Democracy Uprising
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      Is Rambo Still A Republican?

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      Republicans Among Us

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      New York Says “No”

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      The Sideshow Rebels

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      The Seattle Protests Showed That Another World Is…

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      Jeff Bezos Has Enough! It’s Time for a…

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      There’s More Than One Way to Strike the…

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      Jordlösa kombinerar radikala visioner med praktiska reformer (Swedish)

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      Hacer Que Nuestras Demandas Sean Tanto Orácticas Como…

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Democracy Uprising

  • About
    • About Mark Engler
    • About Democracy Uprising
  • Books
    • This Is An Uprising
    • How To Rule the World
  • Topics
    • All Book Reviews Environment Essays / First Person Global Economy Immigration Labor Latin America Social Movements Religion U.S. Politics / Elections War / Militarism
      Latest Articles

      Democrats Won Power in Several States. Will They…

      Social Movements

      Changing the ‘world as it is’ into the…

      Social Movements

      What’s the problem with taking state power?

      Latest Articles

      Is Los Angeles Creating a Model for Fighting…

      Social Movements

      What If America Had Six Political Parties?

      Social Movements

      Movements are vying for political power — is…

      2021-2023

      How movements can maintain their radical vision while winning…

      Social Movements

      What Happens After Movement-Backed Politicians Take Office

      Book Reviews

      The Pan American

      Book Reviews

      The Godfather of Microcredit

      Book Reviews

      Capitalism as Catastrophe

      Book Reviews

      Four Ways of Looking at an Aztec Eagle

      Book Reviews

      The Ascent of Niall Ferguson

      Book Reviews

      Ordinary Outrages

      Book Reviews

      No Better Place

      Book Reviews

      In God’s Country

      Environment

      Why Wendell Matters

      Environment

      The Gulf at the Gas Station

      Environment

      Climate Disobedience

      Environment

      Farming the Everglades

      Environment

      The Winter of the Climate Denier

      Environment

      Climate of Change: An “Inside-Outside” Strategy Against Global…

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      Provoking an American Climate Crisis

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      The Real “Farmer” Story: So God Made High-Fructose…

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      Is Rambo Still A Republican?

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      Global Economy

      Meet the Bailout’s New Slush Fund for Corporate…

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      The Seattle Protests Showed That Another World Is…

      Global Economy

      Jeff Bezos Has Enough! It’s Time for a…

      Global Economy

      The Amazon Effect: Sweat, Surveillance, Exploitation

      Global Economy

      The Godfather of Microcredit

      Global Economy

      Capitalism as Catastrophe

      Global Economy

      Immigration Economics: An Interview with Professor Giovanni Peri

      Global Economy

      The World Is Not Flat

      Immigration

      When Undocumented Activists Infiltrated ICE

      Immigration

      The Children of Intervention

      Immigration

      Immigration Economics: An Interview with Professor Giovanni Peri

      Immigration

      Science Fiction From Below

      Immigration

      Four Ways of Looking at an Aztec Eagle

      Immigration

      Treated Like a Criminal

      Immigration

      When Sanctuary is Resistance

      Immigration

      The Massive Immigrants Rights Protests of 2006 Are…

      Labor

      Democrats Won Power in Several States. Will They…

      Labor

      The Case for a Social Distancing Wage

      Labor

      The Seattle Protests Showed That Another World Is…

      Labor

      Reviving the General Strike

      Labor

      Jeff Bezos Has Enough! It’s Time for a…

      Labor

      There’s Still Power in a Strike

      Labor

      The Amazon Effect: Sweat, Surveillance, Exploitation

      Labor

      There’s More Than One Way to Strike the…

      Latin America

      How movements can maintain their radical vision while winning…

      Latin America

      The Pan American

      Latin America

      Lessons from the Pledge of Resistance

      Latin America

      The Children of Intervention

      Latin America

      Against Shithole Nationalism

      Latin America

      The Last Porto Alegre

      Latin America

      Kissinger Is Not Our Friend

      Latin America

      Even If You Have Nothing to Hide

      Social Movements

      Changing the ‘world as it is’ into the…

      Social Movements

      What’s the problem with taking state power?

      Social Movements

      Is Los Angeles Creating a Model for Fighting…

      Social Movements

      What If America Had Six Political Parties?

      Social Movements

      Movements are vying for political power — is…

      Social Movements

      How movements can maintain their radical vision while winning…

      Social Movements

      What Happens After Movement-Backed Politicians Take Office

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      Should we disrupt the Democratic Party or try…

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      Toward the “Rights of the Poor”

      Religion

      The Pope and the Poor

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      Will the Next Pope Embrace Liberation Theology?

      Religion

      Remembering Romero

      Religion

      John Paul II’s Economic Ethics

      Religion

      Against the God of Free Trade

      U.S. Politics / Elections

      Democrats Won Power in Several States. Will They…

      U.S. Politics / Elections

      What’s the problem with taking state power?

      U.S. Politics / Elections

      Is Los Angeles Creating a Model for Fighting…

      U.S. Politics / Elections

      What If America Had Six Political Parties?

      U.S. Politics / Elections

      Movements are vying for political power — is…

      U.S. Politics / Elections

      How movements can maintain their radical vision while winning…

      U.S. Politics / Elections

      What Happens After Movement-Backed Politicians Take Office

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      Should we disrupt the Democratic Party or try…

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      Does It Make Sense to Protest a President…

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      Lessons from the Pledge of Resistance

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      Is Rambo Still A Republican?

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      War: The Wrong Jobs Program

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      The Ascent of Niall Ferguson

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      Those Who Don’t Count

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      Six Essays About War and About Peace

      War / Militarism

      The Dangerous Dignity of War

  • Translations
    • All Chinese Deutsch Español Français Italiano Japanese Português Arabic Thai
      Translations

      Jordlösa kombinerar radikala visioner med praktiska reformer (Swedish)

      Español

      Hacer Que Nuestras Demandas Sean Tanto Orácticas Como…

      Italiano

      C’è più di un modo per colpire il…

      Português

      As reformas não reformistas de André Gorz mostram…

      Español

      Las reformas no reformistas de André Gorz

      Deutsch

      Die nicht-reformistischen Reformen von André Gorz

      Italiano

      Richieste dei movimenti: sia pratiche che visionarie

      Chinese

      泛美洲人 爱德华多·加莱亚诺的世界 (Chinese)

      Chinese

      泛美洲人 爱德华多·加莱亚诺的世界 (Chinese)

      Chinese

      Why Wendell Matters (in Chinese)

      Chinese

      Globalization’s Watchdogs (in Chinese)

      Deutsch

      Die nicht-reformistischen Reformen von André Gorz

      Deutsch

      Als Martin Luther King seine Feuerwaffen aufgab

      Deutsch

      Mikrokredite: Die Entlassung eines Nobelpreisträgers

      Deutsch

      CAFTA – am besten stillschweigend beerdigen

      Deutsch

      Bush in Mexiko

      Deutsch

      Das globale Duell in Evian

      Deutsch

      Die Rückkehr des Daniel Ortega

      Español

      Hacer Que Nuestras Demandas Sean Tanto Orácticas Como…

      Español

      Las reformas no reformistas de André Gorz

      Español

      ¿Adoptará el nuevo papa la teología de la…

      Español

      Wall Street quiere que les estemos agradecidos

      Español

      Si Las Monjas Se Fueran a una Huelga,…

      Español

      ALEC retrocede; a la derecha le da un…

      Español

      ¿ALEC disgustado ante la pérdida de patrocinadores? Se…

      Español

      La vida en la nación prisión

      Français

      La révolution non-violente a-t-elle échoué en Egypte?

      Français

      Le pari risqué du populisme au Pérou

      Français

      Hong Kong Phooey

      Français

      Bush Nuit Même Aux Compagnies U.S.

      Français

      Le dynamisme du mouvement pour la paix

      Français

      La déroute de l’ALCA dans une Miami en…

      Français

      Ceux qui ne comptent pas

      Français

      La guerre en Irak : une expo des…

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      C’è più di un modo per colpire il…

      Italiano

      Richieste dei movimenti: sia pratiche che visionarie

      Italiano

      La strategia di Gandhi per il successo –…

      Italiano

      Le promesse infrante di Obama

      Italiano

      Guantanamo deve sparire

      Italiano

      IL BANK TRANSFER DAY: UN SUCCESSO

      Italiano

      Come il movimento Occupiamo Wall Street si sta…

      Italiano

      Economia tabù

      Japanese

      ガンジーはどのように勝利したのか? (Japanese)

      Japanese

      Truth Versus Superpower (Japanese)

      Japanese

      Bush’s Bad Business Empire (Japanese)

      Japanese

      Revenge of the Combat Cartoonist (Japanese)

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      Bush’s Uneasy Mexican Visita (Japanese)

      Japanese

      Mark Twain in Iraq (Japanese)

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      Globalization’s “Lost Decade” (Japanese)

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      Hawks Say the Damnedest Things (Japanese)

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      As reformas não reformistas de André Gorz mostram…

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      A vida na Nação Prisão

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      Outro pretexto?

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      2006: A Global Justice Year in Review (In…

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U.S. Politics / ElectionsLatest Articles2019-2020

Alexandria Ocasio-Cortez’s 70% Tax Proposal Is a Great Start—But We Need to Abolish the Ultra-Rich

by Mark Engler and Andrew Elrod January 18, 2019
written by Mark Engler and Andrew Elrod January 18, 2019
Alexandria Ocasio-Cortez’s 70% Tax Proposal Is a Great Start—But We Need to Abolish the Ultra-Rich

Ultimately, finding an optimal tax rate for the super-wealthy is a moral and political issue as much as an economic one. 

Published by In These Times.


 

Last week, when 60 Minutes aired an interview with newly sworn-in Rep. Alexandria Ocasio-Cortez, the freshman New York congressperson caused an uproar with what, by Washington standards, seemed a rather immodest proposal. Asked whether an expansion of public investment in green technologies would require raising taxes, she cited history.

“You look at our tax rates back in the 60s… [and] on your 10 millionth dollar, sometimes you see tax rates as high as 60 or 70 percent,” Ocasio-Cortez explained. Given that a 70 percent tax on the wealthy would be nearly double the current rate on top earners, CBS’s Anderson Cooper responded with disbelief. “What you are talking about…” he said, “is a radical agenda compared to the way politics is done now.”

Cooper was not the only one to express skepticism. While conservatives were predictably apoplectic, even ranking Democrats on the House Ways and Means Committee, responsible for drafting the tax code, were incredulous. Texas Democrat Lloyd Doggett described Ocasio-Cortez’s suggestion as “a little over the top.” New Jersey Democrat Bill Pascrell dismissed it as “comical.”

In fact, Ocasio-Cortez’s comments represent good policymaking. Both looking abroad and in terms of the United States’ own history, there is strong evidence to support the benefits of higher taxes on the super-rich. But more than seeing her off-handed response as an actual proposal or a final policy goal, her comments should serve as an opening to a broader conversation.

Yes, we should be asking what is the optimal tax rate on the wealthy for an expansion of public investment in necessary goods and services. But we should also consider a more fundamental question: Do we really want to live in a society in which those at the top can make hundreds or even thousands of times as much money as those toiling at the bottom?

* * * * *

Taxing the rich is popular—and makes good economic sense

In the fallout from Ocasio-Cortez’s interview, economist and New York Times columnist Paul Krugman was quick to point out that her view of optimal tax rates was far from controversial.

A flight of prominent academics, including Nobel laureate Peter Diamond, whom Krugman describes as “arguably the world’s leading expert on public finance,” have concurred that a top tax rate of over 70 percent would be entirely reasonable. “Some put it higher,” Krugman noted. “Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates [the optimal rate for the top tax bracket] at more than 80 percent.”

America long had tax rates on the rich that reached the levels Ocasio-Cortez proposed or higher, while the nation experienced massive economic expansion. In fact, she understated the rates from the past: For two decades after World War II, until 1964, the marginal tax rate on the highest bracket hovered around 91 percent.

For a married couple in 1960, that applied to income earned above $400,000, the equivalent of approximately $3 million today. Yet this was the period in which the United States economy boomed most dramatically, when college students could reliably expect both a new car and a home mortgage after graduation. The annual growth rate in GDP reached levels as high as 7 and 8 percent.

There are also international precedents to suggest that taxing the super-rich yields substantial public benefits. Sweden has taxes on high incomes comparable to Ocasio-Cortez’s 70 percent proposal, with current rates of economic growth and labor-force participation greater than in the United States. Before Margaret Thatcher’s Tory government cut taxes on the wealthy in the 1980s, the United Kingdom long maintained top rates in excess of 75 percent, with additional surcharges on investment income.

While, like in the United States, inequality has soared in Britain in recent decades (the tax rate on income earned above £150,000, or about $200,000, is now 45 percent) its history of higher rates was part of the broader arsenal of social-democratic policies aimed at making the country a more fair and just place for its residents. These include public hospitals accessible to all, just as primary and secondary schools are in the United States. They also include at least 28 days of guaranteed paid vacation for all workers.

In contrast, there is no economic consensus on the upside of cutting top tax rates. The historical evidence is clear: Over the past 40 years, slashing taxes on the rich has had no discernable positive effect on investment or innovation. On the contrary, both have slowed.

“Right now the main economic puzzle in macroeconomics is that corporate profits are very, very high,” says Marshall Steinbaum, an economist and Research Director at the Roosevelt Institute. “At the same time, corporate investment and innovation [are] at all-time lows. Productivity growth is stagnant.” Despite repeatedly implementing the tax policy prescribed by right-wing thinkers, the United States has failed to reap the supposed benefits.

Part of the Republican counterattack on Ocasio-Cortez has involved attempting to scare the public with the idea that, under her plan, everybody’s income will be taxed at the same, higher level. But, as Ocasio-Cortez herself has repeatedly explained, that’s not how marginal rates work. Even for someone making $12 million per year, the 70 percent tax would only kick in on the last $2 million. Your first $10 million would be taxed at lower rates.

The idea of applying such a levy on the extreme income of the wealthy is also very popular. A recent Hill-HarrisX survey shows that 59 percent of registered voters support Ocasio-Cortez’s proposal of raising the top marginal tax rate to 70 percent—with 45 percent of Republican voters saying they favor the concept.

* * * * *

Toward a more equal society

Higher taxes on the rich could go a long way towards creating higher-quality public schools, free higher education, universal healthcare and a Green New Deal. According to the Washington Post, Ocasio-Cortez’s hike on the top tax bracket could generate $72 billion per year in revenue.

Some progressives—notably advocates of Modern Monetary Theory, a brand popularized by the economists Stephanie Kelton and L. Randall Wray—dispute the necessity of such funding. They argue the government need not be preoccupied with raising taxes, as it can comfortably borrow to stimulate the economy and make socially productive investments. But a higher tax on top earners is not just about generating revenue. Rather, taxes on the ultra-wealthy can be seen as goods in their own right, as tools for fighting runaway income inequality.

There is a surfeit of reasons for proactively combating inequality. Though economists debate the reasons for the effect, there is widespread consensus that increasing inequality contributes to slower growth in the economy.

Inequality fuels negative public health outcomes, and, among psychologists, it is now considered a causal factor in aggregate rates of mental illnesses and personality disorders. It also fuels social distrust. Asked whether “most people can be trusted,” 60 to 65 percent in more equal countries agree, compared to 20 percent in more unequal societies. And a billionaire class risks turning democracy into oligarchy.

In this context, proposals for higher taxes on the super-rich—even those that would use the tax code to create a de facto maximum income—might have socially beneficial consequences that have little to do with government revenue.

For one, raising taxes on the rich can help to lessen their disproportionate political power. Curtailing incomes over $10 million per year will help curb the ability of the rich to buy influence through campaign contributions, dark money issue campaigns, lobbying, and nonprofits aimed at undermining unions, attacking environmental regulations, or promoting further tax cuts.

High marginal rates can also change labor relations, altering business incentives and shifting bargaining dynamics in American workplaces. “We know the things that rich people do in order to be rich come at the expense of everybody else,” Steinbaum argues. He imagines a situation in which the tax code effectively capped the earnings of multi-millionaires: “In a labor-bargaining context,” Steinbaum says, “if the boss’s marginal tax rate is 100 percent, he’s going to care less about outsourcing labor, about squeezing workers, about doing everything that bosses do in order to squeeze a marginal dollar out of their workforce, or out of their supply chain, or out of any other economic stakeholder they deal with. So the point of the tax policy is to equalize bargaining power throughout the economy.”

While higher income taxes would help to address inequality, abolishing the ultra-rich altogether would require measures to address the vast concentrations of wealth that have already amassed.

“Ideally, we should be taxing wealth as well as income,” says J.W. Mason, an economist at John Jay College. “We do tax the wealth of middle class people—in the form of property taxes on people’s homes—but we don’t tax the wealth of the rich, which is more likely to be in a portfolio of financial assets. If you are super-rich, although you might pay taxes on capital gains or inheritance, you don’t pay any taxes on your financial assets simply by virtue of owing them,” Mason explains.

In contrast, he says, “France has a wealth tax that has existed since the French Revolution”—and indeed Emmanuel Macron’s move to cut it was one of the factors that fueled the recent Yellow Vest protests.

“Concentration of wealth may be even more problematic than the concentration of income, in terms of the political power it gives you and what it does to perpetuate inequality from generation to generation,” Mason contends.

Ultimately, finding an optimal tax rate for the super-rich is a moral and political issue as much as an economic one. In a country where the influence of the billionaire class is posing an increasing challenge to democracy, Ocasio-Cortez’s proposal for restoring the kind of taxes that existed through America’s postwar boom should be seen as but a sensible starting point on the path to more far-reaching change.

___________

Photo credit: Tom Williams / CQ Roll Call.

Mark Engler and Andrew Elrod

Mark Engler is a writer based in Philadelphia and an editorial board member at Dissent. His latest book, written with Paul Engler, is entitled, This Is An Uprising: How Nonviolent Revolt Is Shaping the Twenty-first Century (Nation Books). He can be reached via the website http://www.DemocracyUprising.com. Andrew Elrod is a Ph.D. candidate at the University of California, Santa Barbara. He is writing a dissertation on the history of wage and price controls.

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The Author

Mark Engler is a writer based in Philadelphia and an editorial board member at Dissent magazine. His latest book, written with Paul Engler, is entitled This Is an Uprising: How Nonviolent Revolt Is Shaping the Twenty-First Century (Nation Books). Mark’s full bio is available here.

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