Nearly 60% of Americans support increasing top marginal tax rate to 70% for incomes over $10M

[FAH1223]

Poll: Majority Backs AOC’s 70 Percent Top Marginal Tax Rate
By Eric Levitz
@EricLevitz

Centrist. Photo: Nicholas Kamm/AFP/Getty Images

Earlier this month, Alexandria Ocasio-Cortez went on national television and said that the United States should tax incomes above $10 million at a 70 percent rate.

In response, some centrist pundits pronounced the Democratic Party dead by political suicide: National Journalreporter Josh Kraushaar argued that, while congresswoman Rashida Tlaib’s profane call for Trump’s impeachment was getting more attention, Ocasio-Cortez “calling for a 70 percent tax rate on the nation’s most-watched news show a whole lot more politically damaging for Ds.”

There was never much evidence for this assessment. In public opinion polls, raising taxes on the rich consistently ranks as one of the most popular ideas in American politics. Moreover, political-science research suggests that the American people’s resentment of the wealthy is bitter and deep — and, in the not-too-distant past, Democrats succeeded in leveraging such resentment for political gain.

Meanwhile, as far as plans for class war go, Ocasio-Cortez’s was more “Jimmy Carter” than “Jacobin.” As recently as 1980, the U.S. taxed all incomes above $216,000 (or $658,213 in today’s dollars) at 70 percent rate. And recent research on optimal taxation has suggested that the ideal top marginal rate might be closer to 80 percent.

These facts led certain bloggers to describe the congresswoman’s idea as a “moderate policy.” And now, a new poll has confirmed that such bloggers are, in fact, profoundly wise.

Over the weekend, pollsters from the Hill–HarrisX asked voters, “Would you favor or oppose a tax proposal that would apply a 70% rate to the 10 millionth dollar and beyond for individuals making $10 million a year or more in reportable income?” — and 59 percent said yes.

The idea was “popular in all regions of the country.” Southerners backed it by a 57-to-43 percent margin, while 56 percent of voters in rural zip codes agreed that the socialist congresswoman was onto something. Even 45 percent of self-identified Republicans approved.

There are reasonable critiques of Ocasio-Cortez’s tax plan (raising taxes on capital gains might be a more effective way of soaking the superrich; a confiscatory top marginal rate might prove impotent, absent a global war on tax havens; socializing the means of production, under the control of a workers’ state, might be a more technocratically efficacious means of reducing America’s Gini coefficient). But the notion that it’s “politically damaging for Ds” ain’t one.

 

[Hahahaha]

I'd need to see how they propose this would work. Seems like it won't actually target the real 'high grossers'. They would just find workarounds through company shares, LLC's etc.

 

[FAH1223]

I'd need to see how they propose this would work. Seems like it won't actually target the real 'high grossers'. They would just find workarounds through company shares, LLC's etc.

The 70% marginal tax rate is only the beginning of a fair system
Alexandria Ocasio-Cortez has begun a better tax debate, but we still need to close loopholes, not just raise rates.
By Mark Schmitt Updated Jan 15, 2019, 11:47am ESTSHARE

Bill Pugliano/Getty Images
This post is part of Polyarchy, an independent blog produced by the political reform program at New America, a Washington think tank devoted to developing new ideas and new voices.

There’s a wonderful clarity to New York Rep. Alexandria Ocasio-Cortez’s call for a 70 percent marginal tax rate on incomes over $10 million. Compare it to past Democratic or progressive efforts to nudge up taxes on the superwealthy, which inevitably became mired in complexity as they struggled to avoid violating an inexplicable promise never to raise taxes on any households with incomes below $250,000.

Recall, for example, the “Buffett Rule” that President Obama and Sen. Sheldon Whitehouse (D-RI) designed in 2012, in response to Warren Buffett’s point that he paid taxes at an overall rate lower than his secretary, simply because, like all investors, most of his income is in the form of capital gains and dividends. The obvious answer would have been to bring the tax rate on investment income in line with the ordinary rate on income from work, which is the rate his secretary pays. But fearful that might touch some of those struggling quarter-millionaires, Whitehouse and the administration cobbled together the Paying a Fair Share Act, which looked more like a second layer of the dauntingly complex alternative minimum tax.

Even Sen. Bernie Sanders (I-VT) joined in the promise to protect households under $250,000 — about the top 3 to 4 percent — from any tax increases, which made his 2016 campaign proposal to raise the cap on taxable wages for Social Security as convoluted as the Buffett Rule bill.

Ocasio-Cortez didn’t put forward a full tax proposal (there’s no reason she should), but her top-end number alone signaled a departure from the tiptoe caution of earlier Democrats. The focus on the top marginal rate also marks a break from a more traditional approach to tax policy, which aims to keep the tax base broad (as much income as possible should subject to tax, with few special breaks) and rates relatively low. This is the approach of tax reformers from the Kennedy administration through the tax reform of 1986. It’s what Republicans claimed they were aiming to achieve in 2017, although what they actually did was entirely different.

There’s both an economic and a political logic to the low rates/broad base model of traditional tax reform. The economic logic is that the tax system should be fairly neutral about economic activity; it shouldn’t favor one form of investment or income over another, because economic choices should be motivated by economic logic, not tax avoidance. The political rationale was that if rates were very high, politicians would be sympathetic to influential constituents who complained about the rates, and would push through special benefits for favored industries or firms.

That story rang true in the 1980s, when rates were nominally high but the tax code was larded with provisions that directly or indirectly benefited the politically influential oil and gas and real estate industries. (That’s why Donald Trump hated it: “Some very foolish people,” he told a congressional committee, “heard the word ‘tax shelter’ and thought it was a bad thing.”) Starting over with lower rates and as few exceptions as possible would mean that the wealthy would actually pay something close to the nominal rate, and the hope was that the system would be stable.

The tax reform of 1986, which embodied those ideas, doesn’t get much respect on the left today, in part because the lower top rates coincided with, and may have caused, the staggering increase in executive pay, a key driver of inequality. And the lower rates didn’t keep the wealthy special pleaders at bay for very long, so that today we have what might be the worst of all worlds — relatively low top marginal tax rates by historical standards (although at 37 percent, not as low as the 28 percent of the late 1980s), but also dozens of exceptions and special deals, some of which serve good purposes and some of which don’t. These “tax expenditures” totaled about $1.5 trillion in 2017.

If the traditional tax reform model has failed, then just raising top rates makes a lot of sense. But it’s still important to clear away as many of the tax expenditures, old and new, as possible, particularly because the form they take will make them even more valuable to the very wealthy if the top marginal rate were to be set as high as 70 percent.

The first priority should still be to make sure as much income as possible is subject to the same rate, whatever it is. Members of the $10 million-plus club, like Buffett, get most of their income from investments, so it won’t do much just to raise the ordinary rate if the top tax rate on capital gains remains at the current level of just 20%. Many of the most notorious tax evasion schemes — the “carried interest” loophole, the “hedge fund” loophole — involve treating ordinary compensation as if it were capital gains. The main effect of raising the top rate on regular income to 70 percent would be to make those tricks, which are only available to the very wealthy, all the more valuable.

And then there’s a whole family of tax expenditures that have the effect of taking huge streams of income out of the tax system altogether. Take, for example, the increasingly popular Roth IRA, in which you pay taxes on the money when you contribute it, after which it grows tax-free and is tax-free on withdrawal — all that investment income is invisible to the tax system. Married taxpayers can contribute if they make less than about $200,000. So if you expect to be in the 70 percent bracket later in your career, you can (and should!) park all the money you can in a Roth IRA now, paying at your current lower tax rate, and that income will never see taxes again, at any rate. Other tax expenditures that take a similar form include 529 programs for college savings and health savings accounts.

The newest tax shelter, and a particular obsession of mine, is a program called “Opportunity Zones,” which allows investors with capital gains income to avoid tax altogether if they put their gains into a fund that, in turn, invests partly in “economically distressed” neighborhoods such as Brooklyn Heights. While taking very little risk in such gentrifying, or long-gentrified neighborhoods, the program will allow investors to take even more income out of the tax system.

The next generation of progressive tax policy won’t go back to the low rates/broad base model that long ago achieved a bipartisan consensus. But it’s not enough to just raise rates. Given a choice between a 70 percent top rate, with all the tricks and shelters that will allow the very wealthy to avoid it, and a 60 percent or even 45 percent marginal rate that the very wealthy actually pay, we should always prefer the second. But at least the debate has begun and we’re past the cautiousness of the Buffett Rule era.

The 70% marginal tax rate is only the beginning of a fair system

 

[Geek Nasty]

I'd need to see how they propose this would work. Seems like it won't actually target the real 'high grossers'. They would just find workarounds through company shares, LLC's etc.

Yeah I agree with the theory but in practice they always seem to end up targeting the “working rich” (doctors lawyers athletes etc).

 

[88m3]

 

[Secure Da Bag]

70% sounds nice. But someone mentioned it before, if you're not going after their main wealth-drivers, then what's the point?

 

[DEAD7]

Reminds me of the 2016 single payer poll in Colorado. Like 80% of people supported it when polled but it only got like 20% support at the ballot box.
She should push for this type of tax plan in her home state first.

 

[Jhoon]

70% sounds nice. But someone mentioned it before, if you're not going after their main wealth-drivers, then what's the point?

It’s a conversation starter.

If the conversation was about taxing people at 97% most people would support that tax. The MSM doesn’t want to allow that conversation to happen.

 

[Double J]

100% of Americans could support such a measure but it will still never happen so you might as well getting the bed because you got work in the morning

 

[Jhoon]

100% of Americans could support such a measure but it will still never happen so you might as well getting the bed because you got work in the morning

If the will of the people aren’t being met, what should be done?

 

[88m3]

I'd need to see how they propose this would work. Seems like it won't actually target the real 'high grossers'. They would just find workarounds through company shares, LLC's etc.

I wouldn't be so sure about that

 

[Secure Da Bag]

It’s a conversation starter.

If the conversation was about taxing people at 97% most people would support that tax.

Of course, they would. Poor people don't know how rich people make or keep their money.

The MSM doesn’t want to allow that conversation to happen.

Of course not. Because that tax affects them far more than it does their bosses.

 

[dora_da_destroyer]

I mean...I can’t get with this. I get that it will be worked around, but I’ll be damned if someone tells me that I should have 70% of my income skimmed off top. Some folks earning that much truly have sacrificed every other part of their life for that income, so they’re supposed to only keep 30% of every dollar over $10M?

Yeah I agree with the theory but in practice they always seem to end up targeting the “working rich” (doctors lawyers athletes etc).

How do you put doctors and lawyers with athletes?

 

[Hood Critic]

70% is too high at that point but I get it, this is to start the conversation and negotiate to an acceptable rate.

 

[ELESDEE616]

I mean...I can’t get with this. I get that it will be worked around, but I’ll be damned if someone tells me that I should have 70% of my income skimmed off top. Some folks earning that much truly have sacrificed every other part of their life for that income, so they’re supposed to only keep 30% of every dollar over $10M?


How do you put doctors and lawyers with athletes?

Either that or you get what the French kings and Russians czars got. Make a choice