Are Alexandria Ocasio-Cortez's Tax Views That Far Out of the Mainstream?
*By Carlo Versano*
When freshman Democratic Rep. Alexandria Ocasio-Cortez floated the idea to Anderson Cooper on "60 Minutes" Sunday that the very wealthy pay a marginal tax rate as high as 70 percent, it got pundits and politicians all worked up. What exactly was the newly-elected, self-proclaimed radical proposing?
But as it turns out, a higher marginal tax rate is not particularly radical in the context of American history. Marginal tax rates, in which taxes increase as income rises, were as high as 90 percent under President Eisenhower, and were above 50 percent up until the second Reagan tax cut.
But according to Kyle Pomerleau, an economist at the Tax Foundation, a nonpartisan, business-friendly think tank, higher marginal rates do not bring in the promised revenue, and instead are an example of "the worst of both worlds."
Ocasio-Cortez's policy would "distort behavior" as individuals in the highest brackets would find ways to skirt the system. One of the ways they would do that, Pomerleau said, would be to stop selling assets defined as capital gains, which make up the majority of the taxable income at the top of the ladder and are only taxed when they're sold. "The amount of taxable realizations will plummet," Pomerleau said.
The safety net programs that progressives like Ocasio-Cortez seek to strengthen, like Medicare and Social Security, are better funded through other forms of taxation, Pomerleau said, such as a payroll tax, or the European model of sales, payroll, and value-added taxes. But the bottom line, he said, is that "everyone is going to have to pay higher taxes."
That is not a foregone conclusion. Those who advocate for very high marginal tax rates on the wealthy include some respected economists, including Nobel Prize-winner Peter Diamond. Diamond has estimated the top tax rate should be [73 percent](https://www.aeaweb.org/articles?id=10.1257/jep.25.4.165), while a pair of Berkeley economists have put it as high as [80 percent](http://ceg.berkeley.edu/research_117_2123314150.pdf).
Or as Paul Krugman [put it](https://www.nytimes.com/2019/01/05/opinion/alexandria-ocasio-cortez-tax-policy-dance.html?action=click&module=Opinion&pgtype=Homepage) on Monday: "The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue."
At the very least, Ocasio-Cortez's ideas about the marginal tax rate, given that she has such an outsized megaphone within the Democratic Party at the moment, signals that Democrats are getting "more serious" about progressive income taxation, Pomerleau said.
And both sides can agree that the individual tax code is in need of simplification, he said. "There's still a lot of work to be done to fix that."
For full interview [click here](https://cheddar.com/videos/ocasio-cortez-calls-for-radical-income-tax-reform).
Markets were pointing to a higher open to kick off the third trading week in November. It comes as stocks come off a losing week in reaction to October's consumer price index--which showed inflation at its highest point in over 30 years.
Ryan Detrick, Chief Market Strategist for LPL Financial joined Wake Up with Cheddar to discuss.
Harvard Business School Professor Ranjay Gulati joined Wake Up With Cheddar to break down the massive challenge the Biden Administration faces in ensuring projects in the $1.2 trillion infrastructure bill are completed on time and on budget.
Jill is joined by Baker Machado to talk all things infrastructure: where will the money go and who’s in charge? Plus, Sesame Street has its first Asian-American muppet. And a trailer for the trailer for Spiderman. Huh?
In this week's Cheddar Changemakers, Megan Pratz spoke with a 16-year-old climate activist Sarah Goody. She is the founder of a youth-led climate action group 'Climate NOW.'
We toss around the term "democracy is under attack" quite often without thinking too much, but one organization is actually stepping up to do something about it. The Fairness Project is a group that funds and organizes state ballot measures across the country. It has used ballot initiatives on campaigns aimed at expanding Medicaid, adding more paid time off, and raising minimum wage. It recently launched a new direct democracy campaign to fight back against attempts to make ballot measures inaccessible.
Kelly Hall, executive director of The Fairness Project, joined Cheddar Politics to discuss more about the group's efforts to push for economic and social justice, avoiding partisan gridlock.
Doug Flynn, Certified Financial Planner and Co-Founder of Flynn Zito Capital Management, joins Cheddar News' Closing Bell, where he says he believes the news of the infrastructure bill was already priced into the market and that inflation continues to loom large on Wall Street.
President Joe Biden signed into law today his landmark $1.2 trillion infrastructure bill, and it includes approximately $550 billion in new funding for increased broadband access, improving the power grid, and more. But what does this mean for the American economy, and American workers? Eliza Collins, Politics Reporter at The Wall Street Journal joins Cheddar News' Closing Bell to discuss what's included in the bill, which former mayor has been tapped to oversee how the bill is implemented, and how these new infrastructure investments will impact the economy.
The two-week COP26 climate conference has now ended with leaders reaching a deal, but so far the deal is getting mixed reviews from climate experts across the globe. Chloe Demrovsky, president and CEO of Disaster Recovery Institute International, explains that while the agreement is a step forward in some ways, the world still has much more to work on in order to keep warming to below 2 degrees Celsius.
Jill and Carlo cover the latest with the infrastructure bill, the growing state rebellion over boosters, Trump's dereliction of duty on the pandemic, Taylor Swift's reign of cultural domination and more.
