brackets would only apply to the mega rich is not, not, the American experience. Plus the ultra rich could hire fancy lawyers and accountants to dodge the high rates: in those days tax shelters were rampant. If you doubt this, look it up yourself, the data is readily available on the internet.
2
Let's start soaking Jeff Bezos the richest man in America if not the world's #1 billionaire. He owns or has intentions to own everything including the Washington Post. He doesn't need to be President, he already controls much of our lives. Perhaps breaking up his monopolies in so many different sectors would be a best bet. But then he is the voice of the left and funding of leftist ideals - that wouldn't happen too soon. Alexandria Ocasio-Cortez makes loud noises in Washington which I think can be very effective to get others thinking big out loud. But thinking and doing are two different things - let's see if she can "do".
2
Excellent overview, except it repeatedly uses the term “earners” and “earnings” to describe monies received by the wealthy. The reality is that most of that money since 1980 came about by changes to laws which favored the rich - they gamed the system and won. That’s not the same as “earning” millions of dollars a year.
2
Look, friends--I appreciate this debate. But, really, why do we insist on revolving it around some media super-darling who hasn't even had time to warm her seat yet? This AOC business is shallow; it is Beto O'Rourke on steroids. How long before we find piles of their neatly-crafted autobios in Costco?
Too late, our Oligarchs will never agree to pay taxes.
1
Every time I think Trump has no chance to win a second term Ocasio-Cortez pops back up in the headlines with some plan that tells me he can indeed succeed in 2020. If Democrats permit this woman to become the face of the party, they are doomed.
2
"It would be a hard government that should tax its people one-tenth part of their income."
Benjamin Franklin
1
If only we had a educated population. They vote against their own self-interest and are fooled by the shell game. This while the very rich loot the Treasury before their very eyes. They are coming for your Medicare and Social Security next. Republicans will tell you that the deficits are too high,,.... the trillion dollar tax cut aside.
4
It’s not a coincidence that the big push to lower taxes on the wealthy and decimate public education both started in the 80s. A public with less education—specifically less critical thinking skills, and a diminished understanding of the distinction between fact and belief—can be better manipulated by racism, nativism, and fantasy. The GOP played such a long con it would be impressive if the country weren’t a garbage fire.
Excellent essay. Let's hope the Democratic candidates are smart enough to frame the argument for a more progressive income tax in this manner. Through a broader lens, this election cycle should focus on diagnosing why the status quo is not working for the average American citizen and what can be done to raise the standard of living for the median family. The stakes in the next election are too important to have a repeat of 2016 with its puerile name calling, e.g. "deplorables", and the media's obsession with “who was grabbing whom where”.
3
And also, there are "persons" who make billions and pay ZERO taxes at all. Yes, I'm referring to greedy corporations.
10
It is undeniable that the Wilbur Ross Billionaire Tax break was an unnecessary giveaway to the rich by the Trump administration. But raising the tax rate to 70% won’t get the Dems additional votes in my opinion. In order to gain the higher ground in this argument the Dems need to couple a fair tax system with the flag and patriotism like the Republicans always do. So this is what I propose,
Repeal the Wilbur Ross Billionaire tax break and give it to the members of our Armed forces and their families. President trump recently lied to our troops in Iraq that his administration gave them a 10% salary increase. That as we know was a lie. The Dems can correct this lie and at the same time wrap themselves in the flag of patriotism that even the right would have a hard time disputing.
@Mike Lynch Ok, I'm holding my breathe to see when Nancy Pelosi, Chuck Schumer, Corey Booker, Kamala Harris, Elizabeth Warren, Joe Biden, and even Bernie "the Socialist" Sanders, announces their support for a 70% tax rate for incomes over $5M. There is a reason why the US tax brackets, even under Democratic administrations (i.e. Clinton and Obama) and Democratic Congresses (i.e. Pelosi and Harry Reid), top out at 1/2th of that rate (now 37%) and 1/10th of that income ($500K). Partially it is because the donor class would get hit by those taxes. Partially its because they would by hit - or at least hope some day to be hit - by those taxes. The problem is that Democrats are all talk. At the end of the day their are George H.W. Bush Republicans. (Or probably more historically accurate - Eisenhower Republicans.)
Ideally the super-rich would donate the extra money they do not need and will never use to federal, state and local governments. Since they don't, it makes sense to have very high marginal tax rates on those highest incomes. The money they make does not come out of thin air; it comes from the rest of the population. If we look today at Facebook or Amazon, for example, those companies would be worth nothing if no one used them.
4
I agree with the spirit of your comment, but even if all the world’s billionaires were as generous as Jesus it still wouldn’t be “ideal”: in order to become a generous billionaire you first need to exploit people and hoard resources. Only then can you dole a bit of it back out, call it charity, and name Lincoln Center Plaza after yourself. Ideally, there wouldn’t be billionaires in the first place.
McKinsey, not Marx, projected on the front page of the Times last year that fully 47% of all American jobs would be wiped out by tech by 2050. 47%, folks. Thirty years from now. At the absolute abyss of the Depression we had a mere 25% unemployed. There's no stopping the global capitalistic drive to enhance productivity and profits for investors with tech. Yet as more and more are unemployed, capitalism will commit suicide by decimating consumer demand. We had better start re-thinking our political economy very, very fast, or we're all headed for the same iceberg--rich and poor alike. Ocasio-Cortez represents the capacity of the largest generation in history, the Millennials, to start getting as radical as the march of tech should force us to get in public willingness to grapple with a coming growth in inequality which will make the past thirty years of mere globalization for fun and profit look like nothing. Boomers are now dying like flies. Their Trump-backing day in the sun is fading fast. It's not their world anymore, and young people will soon have the votes to get what they want politically--and it's not going to be Trumpism or unfettered inequality, I can assure you.
20
We can thank the Supreme Court's decision on Citizens United for some of this. However, we can really thank the GOP, Ronald Reagan and trickle down economics for much of our inequality today. It's a sign of how brainwashed people are that they refuse to understand how taxes work and that every time there's a tax cut there are programs cut. The GOP is close to achieving its final goal of making government useless for all but the richest. Government of, by, and for the richest is not the same as government of, by, and for the people, all the people, not just the ones with money.
In this reader's opinion, if the GOP wants to bad mouth government services it should have a provision in its "charter" that bars any office holder who is a member from receiving a salary that is government/tax payer based. After all, it's welfare and we know that the GOP is against welfare of any sort. At least that's what they claim in public. I think that the public statement ought to be matched by a public refusal to be on the dole. Isn't it their patriotic duty to serve after being elected? Shouldn't they be thrilled just to have a job? That's what they tell all of us when we complain about being underpaid.
7
Works well in Western Europe, especially Scandinavia; i.e., lowest poverty and crime rates ever achieved by any government at any time or place, but, here in America--well----mass transit, health care, infra-structure; well, so many things, we are practically in a third world mode. I hope we turn around and head towards other Western nations instead of barreling towards a Brazil-like State. Alexandria is right on the money. Is anyone listening?
17
The US is obviously not an oligarchy. I don’t support Trump, but it is clear that he was elected despite being vastly outspent by Clinton and despite most wealthy people backing Clinton. In office, Trump continued to advance controversial policies like the Muslim ban, repeal of Obamacare, immigration restrictionism, and trade wars, that were largely opposed by wealthier Americans (and most Americans generally). The Americans with the most political power are the nationalist minority, not the rich, as they are the ones driving the current policy agenda.
Looking internationally, it is also clear that inequality has little to do with democratic stability. Many Western European countries are experiencing instability despite being the most equal countries in the world. Japan, Canada, Australia, and New Zealand are more stable democracies despite higher inequality than Western Europe. Singapore and Costa Rica are stable democracies despite higher inequality than even the United States. The problems in our democracy are caused by tribalism, not money.
4
@AoyReally? Germany, France, England and Italy do also have instability mainly because of inequality.
@Aoy
What's the source of your rankings? According to the UN, Costa Rica ranks at 0.651 inequality, well below the United States, the Russian Federation, or Kazakhstan.
http://hdr.undp.org/en/composite/IHDI
What is most odd is that a more progressive tax structure is somehow dismissed as a radical or fringe-liberal idea rather than the very best of our heritage.
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The problem is that the Democratic Party won't make this sort of thing the central theme of their messaging. If they would all get together and agree to always talk about a few simple points they might actually be able to sway the American voters.
1) Tax rates favoring the wealthy are NOT the historical norm,
2) The high marginal rates being discussed apply only to the portion of an individual's income above that margin. They don't effect the income below that margin, anyone else's tax rates,
3) the recent increase in income inequality has NOT improved life for the average American or for American businesses (business formations are down, patent applications, too).
Unfortunately, the Democratic leadership is very conflicted about such a program. Probably because of their own personal wealth.
8
Also in need of reform arrest laws governing shell companies and limited liability corporations (LLCs), vehicles for money laundering, foreign ownership, and tax-dodging as well as shielding anonymous owners from criminal liability - for those who can afford the legal but marginally ethical advice needed to set them up. The real estate (speculation) industry is rife with such arrangements. (NOTE: We are talking about the big players here, drug dealers, Russian or Chinese oligarchs, Mideastern sheiks, real estate speculators who take depreciation tax breaks on property that is skyrocketing in value, etc.) So, there will still be plenty of loopholes for the ultra-ultra wealthy and marginally ethical to profit and “shelter” wealth.
8
LETS SOAK THEM!
FOR TOO LONG THE RICH HAVE HAD BETTER LIVES THAN THE REST OF US.
CAP INCOME AT 100 MILLION, ALL OTHER INCOME GOES STRAIGHT TO THE FEDERAL GOVERNMENT TO PAY FOR HEALTHCARE AND FREE SECONDARY EDUCATION!
CHANGE ALL FINES AND COSTS ON A SLIDING SCALE, MAKE THE BILLIONAIRES PAY MILLIONS FOR SPEEDING TICKETS AND EDUCATION FOR THEIR CHILDREN.
3
This is a false argument for many reasons.
1. A permanent income tax was first approved in the early 20th century, it required an amendment to the constitution, which says nothing about redistribution of income, it never would have been passed under such assumed purpose. Its purpose was to pay for Government and that alone.
2. The founding fathers were in general very suspicious of taxation. Hamilton said “If Congress can employ money indefinitely to the general welfare… The powers of Congress would subvert the very foundation, the very nature of the limited government established by the people of America.” And
3. During the era the authors quote of high marginal taxation, huge deductions were available to the wealthy, the actual rate paid by them was lower than today. There was no AMT, and many wealthy people used deductions available to pay NO tax at all.
4. Our current income tax system is actually the most progressive in the entire world, the top 1% pay 40% of the US tax burden. European countries with high marginal rates also have a federal VAT or consumption tax which raises more money but is less progressive.
5. High marginal tax rates have never been proven to be an effective way to redistribute wealth. Wealthy individuals have many ways to restructure their income to avoid a 90% marginal rate, including just shutting down that source of income. Sometimes they leave the US. There is no data that suggests these proposals would be effective in the real world.
15
@Rob - The Constitution said nothing about slavery either and the realities of a complex Democracy have little relevance to 18th Century that was then overwhelmingly agrarian.
As these professors of economics point out, empirical data has shown a direct and positive correlation between high marginal rates and stable and healthy economy.
I think the Millennials have had about enough of the whining billionaire, Laffer Curve, ‘trickle down’ economics of the fascist far right.
AOC is a harbinger of real and long overdue change that just might save us from oligarchy.
4
@RVN ‘69
No unfortunately AOC has clearly shown her limited understanding of even the simplest economic facts. Her 70% marginal tax on over $10 million in income would raise about $700 billion over 10 years, that’s not even a down payment on her $60 trillion plan. It’s a joke. The secret fact is “taxing the rich” to pay for these absurdly expensive entitlement programs can never work because there isn’t enough total income in those top brackets, even if you tax 100% of it. Sad that most millennials don’t get this. The burden for these huge programs will always fall on the middle class. A large consumption tax would be necessary to expand entitlements, that’s the only way they do it in Europe, 17-20% on all goods and services.
Of course Democrats don’t want to admit that and in general they oppose a VAT because it’s not progressive enough. But marginal income tax increases in the rich can never do the job.
AOC May have good intentions but her huge entitlement plans would destroy our economy, clearly math is not her strong point.
@Rob - Rob, you are an eloquent spokesperson for the Koch brothers and their pseudo think tanks.
You are correct in that marginal tax rates alone won't correct enough for off-shore accounts and other methods of tax "deferral" or evasion that the rich have created for themselves.
Tell you what, let's start with a 70% over the first three million in income and see if the economy flounders.
Maybe the John Galts of this world will go on strike, but I think as history has shown that the economy and people overall will have a greatly improved standard of living.
Viva AOC!
Right. Which is why the Trump GOP kleptocrats gave you the tax bill they passed. Because the last thing on earth they want is democracy in the USA. Further evidence can be found in their behaviour in Wisconsin and Michigan, where gerrymandered GOP rural legislators stripped newly elected Democratic governnors of their powers.
10
Interesting approach to assessing potential tax policies. Look at data? What a novel idea.
The accusation of "redistribution" is one of the oldest ones in the Republican play book. But with the GOP using the tax code to redistribute wealth into the pockets of its donors, I think it is only fair to redistribute it right back where it belongs.
But as the authors argue, the main point is that high taxes on ultra-high incomes take away the rewards for bad behavior. We've certainly had plenty of that lately.
AOC is on the right track.
42
I know this is the New York Times and readers are better educated but still I would do more to explain that the top marginal rate applies to whatever income is over that threshold , not the person but the income.
Too too many people don’t understand progressive taxation . I know I didn’t until I paid my first 1040 and I realized I had been lied to by the republicans . I had been told that you needed to make sure your income didn’t exceed the threshold for the next bracket or all your income would be taxed at that higher level
When I read the tax form and found out that no it didn’t work that way - I only paid a higher tax on any money I made that exceeded that level - this was all theoretical anyway because I was a part time minimum wage earner - I was far below that next level - I started to wonder what else they were lying about and that led me to becoming a Democrat
This misinformation about the tax brackets and the other lie about “writing off your taxes” and how that really works are at the bottom of a lot of bad money management and a better educated public would be less likely to be bamboozled
40
@Dani Weber
A good point. To use AOC's proposed rate, and to vastly oversimplify (omitting state & local taxes): It I pulled down $20 million, I'd pay a lower rate on the first $10M, say 50% -- so I'd keep half of that. I'd keep 3/10ths of the top $10M.
I could live quite comfortably for a long time on $8 million.
7
@Dani Weber,
"...a better educated public would be less likely to be bamboozled "
That's a key phrase there, if I ever read one. Better educated... like, starting in high school. But they don't teach things like Tax Code 101, or Balancing Checkbook 001, or How to tell the Difference between Insurance Polices, or anything like Civics and Basic Government, do they? So kids just out of high school and now (presumably) "adults" are simply bait for the wolves out to prey on them from Day One.
Better Educated... even later in life. Adults who are too tired to figure it all out anymore and don't/won't take the time to understand policy proposals ("politics") and the consequences to them and their neighbors. How to distinguish a "tweet" from a statement of reality.
And, yes, how to understand their tax forms.
That's enough for now, lest I venture further off topic.
6
@Dani Weber The Republicans lied to you? The progressive tax system is pretty clear cut and the concept hasn't changed for 100 years. Perhaps your California HS didn't educate you about how it works. You became a Democrat because you discovered how the tax system worked? Most people become Republicans when they figure out the harder they work the more the Federal and State Government take.
Frequently defenders of lower income tax rates for high incomes cite the financial and business incentives for high earners as a reason to keep marginal tax rates low. "Without lower marginal tax rates these these genius job creators will be less willing to take the risks do the extra work needed to power our economy to faster GDP growth." Would Bernie Madoff have done his scheming with a 70% marginal tax rate? Would Exxon have lied to us about climate change with 70% marginal tax rates? Would Michael Millikin have sold the greed is good and shareholder value over all mantra that decimates our economy today with 70% marginal tax rates? Would doctors write prescriptions for millions of dollars of unnecessary opioids with 70% marginal tax rates? Would schemers have sold millions of mortgages to unwitting buyers who couldn't afford them with marginal tax rates of 70%? Would Washington have thousands of lobbyists spreading billions of $$ to pollute our political system with 70% marginal tax rates? Not all financial incentives are good for our economy or good for our country. On this issue AOC is right.
19
The main point of Thomas Piketty's book, Capital in the 21st Century is that if the %age return on investment of *capital* is greater than the %age growth in an economy, capital will quickly or slowly gobble up a bigger and bigger share of the total economy.
When the percentage in the total economy of our country of the financial services industry (stocks, investments, insurance, etc.) exceeds manufacturing + personal and business services, then the economy is at a tipping point where manipulating wealth (paper pushing) creates more wealth than doing stuff and making stuff. We're there, just as the Dutch, the Spanish, and the British were in centuries past.
High marginal income taxes only address these problems tangentially. More wealth taxes, says Piketty, will address the issue more head-on: estate taxes and property taxes are the main wealth taxes in the US right now. . .
5
@Lennerd
In this connection, /Bad Money/ by Kevin Phillips (Viking Penguin, 2008) is worth reading. Phillips excoriates the overenthusiam for financial industries. See page 77, where he quotes Professor Merton Miller praising derivatives as "essentially industrial raw materials."
1
The statistical incorrectness of this article is astounding. One cannot compare 20% of the population to the 0.001% and claim equivalence.
As to the tax rates in the 20th century, it was easy to have high rates when the only economy was the US (remember a couple of world wars?). When the rest of the planet recovered, it was not the economic boom times anymore. People started moving for better economic opportunity. Which means more money in their pockets. It was in 1966 that expatriation taxes started to prevent earners from leaving with all the income. We are also the only country that still taxes foreign incomes above 100K, even if the person never visited the US that year.
Return to a 70% upper bracket, and to the lower ones where the lower middle class was paying something (under 86K household incomes do not pay Federal income taxes). Oh, and reduce the SSI and other government payments that proliferated over the last 70 yrs.
@George
You should spell out more what you think the mistake actually is. I don't see what you're talking about regarding comparing 20% of the population to 0.001%.
You're incorrect that the US was "the only economy." And, anyway, the article talks about high marginal rates in Japan! Why not actually read it and learn something?
7
We are presently living in a new Gilded Age, where a tiny, grotesquely wealthy fraction of our population holds most of the economic resources, and by extent, political power. This is inexcusable and unsustainable. Instead of a government that works for the majority of the American people, we have a government that is saturated with Citizens United dark money and blatantly rigged in favor of a domestic oligarchy. Our quality of life and opportunity has plummeted while costs go ever higher. It's an outrage. This cannot continue.
I am so grateful for voices like Alexandria Ocasio-Cortez and her colleagues. We are desperately in need of such voices and such policies. I am in my late 30's and have been pushing for these issues and waiting for leadership like this for years. Finally, it's arriving.
Let's face it, the "go along to get along", bipartisanship at any cost, milquetoast, "half a loaf" mentality of many of our older leaders has been a catastrophic failure. In their blind pursuit of comity, they've slow-walked disaster instead of averting it. Enough. It's past time that we break the toxic, zombie spell of Ronald Reagan and Trickle Down.
The wealthy and corporate interests have been strip-mining our nation for almost 40 years. It has to end. We need to re-invest in the United States again- to heal our environment, fix our infrastructure and education, and finally join the rest of the advanced world with a Medicare for All healthcare system.
29
@Dominic
AOC s colleagues like Bernie, who earned a million last year, wrote about 9 grand off his taxes in lunches, and chose to only pay SS taxes on the first 128 grand, the current cap, which he would like to get rid of. He could have paid the extra SS tax on all of his million, as a donation. If a Republican had written off "free" lunches to the tune of 9 thousand dollars, progressives would be screaming about "fat cats". BTW, it is not really Medicare for all socialists want, it is Medicaid for all. And it would mean enormous tax increases.
@Dominic
What MAGA really stands for: Making Another Gilded Age
It's nice to see that both parties don't believe in tying taxation to appropriations.
We have a government to actually do things. The decoupling of tax policy to budgets is something I can't support. As an example under the current administration I won't not be willing to pay anymore money because I don't believe in what our government is doing.
I'm willing to pay more if the Government is providing education, health care, regulations and good public policy. Those are very debatable issues and they are the crucial issues of the day.
Tax policy should be progressive. Progressive tax policy that isn't providing quality services, public policy and public institutions is nonsense.
The debate has to be what our government should actually be doing, how much does it cost and how do we want to raise the revenue to pay for it.
3
The tax policy "elephant in the room" is globalization. No country can set tax policy without considering the tax policies of other nations. Whatever you might feel about the Trump tax cut the capital inflow to the United States has increased. So much so that other countries are looking at similar rate cuts. This is something I have yet to see discussed by any "expert" op-ed writers.
1
Corporate tax rates have been falling throughout the advanced economies for decades. In a way, the US held out the longest (having the most large domestically headquartered corporations) maintaining an at least a theoretically high corporate tax rate of 35%; although even many domestic corporations found a way to avoid this high level of tax. But eventually even the US had to lower its corporate tax rates to mirror the rates in other developed companies or continue to watch as corporations parked their profits overseas. If that problem is not addressed, a 70% marginal personal tax rate will not work. Whereas the merely affluent (doctors, lawyers, software engineers, etc...) are not tremendously mobile, the tremendously wealthy are very mobile. If people move from New Jersey to Florida to reduce their marginal income tax rate from around 10% to zero, will not the extraordinary rich (from hedge fund operators to movie stars) move to the Cayman Islands to reduce their marginal income tax rate from a 70% to zero? And if the income taxes on a $10M income drops by $2M or $3M, that buys an awful lot of sunscreen and mojitos. (Or are mojitos passé now?) Imagine the new market opportunity for virtual presence robots?
1
Ok. But isn't there something immoral, tyrannical and patently unjust in taxing anyone over 50%? We're all rightly upset that some government workers are now working without any pay so if the government takes the majority of someone's earnings (of any tax bracket even the top one) shouldn't we be similarly upset? A country founded on individualism, democracy, and capitalism, should be wary about something that looks like collectivism. Of course DSA types like AOC aren't very worried about this optic but surely they can relate to the 13th Amendment's abolition of involuntary servitude. You'd think they could relate to the oppression of working for the company store.
5
@Louis James
I would say yes if the 50% tax starts as soon as the 1st dollar but it starts after $10M, I can hardly think that being marginally taxed at 50% is servitude.
3
@Louis James -- Isn't there something immoral and patently unjust when 26 billionaires own the same wealth as the poorest 3.8 billion people?
2
Yes, by all means take $700,000 from every $1,000,000 made by people with incomes over $10,000,000....I would be very interested in what transpires.
1
@wallace
If I take what you wrote literally, it totally misunderstands what the article says.
This is an excellent column that should be required reading for citizens. Too bad there wasn't room to talk about the link between high marginal rates and greater pretax equality, which is an important part of the argument.
Thanks to the profs and to the Times for this!
6
@John
It's a bit more subtle than that, señor, but only a bit: give it just a couple of minutes of your attention, or read the article, or read just a few of the comments, or read AOC's tweets on the subject, and you will surely come to comprehend the meaning of the word "marginal" when applied to tax rates (and maybe even the difference between history and hysteria). As Mark Twain liked to point out, the difference between lightning and a lightning bug is just one little word, but it's significant nonetheless. Pitchfork-wielding talking-points mob-think, though wonderfully easy to do, is bad for your brain, bad for your self-esteem, and bad for your prospects in the world.
Agreed.
I think generally folks have to realize that vast majority of wealth generation of the past ten years was "un-earned" and the root cause driving the surge in populism on left and right, here and in Europe.
When you get rich by simply squatting on assets, when the central banks print unlimited money to the tune of trillions, where the 1% get most of it, we have a problem.
On the flip side, we allow un-checked low-skill immigration further squeezing the poor with more competition for their already dwindling job opportunities, we have a massive problem.
We need a third party to: Claw back the un-earned inequality and to stop low-skill immigration.
3
@Mehul Shah There is no such thing as unearned wealth.
@Left Handed
When Netflix stock spikes 1000%+ which only happened because the central banks depressed interest rates, and made stocks the only game in town,
This company has boatloads of debt and would have not have thrived to the extent it did if not for the selective generosity of the central banks.
This appreciation is un-earned.
Income inequality is THE most important domestic issue (as the environment is the top international issue). Alexandria Ocasio-Cortez is using her bully-pulpit effectively to champion on this issue and we need her progressive energy and voice to make this a top Democratic priority. The regressive changes in our tax code from Ronald Reagan, George W. Bush and Donald Trump have us on the threshold of an autocracy of oligarchs. That is the battle currently being waged by the Republican Party that threatens our Constitution as well as our very economic and social well-being. We have, as John Edwards said, "Two Americas--one rich, one poor." Teddy Roosevelt realized the threat posed by the Robber Barons of the Gilded Age a century ago and created the progressive income tax that is at the economic heart of our democracy. Unless we return to that progressive tax system we will be controlled, as we currently are, by a kleptocracy of the wealthy.
11
Remember that these richest people make most of their money in the markets, not by working. That's not to say that many don't work hard. But others inherit their wealth and will continue to be rich no matter how hard they work or don't work. By increasing inheritance tax on the richest Americans (not others), we ensure that everyone comes by most of their money through work, thus decreasing inequality and answering those conservatives who argue that if you have money, you've earned through merit and you are entitled to it. Let it be merit then. Your own merit, not your grandfather's.
5
Inequality is a statistical abstraction. No one actually "feels" income inequality. It is used merely as a justification for a preferred agenda - higher taxes (on others).
What is "felt" is continuously growing government that relentlessly extracts more of one's income and delivers less.
The fact that some are paying more/less in taxes is irrelevant to the dissatisfaction felt by those left out.
Instead of desperately looking for new revenue, Progressives should be prioritizing what government needs to do.
Before deciding what more the government should be doing, let's address what it *shouldn't* be doing.
There is much more waste and unnecessary/counterproductive spending that could be curtailed than any high tax rates could ever garner.
Do that first, and ask for more in taxes when that is accomplished.
4
Did you read the article? It isn’t about revenue. It isn’t about what governments should and shouldn’t be doing. It is about curbing inequality so we don’t have power resting in the hands of a few — it is about how to remain a democracy.
11
@CPBrown
"Inequality is a statistical abstraction. No one actually "feels" income inequality. It is used merely as a justification for a preferred agenda - higher taxes (on others)."
What an incredible piece of ignorant hogwash.
40 million Americans live in poverty.
Babies born in America are less likely to reach their first birthday than babies born in other wealthy countries in the Organisation for Economic Co-operation and Development (OECD).
The reasons the U.S. has fallen behind include higher poverty rates relative to other developed countries and a relatively weak social safety net, says lead author Ashish Thakrar, medical resident at the Johns Hopkins Hospital and Health System.
“The poorer children are, the worse their health outcomes are,” says Thakrar, whose team found that poverty among U.S. children has been higher than in the 19 comparable OECD countries since the mid 1980s.
http://time.com/5090112/infant-mortality-rate-usa/
America is a disgraceful oligarchy with the greatest healthcare rip-off system in the world.
Wake up and smell the inhumanity.
82
@CPBrown
There's an overwhelming amount of evidence that people very much prefer not to be unequally worse off to those they share a society with and see inequality as a salient feature of their lives. Your claim to the contrary is plainly wrong, as even a little reflection would illustrate.
You might think there's nothing wrong with inequality as such, perhaps because those people feel mere envy, and you may think mere envy shouldn't count for anything. (This is the more reasonable point in the realm of the one you're making.) But the idea that people don't experience what it's like to be unequally worse off to others and generally find that undesirable is hard to take seriously.
I'd say that people sometimes feel reasonable envy when they correctly perceive that society is structured to benefit some people at the expense of others on the basis of their social class, and that a society is worse in at least one way if someone can reasonably feel envious toward others.
3
So the Times finds some left wing college professors from Cal-Berkley (surprise!) to approve of confiscatory taxation rates. History shows us that these rates will slide down into much lower levels. In 1978, when we were married, the marginal tax rate for married filing jointly for a taxable income of $35,200 was 43%. Multiply that by the 285% rise in the CPI since that time and a married couple filing jointly making less that $100,000 would be taxed at that rate today under those tax brackets. That level of taxation is obscene. That isn't the "tippy top" by the way, Miss Ocasio-Cortez. Oh, and state income taxes, property taxes, and a myriad of other taxes don't figure into the mix.
The left will quickly realize that their utopia won't come from higher marginal tax rates. Then, those higher tax rates will quickly filter down the income ladder; they always have in the past.
10
@Ron Wilson
I disagree. 43% of all income over $100,000 is not obscene at all, and people earning over that amount won't stop living blessed lives if taxed that amount at the margin rather than 30-something %.
Also, the AOC suggestion is for a marginal rate of 70% on *very* high earners, who are in the tippy-top.
1
@Ron Wilson Excuse me, but the current right-wing administration just raised my taxes (and cut many of my deductions) to fund a windfall for the very rich. What is the justification for that? At least the left is shooting for Utopia.
@Dominic Well, Dominic, if you are on the left you shouldn't mind paying higher taxes. But, as a matter of point, the standard deduction was increased to more than offset the elimination of personal exemptions.
Besides high taxes on oversize yearly income (that must include unearned income) there is another effective way to reduce inequality and that is to tax wealth above some level (similar to a property tax). That need not be very high but as long as it is higher than inflation it will reduce accumulated wealth in the long run. A side effect will be that the very wealthy will try to hide their wealth but on the other hand it will reduce obscene displays of wealth.
4
The Greed Over People party has two core constituencies to it.
The first constituency falls into this sociopath category:
"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."
- John Kenneth Galbraith
The second constituency falls into this sociopath category:
"If you can convince the lowest white man he's better than the best colored man, he won't notice you're picking his pocket. Hell, give him somebody to look down on, and he'll empty his pockets for you."
- Lyndon Johnson (lamenting about American voters)
Put the these two sociopath categories together - along with gun nuts and religious lunatics - and the Russian-Republican Party has created the modern American feudal state with oligarchs shoveling Randian garbage down America's throats for 39 years.
Most Americans support reasonable socialist Democratic policies like single-payer but many refuse to vote for Democratic candidates out of white spite and acute chronic Pachyderm Spongiform Encephalopathy.
Voting against one's economic interests is a favorite pastime of the brainless heartland.
"There is a cult of ignorance in the United States, and there always has been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge'".
- Isaac Asimov
165
" .. Voting against one's economic interests is a favorite pastime of the brainless heartland .."
Hey, thanks for repeating HRC's 2016 presidential platform! How'd that turn out?
Please keep repeating that! Thank you!
#WarrenDolezal2020 -- (D) you can believe!
Inequality has not to do with Tax Rate on "Wage Income". Its about Real Estate and how those types of investments are taxed. Take a look at Detroit. Landlords have owned building for 30 Years, not investing any real money and not really building neighborhoods. Essentially Slum lords with minimal Real Estate tax because it's a slum.
In Year 31 per se, there is a turnaround and those Landlords Cash out.
Follow the money. There was no benefit to the greater good, but the the taxes on the transaction and probably non existent.
2
Thank you. Perhaps, more people will now not automatically balk when progressive tax rates on mega-earners are brought up. This is not "soak the rich" socialism by an undeserving underclass. Progressive tax rate are a defense of democracy against the political power of super concentrated wealth. Individuals with nearly unlimited income will inevitably seek to use it to influence society and thereby politics personally. Even the most well-meaning plutocrats will involve themselves in boondoggles and disasters with the best of intentions. Those with the worst intentions will seek to subvert democracy to their will and use their vast capital to do so. By eliminating the reasons for corporate culture to personally compensate any individual above a certain threshold progressive tax rates have, as this piece so admirably delineates, historically enabled superior growth rates in GDP as compared to low or flat income tax rates. This is the power of egalitarianism. The profit motive being regulated by progressive tax rates is not some "socialist" plot against wealth. Together (engendering a sincere belief that everyone is contributing their fair share and playing by the same rules among a nation's citizens) they are, in actuality, the platform on which great growth historically occurs in a healthy, egalitarian democracy.
7
Two points not mentioned in this enlightening piece,SOCIALISM and Citizens United , discourage any move for higher taxes for the ultra rich.
Socialism is seen as a bugaboo to economic health. However, the Scandinavians with much higher taxes and a stronger safety net are doing well, very well with a lot less resources than America. Strong, healthy, innovative corporations exist there and thrive. And healthcare, good schools, for starters, are not a fantasy as a middle prospers in a high tax arena. This is bad?
And Citizens United gives the ultra rich an atomic weapon to oppose moving masses of citizens into the middle class.The advantage Citizens United gives is immeasurable. David, without even a sling, against a lean, swift. Goliath using the best of Madison Avenue and mass media. The very people who would be aided by good healthcare system, schooling are bombarded by the Socialism straw-man argument. Articles like this one are buried by cries of confiscation, economic killer and the ultimate insult, Venezuela. And those shouts are believed.
As our population ages, Artificial Intelligence replaces more and more jobs, 20 trillion in debt, the need for higher taxes is not a luxury for discussion but a call for action.
9
@Sly4alan Scandinavians tax the middle class to make them pay for the services they want and utilize. I don't think you are willing to do the same.
@Left Handed
I reside in New York. You know, one of the states Trump and the Republicans stuck it to in this last 'TAX' cut. So please don't tell me about paying more or my willingness. Maybe I should move to one of those grubby low tax states that steal money from those states who pay more than their fair share. You know, the ones that send a dollar to Washington and get back a buck and a half.
I'd gladly pay more for what the Swedes, Danes, Finns get with their tax dollars. Where going to the doctor is not a choice between eating that night or not. Or where bankruptcies are not caused by medical problems. Or where a hospital is two hours away because states did not choose Obamacare and the local hospital closed. Or homelessness. Or trains . Or roads. Or bridges. Or wifi. Or schools. Or teachers are professionals and paid as such. Or the government stays open.
Wonder why the happy quotient so high for these heavily taxed people?
Democracy is expensive. Cheap is as cheap gets.
1
Personal and corporate income tax rates are not the only ones that need to be reformed. To start with, there is the egregious "carried income" loophole that allows hedge fund managers to be taxed at giveaway rates. The country does not lack for private capital - economists talk about a "savings glut" - so there is no need for a special low rate on capital gains. The failure of record low interest rates in Europe, Japan and the US to promote increased investment as well as the similar failure of the last round of tax cuts both demonstrate once again the failure of supply-side economics. What the country needs is more government investment to spur demand, and there is plenty of room to support this with higher tax rates in many areas.
The very common claim that Social Security faces a "crisis" is completely false. Any shortfall in projected income to cover benefits can be made up by extending the tax base to include capital gains, dividends, interest and rents, as well as raising the cap on wage/salary income. I doubt if most people are aware that these types of income are not taxed for SS. The Democratic party should be sponsoring polls to demonstrate support for increasing the tax base for SS, not falling in with talk of privatization or cuts.
8
@skeptonomist - Only .0011% of tax returns use 'carried interest'. They pay at the capital gains rate of 20% plus 3.8% Medicare tax. If they paid at the ordinary rate, they would pay 37% instead of 23.8%. The difference on such a small number of returns would only raise a few billion in revenue.
2
@Jonathan...., Since when is "only a few billion in revenue" not important given he challenges our country faces. I believe it was Everett Dirkson of Illinois who said something to the effect" a few billion here and a few billion there, and pretty soon you are talking big money"
The entire zillion-page US tax code needs to be scrapped and replaced. A flat-tax rate applying to all taxpayers regardless of what they earn would be the way to go. I am not sure what the rate would be set at, but 10% or so might be right. There would no deductions or loopholes at all. Instead of withholding from paychecks, every taxpayer would be sent a monthly statement that he would have to pay, just like mortgage or rent payment. This would force folks to see just how much money they are turning over to the government, and probably make them more politically active and lead to more people voting at election time. Wouldn't this help strengthen the "social compact" the authors keep referring to?
4
@mpound - the authors are addressing the problem of inequality - a flat tax would worsen inequality.
4
@mpound - The real problem is determining exactly what 'income' is. It's easy enough if you have a salaried job, but if you own numerous buildings and businesses, and employ squads of accountants, it may not be so obvious.
1
@mpound
No. Re-read the article.
This is an enormously important piece that I almost didn't read because of the teaser title. It isn't so much about AOC - come on, she's not only one talking about raising taxes for the rich - but about the danger of gross income inequality. A tax structure that helps the richer get richer (often by contributing nothing) and pass on their wealth to their offspring (who have done nothing to earn it) is antithetical to democracy and the concept of meritocracy, and the scariest part is that wealth and the accompanying power grow exponentially.
18
I hope it is her or someone like her who gets to be the next president. Since Ronald Reagan the Stockmarket wealthy have gotten one tax cut after another at the expense of the person having to work harder and harder to make up for those tax cuts. No new jobs were ever created via those wall street tax cuts.
I blame the NYT and news outlets who do not explain better who really benefits from those cuts. Stop saying it will trickle-down to the worker. It never does. Instead, corporations applied the tax cuts to buy back stocks and to pay their stockholders. Corporate taxes fell from the high of about 70% to 10% on average? Taking into consideration tax loop holes and of shore tax heavens. In the meantime those who work for a living may see a tax cut only to have prices go up somewhere else. All to fool the hard working person. NYT and I read it daily, together with MSNBC, CNN etc. I don't watch Fox news. They, together with the Mercer family, the Koch brothers are the enemy of the working class. It is sad to know that still too many are blinded by these liars and twisters of truth. Wall street (though I am also invested in it) is only there to make money for the (old Britain called them gentlemen, when they make their money from investments). Workers made little money during those times. Is this what we are returning to?
Unions, who used to protect many workers, have been pushed out since the Reagan era, so that only about 8% of US workers have that protection.
9
Not only will a higher marginal tax rate improve democracy, it will improve capitalism as well.
What those who oppose increased taxation for the ultra-rich don't seem to recognize is that our nation needs a robust middle class to keep the engines of capitalism moving along. What made the "golden era of capitalism" so successful was a strong (unionized) middle class, with purchasing power. We now have a nation where the majority of workers live paycheck to paycheck, while the most wealthy among us are immune from the effects of inflation, recession, government shutdowns, and layoffs.
Capitalism is about individuality and the myth of the self-made 'man,' so it's no wonder that many Americans are opposed to higher taxes on the wealthy. Ultimately, however, this greed is self-defeating.
11
Unfortunately for this thesis, the few billionaires collecting huge incomes are not the problem. They are statistically insignificant, and if they disappeared tomorrow, society would not be much different. The article practically admits as much.
The inequality most people feel comes from the affluent professional class, those making $150-800K. There are huge numbers of these people, and they are soaking up a large percentage of the wealth and income. There are enough of them to gentrify whole cities, and push out the middle class. This is what most ordinary people find annoying.
They also pay a very high percentage of their income in tax, especially in states like NY and California. A couple making $500k might pay $125K in Federal income tax, $35K in FICA, $40K in state income tax, and $25K in property tax. These taxes are the bulk of both state and Federal revenue.
In return for paying all the tax, these people get to run society - law, medicine, education, and government. They tell everyone what to do every day, right here in the pages of the NY Times. While some of them talk a social justice line, it's not in the cards for them to give up their money and power.
4
@Jonathan..."it's not in the cards for them to give up their money and power."
Why should a couple who makes 500k "give up" the salary they've earned?
1
@Jonathan I would not say that the Koch brothers, Alderson and others of similar ilk have no influence on American politics and that influence does not depend on their wealth.
1
@Jonathan - Oxfam recently reported that 26 individual own as much as half the world's population; half the world's population is no "blip", and the money of those 26 would double the wealth of 3.4 billion people. I don't know about you but doubling one's wealth or 3.4 billion people are not statistically insignificant.
2
The super-rich potential oligarchs don't make money in the way that can be taxed as income. They make it as unrealized capital gain. We need a stiff estate tax to break up dynasties, but high salaries - athletes, movie stars, even CEOs -aren't the problem. Inequality today arises from the capital-intensive nature of American business, as the labor component is off-shored or done by capital assets called robots. Taxing high incomes is fighting the last war.
5
Measuring the success or failure of our political and economic systems in terms of income inequality is flawed. Income inequality exists because people are not equal, not because they are not taxed enough. We do not have equal IQs, equal temperament, equal ambition, nor are we born into equal environments.
We should measure our success and failure in absolute terms. Instead of comparing tax rates over the past 100 years, we should measure our success on the profoundly higher standard of living that the average person enjoys compared to 100 years ago, even 50 years ago.
We are all much better off not because the movers and shakers of our economy were taxed so high, but because of the contributions those private individuals have made to meet the demands and needs of our people. Taxes interfere with those efforts, and that will jeopardize standards of living in absolute terms.
Income inequality is just something politicians talk about to generate more revenue for themselves. It’s an empty, misleading promise that at least partially panders to people's jealousy of other people's success.
There certainly is room for income taxes to increase, and they will need to increase on not only those with millions of dollars of income but all affluent households. Don’t let the Ocasio’s of the world fool you, the math just does not otherwise add up. But more taxes are not going to change inequality. It will just give Washington more power and influence to make more empty promises.
5
RE: Inequality
Economics is a subset of culture, so lets examine how different cultures deal with the pay gap between CEO's and average workers
Numbers please:
Country CEO salary in units of median worker
US 265 x average worker income
UK 200 x average worker income
Netherlands 170 x average worker income
Sweden 70 x average worker income
Norway 20 x average worker income
Note: A difference of 1,350 % between Norway and the US of CEO income vs median worker income !
Q: Are there laws in Northern Europe that limit CEO incomes ?
A : No. There are no such laws
As I stated, economics is a subset of culture. If economic laws applied independent of culture, the CEO to average worker ratio would have to be the same in all countries
It is not. The same considerations apply why austerity works in some countries and not in others. l
10
@Woof You seem to be missing the point. There are no "laws" that limit income, to be sure -- but there are high marginal tax rates that keep such incomes down, among other ways by incentivizing business leaders in countries like Norway and Sweden to reinvest money in their businesses rather than take it out as personal income. These rates kick in at way lower levels than what AOC is suggesting. E.g. in Sweden the marginal tax rate is over 50% for the equivalent of $50,000, and close to 60% over $65,000.
2
@Woof
Quick - name one Norwegian world-class entrepreneurial company that employs over 100,000 people.
No googling allowed.
"Google LLC is an American multinational technology company that specializes in Internet-related services and products, which include online advertising technologies, search engine, cloud computing, software, and hardware."
1
@Woof - you stumbled onto the flaw in the article while trying to support it. In tiny extremely rich countries with high tax rates, CEO's take more compensation in life style maintenance and in stock futures than payroll; CEO get more payroll in low tax countries. That is how it was in the US during the time of 90% tax. There are more high paid CEO's on the island of Manhattan then there are in all of Norway. More than half the Economy Norway is owned by the government. Norway produces nothing except dirty carbon from Oil.
1
Changing tax rates on earned income alone (income derived from salary or wages) overlooks the real injustice in the system of taxing unearned income (income derived from activity not related to labor) at rates that are nearly half the tax rates applicable to earned income.
The bristling by a current political class that protects the wealthy from any suggestions of higher marginal tax rates on the dollars over ten million in earned income is intended to distract informed taxpayers from the reality that the very highest tax rates on capital gains and on corporations (people after all) grant those taxpayers a favored taxpayer status. Protecting that special treatment is the reason why the super wealthy together with corporations work so hard to control and dominate the wheels of democracy.
It's just a matter of time before the GOP and corporate Democrats propose extending taxes to all social security benefits and all employee fringe benefits. It was Reagan, after all, who subjected half of social security benefits to taxation for the first time to protect his tax cuts for the favored class. The current crop of GOP and corporate Democrats will never betray the rich by examining the inequities of a two tiered tax system that punishes wage earners and shields owners of capital.
6
Thank you Professor Saez. Thank you Professor Zucman.
Best article I have read in The Times for at least a decade.
You are absolutely right about the ills of oligarchy. I love your taxation proposal to cure it.
We are going downhill fast as a society and as an imperial power as anyone with half a brain could see if they look.
Your friend and colleague Professor Piketty in his wonderful book Capital in the Twentieth Century gave us many examples in the history of this country (plus Europe and Japan) of the phenomenon of wealth and inequality. Professor Scheidel in his brilliant The Great Leveler goes back even longer in history to explain what went on. I like your proposal to level the field better than devastating environmental catastrophes, plagues and World Wars. I hope we can get there your way by electing people like Ocasio-Cortez into government.
I would like to make a request on behalf of progressives in this county: please help Bernie Sanders and Elizabeth Warren in their work if you are not already. As directly and as thoroughly as humanly possible. We need to turn things around and your help is so essential. I thank you in advance.
6
All I can say is, good for AOC! We need more like her in Congress, and fewer McConnells.
35
@Christy
Correction; NO McConnells.
Thank you.
2
Attention and efforts also should be made to treat all income alike for taxation (while retaining progressive rates). Why should the "hard working" people, whether plumbers or pulmonary surgeons, be taxed at a higher rate than hedge fund managers or trust fund babies?
Not to mention that doing so would be the single best thing to simplify taxes.
5
@Jim S.
So really not "treat all income alike for taxation"
I like where this is going. But if we really want to achieve equality and the best social services, we should raise taxes to 100%. On everyone. That way we will all be equal and Congress can put all the money to the best use for everyone's benefit. Based on their logic, I assume the authors will be 100% in favor of this.
4
@Michael
Thank you.
When 26 Billionaires Own The Same Wealth As The Poorest 3.8 Billion People we have a problem. The few wealthy friends/relatives I have---they are not ultra-rich--have the attitude, that it is there money, they earned it, they should be able to keep all of it---even though there is no remote chance they could spend it all. At the same time, they live in a gated life-their homes are behind gates, their children go to private schools, they retain private doctors, their shopping is done by some service---I could go on, but they have traded in their earned money for a life removed from the public's around them---this manner of living and thinking is not good for a democracy, which, thrives in environments where all citizens participate in advancing the common good.
12
@Amanda Jones
Why shouldn't they be able to keep it? You are vilifying high wage earners, who already pay more than their fair share of taxes in this country, and who earned their money by working for it. I get it-if socialists dehumanize and vilify high wage earners, it "justifies" taking their money away from them. FYI, high wage earners do not get to keep all of their money. Even this article says that many pay 50% in states such as CA and NY. How high earners choose to spend money they earned is their right. This is where socialists are dishonest. The huge tax increases on multi million dollar earners will open the way to huge tax increases on high wage earners. You want to confiscate other people's money and you say those who earned it are greedy? Who's greedy?
The authors are right to link economic inequality to the corrosion of the social contract that sustains democracy. But they are on shaky ground in saying, "The view that excessive income concentration corrodes the social contract has deep roots in America." To the contrary, this attitude has shallow roots. To me, the attitude seems more likely to have been nothing but a 20th-century blip in America's continual obsession with and admiration for wealth. Yes, we have contempt for titled aristocrats, but they haven't been the real owners of wealth ever since the 16th century and the rise of the mercantile class.
From the start, our "spirit" was overwhelmingly mercantilistic and Puritan. While the Puritan side admired hard work, the mercantilist side admired the accumulation of wealth; the two work together very nicely.
From Puritanism, Americans learned to believe in the myth of the "self-made" man, including the idea that all wealth is deserved. We see wealth accumulation as the highest human achievement possible (aside from--maybe--fame). Look around and we see how the word "success" now equates with "wealth," and being wealthy is universally admired--far more admired than being educated or learned, or being a scientist, teacher or artist.
It's grotesque, and sick, even, but our admiration for wealth and wealthy individuals is boundless and growing, and unless this attitude changes, Rep. Ocasio-Cortez's idea is a non-starter.
9
The phrase "regulate inequality" bothers me because it suggests heavy-handed government intrusion into the free enterprise way of life that Americans prize so highly. A less contentious approach would be to highlight the steep costs of income inequality, and then frame the solution around the phrase "protect equality." After all, wasn't the United States founded on the idealistic notion "All men are created equal?"
2
@Charles Michener
America was actually founded upon slavery, imperialism, Native American genocide and freedom from religious insanity.
Of course the founding words sound nice, but one should note men's actions in conjunction with his spoken and written words.
Time for modern feudalism and oligarchy to become extinct.
Canada, Western Europe and Japan have a blended economy that balance's society's interests with 'free enterprise'.
Excessive and rapacious greed deserves regulation through higher taxes.
The American 0.1% tax code Christmas buffet needs to end yesterday.
17
@Charles Michener
The authors also address market inequality, which can be further developed into inequality between those who only have their labor power to sell for wages and those who own the already concentrated and centralized technologies, machinery, buildings and so on. Monopolies are a reality against which even small capitalists frequently fail because they don't have the massive amounts of capital to compete against giants (see telecommunication industry, for instance). inequality is built in at the productive level. Taxes are only a superficial phenomenon of this deeper structure.
1
@Charles Michener
Not arguing with the semantics of your argument. A kinder, gentler phrase may sound less off putting to many, but by no means is the free enterprise system free from the government.
Companies have always relied on passing off their externalities to the public in order to increase their profits. Pollution? Bah, we'll make the government clean up our mess. Transportation? Bah, we'll let the government set up and manage transportation systems. Employees? Bah, we think they're an expense and when we're done we'll let the government take care of them.
Don't forget the ridiculous race to the bottom to encourage companies to move to cities and states. These governments lavish companies with incentives and tax breaks that provide no local benefits. Instead, those governments would be better off providing cash payments to all of their residents.
The problem is that there is no "free market" system and in fact one could argue that "heavy-handed" government intrusion into the market has made the playing field unlevel.
2
Who actually believes, that a CEO deserves 600 times the salary that a worker on the line does? How can this ever be justified? Truth be told, it should be the opposite, the ones who works harder. If government does not step in then this would never be rectified.
14
@LFK - From an strictly economic point of view, it probably is justified. Who would you rather have, a CEO like Jeff Immelt whose bonehead decisions caused GE to lose hundreds of billions of dollars in market cap, or a sharp operator like Jamie Dimon, who insured that JP Morgan made a profit in every quarter of 2008 and 2009, while other banks went bankrupt?
Of course, the stockholders and board who paid Immelt a huge salary and believed his BS are now feeling blue. But in the modern business world, you can't pay a good CEO enough.....if you can find one.
2
@LFK. CEOs are just hired hands...they did not create the company, hold no patents, no copyrights/TM Reg...or anything...they are a dime a dozen and can easily be replaced from a number of executive agencies, nothing special about them, and nothing can justify their ridiculous rates of compensation and their equally disgusting golden parachutes even when they fail miserably...that is not how the private sector works and these guys (most of them are men) are juicing the corporate system for themselves and a handful of board members. Not OK and clearly not good for American workers who literally make it all possible in the end....do these guys even know how to make their own coffee? Seriously, they are just widget counters and hold no special knowledge....other than manipulating the bottom line and pretending to create the illusion of profits...always at the expense of labor and ultimately the entire economy of the American people.
This is more of the same foolishness we've been seeing in the Times. To look at the history of 30 - 100 years ago is disingenuous; the conditions were much different then than now. The most recent example, from 2012 in France, was a dismal failure and was rescinded after a year.
If reducing inequality is the goal (a worthy goal in-and-of-itself), more could be done by eliminating loopholes, deductions, and carried interest, and raising/eliminating the cap on which Social Security taxes are levied.
Raising the marginal rate will just cause people to move their money out, as France discovered. It's just another example of the superficiality of AOC's "policy" proposals; she seems to think if it sounds good to her, it must be so; remind us of anyone else in the federal government?
4
Danny, your good points don’t negate her points.
Let’s get the facts straight. The US had a history of higher rates, not just for the ultra rich. The last time we had a 70% bracket (1981) it applied to single filer taxable income over $108,400, which would be a few hundred thousand today; nice, but hardly the ultra rich. So watch out for the old switcheroo.
4
The concept of saving democracy with crazy taxes is ridiculous. Our Democracy was founded and survived without Federal taxes until the Revenue Act of 1861. Upon paying for the wr and reconstruction taxes expired and not re-introduced until Woodrow Wilson. While the federal programs of the 1930's were the foundation for moving forward as a nation, there was no call to create taxes to resolve international environmental issues.
If our country wants to solve China and India's air pollution, let the country vote on it., plain and simple. Someone elected with less than 125,000 votes is hardly the representative of a nation or the survival of Democracy. Sounds like the economic professors from California need to take some history lesson.
2
@Matt
taxes are only a portion of the surplus value. Value is created globally by workers and transferred to the already wealthy. So boundaries don't really support the idea that value is solely created within one country. Never existed. England would not exists without its markets in Asia. The US took off precisely after the 1860s when labor was set free to work in large scale agriculture and industry. Today most value is really created in Asia
2
@Matt - From Wikipedia:
"The history of taxation in the United States begins with the colonial protest against British taxation policy in the 1760s, leading to the American Revolution. The independent nation collected taxes on imports ("tariffs"), whiskey, and (for a while) on glass windows. States and localities collected poll taxes on voters and property taxes on land and commercial buildings. There are state and federal excise taxes. State and federal inheritance taxes began after 1900, while the states (but not the federal government) began collecting sales taxes in the 1930s. The United States imposed income taxes briefly during the Civil War and the 1890s. In 1913, the 16th Amendment was ratified, permanently legalizing an income tax."
And BTW " there was no call to create taxes to resolve international environmental issues" because there were no international environmental issues. We didn't have a gasoline tax in 1800 either. Things change.
5
@Matt what you fail to account for is that for most the 19th century the US was primarily an agrarian society. Additionally, westward expansion made it possible to redistribute land to otherwise poorer families. Industrialization changes the game; suddenly land was no longer the basis of wealth - but ownership of machinery and corporations. This made it more possible than ever for a handful to accumulate disproportionate wealth, which is part of why reformers pushed for the introduction of a federal income tax.
Also, if I could suggest, please consider adopting a less belittling tone towards those with whom you disagree. No need for it here.
8
While higher tax rates for the astoundingly rich and for high levels of inherited wealth are reasonable ideas, or at least sound reasonable. I agree that someone making $500K should not pay the same rate as someone making $500MM. However, the authors, despite their academic pedigrees, have flubbed their history lessons a bit. First, the halcyon days of the postwar era may have had much higher listed tax rates, but the ability to legally deduct or otherwise hide large percentages of that income was truly astounding. Today it is much more difficult to do so. During that same period even very modest incomes were taxed at higher rates and the percentage of tax revenue generated by the middle class was much higher. Second, the lowering of tax rates in, for example, Russia, did not result in oligarchy, but was the result of power being projected by the oligarch class through a new leader that was coddling his power base, much the same way it happened here.
The Social Democrats and their ilk would be much better off if they focused on things that could make a real difference in the short term, such as real reform of the influence of money in politics. By their own analysis raising the rates on the highest incomes would not generate significant new inflow into government purses, but is meant as a form of social leveling. I could care less about the billionaire class, but I suspect it would be ineffective, and think other measures could moremrealistically achieve the same goals.
6
@VKG The purpose of high marginal rates on the Rich is NOT to raise revenue. The federal government can create as much money as it needs out of thin air. It is to discourage the Rich from taking obscene compensation from their businesses and using the money to speculate (see 1920's & 2000's), and to encourage them leave the money in their business and pay their workers more so the workers can buy more stuff and increase business (see 1946 - 1973).
5
What most people don't realize is that the maldistribution of wealth can endanger that very wealth. And the lack of a safety net, or its pitiful condition, can aggravate the situation. One of the symptoms is the Trump presidency; he was elected largely because of our unhealthy economic system and he offered the uneasy and the desperate scapegoats to blame - the tactic of the tyrant which he would love to be.
8
There are a number of the "rich" that agree with Alex and Krugman on inequality and that balancing of taxation can actually equal prosperity for the country.
and......
There are a number of moderates on the left that could accept the wall with a perspective of a Democracy that can still welcome immigrants legally.
A wall of guards with guns is really a wall, the visual is more offensive to many.
2
The rich have already found a way around the tax on income-- it's called Carried Interest (where they are taxed at Capital Gains rates)
3
@Tony - Out of 135 million tax returns filed, only about 15,000 used Carried Interest. That's .0011%.
1
@Jonathan But isn't that .0011% exactly the group of folks this article addresses - the very wealthiest?
1
@Furd Burfle - Yes, but making these people pay 37% instead of 23.8% on this income is scarcely going to shake the world.
1
The primary purpose of increased taxation should be to fund projects and programs for the public good and not to re engineer society.Extreme taxation on a small group is unlikely to achieve this and more likely to have unintended consequences.The increased tax burden is most likely to fall in the "rich professionals," in blue states who are as the article states already are in a high tax bracket.There have always been a small group of super wealthy in society,and this has actually resulted in much charitable giving,foundations,museums etc..We would do better to consider a broad based VAT tax as in Canada and many European countries to tax consumption and help provide social programs of value.
4
I am afraid that most people have no idea how the finances of the federal government actually work.
For example, people believe that the purpose of taxes is to pay for government operations. If you ask yourself the question "Where does the money I use to pay my taxes come from in the first place?", you will see you are putting the cart before the horse.
The federal government can create as much money as it needs. It then spends this money on government operations, e.g. the military, roads & bridges, research, education, etc. In this way money gets to you.
Now while there is no theoretical limit on the creation of money, there is a practical one. If too much money is sent to the private sector, there will be excessive inflation. Taxes take some of this money back. Hence the purpose of taxes is to adjust the amount of money in the economy.
Note, however, if the budget is balanced, there will be no new money sent to the private sector to support a growing economy. Even worse, if the government shows a surplus & pays down the debt, money will be leeched out of the private sector. If enough money is taken out of the private sector, the economy will crash. This has happened every time, 6 times, the debt has been paid down 10% or more.
Also a trade deficit takes money out of the economy. Hence to support a growing economy, the deficit must be larger than the trade deficit. Except for a brief period in 2003, this condition was not met from 1996 to 2008. And the economy crashed.
4
It is amazing how this woman is so much like extreme right wing conservative albeit on the other end of the spectrum.
She will not be happy till rich people are made paupers and the extreme right is not gonna be happy till rich people pay zero taxes.
The answer is to let people become as rich as they want as long as the low guy on the totem pole has a livable wage/benefits.
This is basically what is going on in many of our peer countries.
3
@Paul
"The answer is to let people become as rich as they want as long as the low guy on the totem pole has a livable wage/benefits."
And that is NOT what has happened, nor is it all all likely to. No one is "looking to make rich people paupers". That kind of rhetoric is unhelpful. Look at history when tax rates were higher for the ultra wealthy. They did great! They had yachts! They were still able to hold their feelings of superiority!
And look at what's happened to the middle class since the 80's.
13
Great to hear you are worried about the mega rich becoming paupers while States debate the need to increase the minimum wage to $15, 75% of Americans live paycheck to paycheck, tens of millions don’t have healthcare and profits of Big Business hit record levels.
10
@LFK-Thank you for your reply. I should have added another paragraph. I agree with you that it is not happening and attempts should be made to fix it but also not to overreach like we did in the 1950s-1970s where the opposite happened ie with overzealous unions bleeding companies especially the auto industry dry.
3
What has ballooned the fortunes of the .01%? A.) The stock market advance of the last 10 years fueled by excessive Fed money creation, and B.) Realization (monetization) of the commercial, largely consumer oriented, possibilities of computers and the internet. A short list: Amazon, Apple, Netflix--you can add many more names. The technology exploited by these companies is not all that advanced, nor in most cases, actually proprietary; they just happen to have first mover advantage. As a result their share values are currently high (overvalued?). When stocks finally fall, as they will, and the technology underlying these prodigies ages and their profit margins and growth-rates shrink as competition moves in on them, the fortunes they've generated will dissipate and the wide-eyed cupidity of social levelers will have to find a new target. The true solution to the problem? A.) Patience, B.) Laissez faire.
Patience? The disappearing Middle Class has been waiting 40 years for Trickle Down Economics to reach their paychecks.
10
And still not one politician will do anything about credit card interest in excess of 20% at a time when interest paid on bank deposits is less than 1%
23
Sure, set a maximum rate. And watch lots of customers get dropped or new ones denied credit because they are no longer worth the risk. I’m fine with that, are you?
2
@Tony - These prices are not due to the cost of funds, but to the operational overhead of making many small loans, and the loss ratio. The 20% interest funds those who don't pay, the computer infrastructure, the services available at the branches, and the rewards programs where well-off CC users get points and cash.
The last is kind of interesting, an income tax in reverse where money is collected from poor people who can't pay and handed out to rich people who pay promptly every month. I'm surprised some NY Times editorialist hasn't written a scathing Op-Ed.
"From the 1930s to the 1980s, the United States came as close as any democratic country ever did to imposing a legal maximum income. The inequality of pretax income shrunk dramatically."
Not to be picky, but isn't "shrank" better usage than "shrunk"?
A few points.
1. I don't disagree that a major function of high marginal tax rates is to lessen the effects of oligarchic influence that stems from massive inequality. But it's also nice to have those tax revenues to, in order to "promote the General welfare". Particularly if ALL income is taxed at appropriate ways (capital gains and such in addition to "earned" income).
2. As an extension of 1., a major reason for high marginal tax rates is to nudge those with stratospheric incomes to avoid them--primarily by structuring your system to reward those who channel windfall profits back into investment and higher wages rather than stock options or capital hoarding. In the 40's through the 70's, a lot of what would have gone to oligarchs coffers was reinvested, and you got innovation and expanding industries--the happy accident of both private and public investment.
3. Higher marginal taxation cuts down on the discretionary funds that too many oligarchs use to dabble in politics. It's not enough--one still needs laws that prohibit organizational/503/union/religious/PAC contributions to politics, and there should be strict low limits as to how much an individual can contribute to a given campaign, but proper taxation helps. And we all now how pernicious is the influence of oligarchic money on our governance.
12
@Glenn Ribotsky I'll go with 2. & 3., but as for 1., thru the FED the federal government can create as much money as it needs out of thin air, It doesn't need taxes or borrowing to support government operations.
Taxes are needed when we want the government to spend so much that the new money causes inflation. So the government takes some money back via taxes.
But if we use 2. and the government spends its money in ways that stimulate production, there will be enough stuff to soak up the new money and we can keep taxes low.
4
Finally, Krugman's "soaking the rich" meme gets the treatment it deserves.
It was so telling that the Princeton professor addressed AOC's proposal in such an elitist, back-handed way.
Thank you!
2
Krugman is now at the The Graduate Center, City University if New York. Some elitist.
I own a small business. If my tax rates go up my quarterly payments go up. If that happens I'm forced to borrow from a bank to meet payroll and pay my vendors. They require me to personally sign for a loan.
Since I have assets that I have built up over a lifetime, I won't do it. I will close my business let my small group of high paid employees who have both pensions and health care go.
What I can afford is higher cap gains and dividend taxes. Taxes on wages directly impact my ability to run my small business. Passive income doesn't.
When taxes were cut on corporations they should have raised Cap gains and dividend taxes that pass through to ownership.
The Reagan tax reform, which was bi-partisan taxed cap gains and dividends at the same rate as income. These rates came down under both President Clinton and Bush 2. They should have been raised to compensate for the Corporate tax cuts which was essentially given to large C corps and real estate entities.
10
@HL
If someone taxes capital gains and dividends, though, people will invest less in capital, possibly employing fewer people and forgoing efficiency improvements that increase productivity.
I agree that taxing capital is a better way to address income inequality, which is something we should do.
Businesses that aren't profitable under an alternative tax regime would just have to adjust. That's part of any tax proposal. Normally, the threats of this happening are oversold, and people will know about changes to tax policy in advance. It's also possible to sell your business instead of shuttering if it's too expensive to run at a given tax regime.
1
As the article points out, income for the average American has remained stagnant while increasing 600% for the most wealthy. That means that while the rest of us have worked harder and steadily produced more value with our labor, it has just been siphoned away from us into wealthy pockets, leaving us with nothing to show for our harder work. This is not simply the dispassionate hand of the market at work. It's due to deliberate legislative policy favoring the wealthy, encouraging sketchy investment vehicles with preferred tax rates, discouraging unions, hobbling antitrust, allowing non-compete clauses, and removing other worker protections.
AOC's progressive tax rates aren't a handout or gimme, they're just a way for the working American to get back what's been expropriated from us.
48
I'm on board with all they write. So too, I believe, would be Buffet and Gates, Jr.
However, we cannot SEE the wealth of Buffett and Gates, Jr., nor that of Bezos (though his divorce proceedings should make many gawk); the ethos of wealth that niggles and whines against such safeguards of our republic can be found amongst those whose wealth is made most visible and least earned (the Trumps, the modern day Hiltons, et al., all of those whose accomplishments are risible).
Keep the conversation going. When will the working classes realize that they will not be harmed or subject to such taxes, but socio-economically, reap great (but subtle) benefits from such.
K
4
@Ken - This wealth is ownership of stocks, which represents physical assets, not money. Wealth cannot be taxed, because it is not money. The IRS does not want you to send in some bricks from your factory or a wheel off your truck.
Now if ownership of these assets were more widely distributed, everyone would benefit.
However, if you took all the stock in all US companies, and distributed it evenly to every family. things wouldn't stay equal for long. Some families would sell it and spend all the money, others would use the dividends to buy more stock. After a few decades, we'd be back where we were.
Some East European nations did that with state assets after the Soviet Empire crashed. It was how the oligarchs there assembled their ownership of resource intensive industries, buying blocks of stock from people that did not understand what they had.
Unfortunately, the political right cannot be bothered with facts. They attacked AOC's idea of a progressive income tax that would help America with false information that she wanted to take 70% of the average American's money. The idea was also championed in the now red state of Kansas in the 1870s and 80s when the inequalities of an unregulated capitalist system were ravaging America. Now that the new robber-barons are back at it, we see Americans struggling again.
Over and over again, we hear about the jobless recovery. Now, we hear that we are headed for another recession and that many Americans haven't recovered from the first one. Credit card debt is as high as ever. I wonder why all these problems exist? Well, let's start with income inequality.
What is the next step if we don't solve the problem? We will see more riots and political gridlock. We cannot attack poverty and cure the social ills of America without regulation and income redistribution. The political right needs to wake up and do what is best for America.
8
We can argue about tax rates and marginal tax rates -- but until ALL income is subject to whatever rates are finally adopted and loopholes are eleminated, the crushing disparity in wealth (and with wealth comes access to better healthcare, political influence, and the leverage to make even more money) will continue.
The destructive gap between the "haves" and "have-nots" is not just a moral outrage; read Marcia Angell's essay (Opioid Nation, The New York Review of Books - 12/6/2018 ) for a deeper look at how despair helps fuel the opioid crisis and how the wealth-gap fuels that despair.
6
More important than just raising income tax rates into the 70% range would be insuring that all forms of income, especially capital gains and dividends, are taxed similarly. The same goes for many deductions. The tax code allows for all kinds of shenanigans so it's particularly important to eliminate the many strategies the wealthy use to avoid taxes. 50% as a top rate would be more than sufficient if we could accomplish this.
5
Always nice to see these authors.
We're living under Vultures, who feel they have no responsibility back to the system which has made their riches; they justify their cannibalism with Greed is God - oops, Good - ethos which is laughable.
Citizens United completes the circle, allowing the purchase of bankrupting legislative favors by this crowd.
27
Hopefully, al readers understand what MARGINAL tax rates mean. It is sometime called the "disc-system" of taxation rates.
2
Most Americans are not much exercised about inequality of wealth per se, but care fiercely about political, legal, and educational social and economic opportunity equality. It's equality in this latter sense that's been under attack by the radical right since Reagan. Why bother with the messiness and compromises necessary in a democracy if you can simply buy the political and legal institutions to serve your interests? Moderate wealth inequality gives those holding it a louder megaphone but middle class and poor individuals with strong points can still be heard and their interests and needs will still be addressed. But when inequality reaches the level it has in America today only the interests of the very wealthy are even heard The country becomes an oligarchy where only the views and interests of inherited and mostly unmerited wealth matter. Nor is it true that the rich "already pay most of the taxes". Yes, the 1% pay 39% of income tax on about 21% of America's total income (but hold 40% of the wealth) - but income tax is only 47% or so of total revenue. About 33% of revenue is derived from payroll tax, 11% corporate tax and 9% other - most excise taxes. Payroll and excise taxes are paid almost entirely by the 99% (remember payroll is capped at $128,400). So yes the instinct of everyone reading this is right, the working middle class pays the bulk of the taxes that provide the revenue to run the country.
9
Long needed debate, (modern economists 32, 36, against ageing economist 65 who no longer readswith modern literature)
3 Observations
1. Fundamentally correct. The core of modern political
dysfunction is increasing inequality. The left behind
vs the elite
2. Left out: This development is not the result of taxation
but the result of globalization. The owners of capital
profited from moving factories to Mexico, the "left
behind" lost.
3. Globalization in turn has made it very difficult to tax
the rich. The owners of capital move to where they
are taxed least. London is just as attractive as NYC
Witness the failure of President Holland to tax les plus
riches at 75% (ACC's rate of federal 70% once your
add State taxes, in most US States will hit about 80%)
4. As to the uncanny similarity of the taxes reforms under
Trump (ignorant parvenu) and Macron (highly educated
French President) I recommend reading Piketty
http://piketty.blog.lemonde.fr/2017/12/12/trump-macron-same-fight/
5. The question is if this uncanny, and unsettling
similarity is an accidental coincidence, or the logical
result of globalization : If capital and labour can move
freely over the globe not only will wages have to settle
to the global average (up in China, down in the US) but
so will have taxation of the mobile elite
14
Over the last decade, under Chavez and then Maduro, Venezuela has been very diligent about redistributing wealth. How is that working out for them?
9
@Richard
Are you arguing that America in the period between 1930 and 1980 was like Venezuela? It certainly sounds like it, but that is ridiculous, isn't it?
4
@Richard - And the incompetence and corruption in running the government and above all, the crash inn the price of oil, Venezuela's main product, had nothing to do with their economy.
6
@Richard
Just so you know, Venezuela is a resource (oil) dominated economy. Much has been written about the difficulties of capitalism and democracy in a country with a large resource dominated economy. Basically, it's easy for one class to control some holes in the ground.
Corruption has been a part of these economies seemingly forever.
That is not the case with broad based economies which rely on trade between multiple segments of that economy. You can control oil, but high tech too? Auto manufacture? Agriculture?
It's called the "Resource Curse". And I doubt they talk about such things on Fox ...
2
Perhaps if Bone Spurs and company hadn't given their rich donors tax breaks there might be money in the budget for his beautiful wall. Meanwhile back in Dodge gov't workers still not being paid but the House and Senate are.
6
It is self-defeating though: if you impose very high tax rates in order to create an effective maximum income then you won't raise as much tax receipts from that income. You get lower "income inequality" but no higher tax income for the Government and you create a larger incentive than there already is to get around that tax rate.
2
@Faust no, as mentioned the cash is reinvested or goes to lower tax bracket wages. See pre-1980 US e.g
1
@Faust
Not necessarily so. Using simple arithmetic one arrives at that conclusion, but that is not how economics works. A high marginal tax rate forces money into circulation, which in turn promotes more income. Additionally, people with very high incomes, currently often pay less tax than people in the middle class, consequently higher marginal thresholds will, at least initially, raise the tax receipts.
4
It goes to dividends to stockholders. If the business needed investment, those components would have already gotten funds. The employees won’t see a dime extra.
Superb column! Focuses on the #1 key to recovery of America for The People, from its seizure by The Money.
But the most important line in the column mentions something else that's another even higher priority. It says: "For just as we have a climate crisis, we have an inequality crisis."
There is a critical difference between these two crises. We must stop inflaming the climate crisis NOW -- or there will be no future human civilization and species to fix anything later. We have been and are igniting self-driving processes of climate change that once underway will continue until our civilization and species are gone.
To stop this civilization-and-species suicide, the best thing we can do is apply another kind of tax: A carbon tax, high enough and rising fast enough to end our burning of fossil fuels in a decade. Among economists there is a consensus that to combat the climate crisis, such a carbon tax is the most effective single thing we can do.
Sadly, most of the 28 potential Democratic nominees the NYT has listed don't even have the climate crisis at the top of their priorities. Their priorities are like rearranging deck chairs as the Good Ship Human Civilization on Earth goes down. And even most advocates of a Green New Deal offer instead a flood of other proposals that will be stuck in committees and prey for lobbyists as we sink.
Priority #1 is carbon tax now. Or it will soon be over.
16
The authors make good points about low taxes on the Rich undermining our democracy. In addition there is a good economic argument as to why inequality is bad for the country.
Economists have a concept called the velocity of money. It is the frequency, how often, that money changes hands in domestic commerce. You can think of it as how useful that money is for the economy.
Trump's bill sends most of the money to the Rich. Money going to the Rich has a lower velocity than money going to the non-rich. The Rich spend a lower percentage of their money. What's a guy or gal who already has so many houses he can't remember how many & an elevator for his horse gonna spend his money on? The answer is he is going to use it to speculate.There is a correlation between inequality & financial speculation. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746 Speculation is bad for the economy. That money has a very low velocity. AND it increases risk which we have seen in 2008 ain't a good thing.
When the money in circulation has a low velocity that means people are not buying stuff very much. Thus there is no reason for the Rich to invest in their businesses to expand production. So they speculate.
12
ncome taxes have not away been about safeguarding democracy against oligarchy as the authors assert. Congress imposed the first person income tax in 1861 to pay for the Civil War.
2
On a moral level, is there a limit to the government’s right to tax? Suppose the government came to the conclusion that by seizing Jeff Bezo’s estate or some large percentage thereof they could do any number of things of great value for the American people, things that would surely be of more value for the country than the value of letting Mr. Bezo’s keep all that money. Does this sort of argument justify raiding Mr. Bezo’s fortune or is there a thing called private property that the government can’t just take without compensating the owner thereof? I think everyone agrees that the government has a right to lay taxes on people to fund the government, but given we are a society that believes in the right of people to own property, at some point a tax rate becomes confiscatory. I think the line is at half. The government has no argument that they generate enough value to become entitled to more than half of a dollar paid to one of its citizens. Thus a tax rate in excess of that is theft, no matter how you justify it. Leaving the morals aside of coveting your neighbor’s wins, there is a practical challenge that prohibits the US government from instituting 70 percent taxes. People who make this kind of money are welcome everywhere; they can become citizens of any country. Governments thus simply do not have the power to tax these folks at such rates. They simply move to a lower tax country, and then the US gets zero percent (less than the 40 we get currently).
3
@Bill
This argument is confounding. You argue, without any empirical justification except "I think", that it's okay to tax at 50% but not a penny more. At a moral level, you argue, there is an upper limit, but what is magical about 50%? Is it more moral to tax at 40% and less moral to tax at 70%, but still moral?
Furthermore, 70% is the marginal tax rate and not the effective tax rate. So, if the government taxes very high incomes at 70%, but the effective tax rate is 50%, is that still immoral?
Finally, you ignore empirical data when you suggest that all those poor, over-taxed rich folks will simply pick up their bags and leave. Some do, most don't.
And finally, you simply ignore the central tenet of the discussion, which is at heart a moral point, that democracy itself is corrupted when a very few rich folks can make the rules. Now, that's immoral.
8
@Bill - You're overlooking a couple of things here. First this is about marginal rates AFTER the first $10 million dollars of income. Any way you slice it being paid more than that each year seems hard to justify.
But more importantly what has happened is the current motivation is to keep employee wages down so that those at the top can have all the profits of a company. Workers are working more hours and are more productive yet they haven't shared in the gains of management.
The wealthy are drawing up all the assets of our economy well beyond what any person has earned, or could possibly deserve. The union-busting of the right has made it impossible for workers to command their fair share.
2
You seek an empirical justification for the statement that it is a theft of sorts for the government to take more than half the marginal dollar earned by a citizen. Go figure that there isn’t one (it’s a moral sensibility you either have or don’t). You apparently think the government has a limitless right to take whatever it wants from its citizens. We fundamentally disagree. Empirical evidence may also be lacking on the claim about the mobility of the rich in response to confiscatory tax policy. We can look to history but even that would be of little utility given that the world has become much more global than it was back in the day of over 50 marginal tax rates.
Yes, let's have income, or better, wealth, redistribution
But, there is liberal redistribution and radical redistribution. Liberal: chiseling away at a bit of the greatest wealth. Radical: a draconian progressive tax on all substantial wealth, say wealth ten times the average, or more.
The constituency for tax increase dreams of the latter. The liberal legislators will talk about dramatic changes, but, with luck, will deliver only some chiseling.
We've been through this picture several times. At least it doesn't hurt the economy much.
Radical income redistribution, the only kind for which it is worth fighting, is far riskier. Indeed, like flight in 1900, it has never worked. Russia is the best example of a typical outcome.
To make dramatic redistribution work, one needs a free market, close enforcement of the rules, the sustaining of capital formation when a huge jump in consumption is possible, and incentives for managers to function efficiently despite the loss of their privileges.
When these break down, as they nearly always have, the state chooses compulsion, which becomes terror as the crisis worsens.
Russia needed two main actions in 1991-1992. (1) Overnight privatization. A success. (2) Overnight breaking of the power of the Party, probably by banning ten to fifty thousand bigshots from political and economic activity. Not undertaken.
It was the failure to wreck the Party that made for the oligarchs and Putin.
Not the laudable market reform.
1
@alyosha - "A joke on the streets of Moscow these days: 'Everything the Communists told us about communism was a complete and utter lie. Unfortunately, everything the Communists told us about capitalism turned out to be true.' " -John Nellis, World Bank
2
As a 50 year old latino male who grew up in the Bronx (single mom), father to a smart and curious 14 year old daughter, I'm wishing success for Alexandria Ocasio-Cortez out of self interest. The image of a well informed, educated Latina woman offers me an easy choice of role model for my kid. I'm also proud of being part of the immigrant tapestry that makes up America. Let us by all means endeavor to increase opportunities for all. But we ought to do so with full knowledge that to increase opportunities for all is likely to favor those better able to take advantage of them & may often at first increase inequalities. Where the demand for "equality of opportunity" leads to attempts to eliminate "unfair advantages," it is only likely to do harm. All human differences, whether they are differences in natural gifts or in opportunities, create unfair advantages. But since the chief contribution of any individual is to make the best use of the accidents he encounters, success must to a great extent, be a matter of chance. A 70% tax leads to slow economic growth, less entrepreneurial opportunity & competition, & a potential lack of motivation by individuals due to lesser rewards. The weakest rebuttal to what I propose is that no market is absolutely free; a frail objection since all things exists in the margins. I advocate for capitalism by arguing the economic pendulum should swing more in the direction of the free market in order to promote a better quality of life for the masses.
4
@José Franco
The market has been increasingly freed of regulation for forty years. The result has been dismal. "A better quality of life for the masses" results from effective regulation of the market. When "free", it tends to monopoly power that prevents the entry of new business and constricts the bargaining power of the individual as there are no other choices for the services they need.
Capitalism is a good servant but a bad master.
3
@nora m Help me out by pointing out to me what I don't see. As a small business owner I often see well intentioned people start a business without asking themselves the most difficult question and self reflecting. First ask yourself, can you live with the worst case scenario, if you reply no, do yourself a favor and don't start the business. Self reflect with an honest assessment of your added value (be your harshest critic) Do a C.E.N.T.S. analysis of business you're considering. C- How much can you CONTROL? (vertically integrate) E- ENTRY how much money is needed to enter business? N- NEED Do people want and prefer what you're selling? T- TIME can you put your offering together while it's in demand S- SCALE how easy does your offering scale to easily repeat processes without you present. Monopolies are also fluid. If you take two literate people with the same aptitude and put them in separate rooms, one empty and the other filled with books, the one with all the books has a monopoly. Today, with access to so much information most homes via the internet and subscription service allows self motivated individuals to create human capital for themselves and creates what seems like monopolies to those not putting in the work. P.S. The C.E.N.T.S. analysis also applies to what you choose to take in on the internet. Since business is always fluid on shouldn't seek to fall in love with the destination, fall in love with the journey. What is it that I'm not seeing? Thanks in advance.
@nora m I with you on the reality of the struggle and the pain associated with it. As for Mr Franco, he seems to be an outlier with the best of intentions. A friend of an old boyfriend played on a travel baseball team Jose coached. He claims to still have nightmares from running when he was late. Late arriving players would have to run one sixty yard sprint for every second late. (600 sprints if 10 minutes late) P.S. Jose Franco is also collecting signatures to run for President in 2020. My ex's friend wouldn't put it past Jose Franco to try to make all Americans run sprints if he's elected President.
This debate is so tiresome. If you want to achieve all of the stated goals of this tax policy then tax wealth, not income. The wealthy laugh at the income tax debate while sitting on mountains of un-taxed assets. The reason that this will never happen is that both parties are funded by the holders of immense (what liberals would call "obscene" wealth).
13
@RCH - Actually In his book, Piketty almost agrees with you. He, however, realizes that if any country taxes wealth, the Rich will simply move their money to another country, That is why he proposes a WORLDWIDE tax on wealth.
But how in the world could you get that passed!
7
You would have to amend the Constitution. Good luck.
I always marvel at the academic & political elites who self-declare that it’s their right to decide what kind of income and wealth people should be permitted to earn & accumulate. Somehow I struggle to find that right anywhere in the US Constitution.
Of course, people who work in academia & politics - two fields heavily dependent on taxpayer money - would naturally believe this. They aspire to have a comfortable existence & living too while comparatively few of them actually make meaningful contributions to society. The academics depend on government funds while most politicians see the public as a giant teat there for the milking.
Yet we never hear them discuss why it is that states no income tax like NH, TN, DE, FL, TX and WA succeed. They never ask how it is that states like PA are no worse off than their neighbors with its flat rate for all incomes. They never ask why states with some of the costliest tax systems like NY, NJ, and CA have some of the worst fiscal problems and also the highest population losses.
High tax rate advocates should be seen for what they are - busybody parasites who are not content with merely managing their own lives. They are a danger to our economy.
29
@Alan
If you think that higher tax rates are a danger to our economy, can you please explain why the United States did so during the decades when top tax rates were 70% or more?
11
Virtually nobody paid an effective rate of 70%. The effective rate is not the same as marginal rate, the latter being the rate on the last dollar earned. Many more loopholes existed in the code which enabled people to report lower taxable income - AGI and taxable income are also not the same thing. Since WW-II, tax revenues as a percentage of GDP have generally ranged between 15% - 18% of GDP regardless of the current contortions in the tax code.
2
@Alan
To the degree that New Hampshire is successful because it mooches off Massachusetts, its richer neighbor.
Contrast the economies of the northern counties with closed paper mill industries etc to the southern counties an easy commute* to Boston and tech companies located just above the state line with access to metro Boston’s many top universities and talent.
3
Agree completely with the inequality case--no justification for executive pay 300 times average worker. Ratio was 20:1 in 1965.
Note that Japan has the world's longest life expectancy, while Russia's is the lowest among developed countries. Russian life expectancy has supposedly recovered somewhat in recent years, but some of that improvement may be the result of statistical manipulation for political reasons. See
https://www.polygraph.info/a/putin-newsconference-life-expectancy/28931322.html
4
To simply correlate tax rate and economic growth is sloppy reasoning. Many factors drive growth, with tax rate being one of them.
And, yes, this is a moral issue. Inequality reflects the wildly different potential for success in a globalized economy, and brutally penalizing the successful to subsidize the failures in the name of “equality” is abhorrent and encourages the expansion of the failures population.
4
These professors are wrong. When rates were 70-90%, high income taxpayers just structured to corporates taxed at lower rates and triggered capital gains instead of ordinary income at the high rates. It did nothing to improve or forestall income any so called inequality. Disparities still existed.
6
Well, Bill, then how do you explain facts like these:
The Gini coefficient during the 1920's and 2000's (when top marginal rates were low) was twice what it was in 1946 - 1973 (when they were high).
CEO's earned around 50 times what the average worker in their companies earned in the high tax period while they earn 300 to 500 times as much today.
5
@Bill Kaetzel
No where did it say that disparities did not exist. However, the disparities were manageable and did not drown out the voices of those even only one rung down the ladder as it does now.
I suspect that most of the commenters here defending the present situation and clutching the pearls are people of some wealth but not of great security. You realize that you could be wiped out economically, and you identify with the term "wealthy", where you desperately want to remain.
We aren't talking about you. We are discussing the people who are further above you economically than the beggars on our streets are below you economically. Yes. The Bezos, Buffets, Kochs, and Mercers of this country need to be taxed far more heavily. Am I afraid they will all move to Angola? Not really. What good is extreme wealth if there is no one to see it?
2
@Len Charlap
The expansion at the top can largely be explained by the effect of increased scale. 25 years ago the biggest corporations in the world enjoyed values typically in the 10's of billions although there were probably a few that had a value above $100 billion. Today dinky startups with no history of profits and little more than a good idea that's shown some traction command values in excess of 10 billion and there are multiple companies with values around a trillion. As the corporation gets much bigger and more valuable, the impact of a good CEO becomes much more significant (e.g., if a CEO is able to successfully increase sales or reduce costs by a few points, it may create billions of dollars in annual income and even more in terms of business valuation). In addition, the CEO's salary, though offensively high to some simply does not move the needle in terms of profits for the large modern corporation. What is the business impact of paying your CEO an extra, say, $10 million, when your profits for the year are in the tens of billions? Answer: nothing. By contrast getting a slightly less good CEO and saving that $10 million could easily hit the bottom line in a meaningful way. We've seen plenty of times where a company hires a CEO or CFO that is regarded as excellent (or makes an announcement that suggests that the existing CEO/CFO is staying put amid speculation of a departure), and the market responds by increasing the value of the stock by billions of dollars.