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).
Jill and Carlo discuss the scenes of joy at American airports as borders reopen, another tool in the Covid toolbox, the latest in the Astroworld crowd crush tragedy and more.
Frank Lee, Managing Director at Miracle Mile Advisors, joins Cheddar News' Closing Bell, where he explains why markets are soaring after the Dow, S&P, Nasdaq, and the Russell 2000 all reached new record closes to begin the trading week.
The Biden Administration's mandate for COVID vaccinations by large employers has been put on hold by federal courts as GOP-led states and some businesses push back on the order's legality. Jonathan Adler, a law professor at Case Western Reserve University, joined Cheddar to discuss the legal challenges to implementing such mandates through OSHA (Occupational Safety and Health Administration). "Certainly expanding vaccinations is a good thing, and as vaccination rates go up that's better for all of us," Adler said. "But there are some legal questions about whether or not it's appropriate to use a law about occupational safety and health as the means to do that."
The Biden administration is giving businesses a deadline to implement a vaccination mandate, saying companies can take until after the holiday season. Andew Noymer, Associate Professor of Population Health and Disease Prevention at the University of California, Irvine, joined Cheddar to discuss.
Jacob Rubashkin, reporter and analyst at Inside Elections, joined Cheddar to discuss Republicans' wins on election night and what they mean for Democrats going forward.
James Astill, Washington Bureau Chief at The Economist, joins Cheddar News to discuss the latest issue, 'ONE YEAR ON: The calamity facing Joe Biden and the Democrats.'
Elon Musk asked Twitter if he should sell about $20 billion worth of his Tesla stock and about 58 percent of those who answered said yes. The Tesla CEO pledged to abide by the results of the poll, whichever way it went. Arun Sundararajan, NYU Stern professor & author of "The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism," joined Cheddar to discuss what the Twitter poll says about America's attitude towards billionaires and the nation's tax system.
Dr. Nasia Safdar, Doctor at UW Madison, joined Wake Up With Cheddar to discuss the implications of Merck sharing its antiviral pill, which has been shown in early trials to cut hospitalizations and deaths by half, with poorer nations around the globe.
The Federal Reserve finally announced its taper plan on Wednesday saying that it planned to scale back on bond purchases as growth slows, and would not rush to raise interest rates. Ross Mayfield, Investment Strategy Analyst at Baird spoke on whether or not a decrease in inflation could be in the country’s future amidst comments made by Fed chairman Jerome Powell. Baird also broke down ADP jobs numbers ahead of the Labor Department's October jobs report.
