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).
Tim Davis, Partner and Executive Managing Director at Steward Partners, joins Cheddar News' Closing Bell, where he discusses what activity we could expect to see from the crypto market this week as the Fed decision approaches, the prices of Bitcoin and Ether struggle to find a spark, and the industry continues to digest President Biden's executive order on crypto.
Russia may be asking China for help with its war in Ukraine, according to several reports citing unnamed U.S. officials. Russia is reportedly calling on its ally for military and economic assistance, in an attempt to avoid punishment from sanctions imposed by the U.S., Europe, and Asia, which have hammered Russia's economy. Chinese and Russian officials denied the reports. Meanwhile, top U.S. and Chinese officials are meeting today, with both countries confirming the conflict in Ukraine will be the meeting's main topic. Edward Wong, diplomatic correspondent for the New York Times, joins Cheddar News' Closing Bell to discuss.
A Ukrainian drone company is using its technology to help defend its home nation during the ongoing war with Russia. Valerii Iakovenko, co-founder and CEO of DroneUA, joined Cheddar News to discuss its efforts to help against the invasion. "These drones can be used to do strikes more precise and even cheap drones, even simple technologies can help to make a defensive possibilities more precise," he said.
Following the Texas Supreme Court's decision to end further challenges against the latest abortion restrictions, Texas saw a 60 percent decrease in abortions performed in the state — with an exodus of patients seeking care in other parts of the country. President, and CEO of Planned Parenthood Federation of America, Alexis McGill Johnson, joined Cheddar News at South by Southwest 2022 to discuss the impact of the court's ruling on reproductive health care in the Lone Star State and beyond.
Damian Mason, farm owner, agricultural economist and author of "Food Fear" joined Cheddar News to talk about how the Russian invasion of Ukraine is putting pressure on commodities, which could lead to a 20 percent price hike according to the United Nations. “Russia and Ukraine are responsible for about 35 percent of exports, 35 percent of grain exports, specifically wheat,” said Mason. He also added, "You've got Russia saying, 'we're going to hoard and hold back our wheat,' which of course crimps global supply, and you've got Ukraine that maybe won't even get harvested."
In order to qualify for one of the coveted first retail licenses in New York's adult-use cannabis program, you'll have to have a conviction on cannabis-related charges or have an immediate family member who does. It's part of the latest effort by New York lawmakers to create a diverse and inclusive industry — but some advocates still have reservations. Amber Littlejohn, the executive director of the Minority Cannabis Business Association, joined Cheddar News' Closing Bell to discuss. "We definitely applaud the state of new york, but ultimately the devil will be in the details as to whether or not this actually works out to create equity in the cannabis industry," she said.
David Daley, senior fellow for FairVote, joins Cheddar News to discuss the Supreme Court denying the GOP's challenge to congressional maps in North Carolina and Pennsylvania.
