Last week, in an interview with Anderson Cooper on 60 Minutes, newly-elected Rep. Alexandria Ocasio-Cortez (D-NY) proposed a 60-70 percent marginal tax on income above $10 million, to finance a transition to renewable energy.
This isn’t a particularly extreme idea. It would be about where the top marginal tax rate was in the 1960s, and indeed the super-rich would probably still get to keep most of their money because the bulk of their wealth comes from capital gains, not earned income. If anything, Charles Lane argues in the Washington Post that Ocasio-Cortez ought to go even bigger and propose eliminating all deductions.
Nonetheless, her proposal has sparked a predictable wave of anger from Republicans, some of whom are trying to claim she wants to tax all income at 70 percent (which is not how marginal tax rates work).
The debate prompted Nobel laureate economist Paul Krugman to write a basic primer in The New York Times on why Ocasio-Cortez’s idea was a good one. Essentially, he argued that the top marginal rate should be about where Ocasio-Cortez wants it to be, if not slightly higher, because an extra $1,000 in income is less valuable to a wealthy family than a lower-income one, and because in a competitive market, where everyone earns the value they produce, we should care more about the tax revenue generated from the rich than how much more they are incentivized to work.
On Tuesday, Krugman reflected on the reactions he got to his article:
I was sort of startled by how much reaction this piece on top tax rates got; most of it positive, but the negative reactions were revealing 1/ https://t.co/PyQn022BaR
— Paul Krugman (@paulkrugman) January 8, 2019
Not surprisingly, most of the pushback came from the right, where I got a fair number of complaints that the government has no right to tax away income that people have earned. Worth thinking about that: isn't it an argument against any taxation at all? 2/
— Paul Krugman (@paulkrugman) January 8, 2019
Or if you admit that we need a government, maybe it's an argument against any kind of progressive taxation (and also against any social safety net). And that's a coherent point of view — but one the public overwhelmingly rejects 3/ https://t.co/jnvvHUz0in
— Paul Krugman (@paulkrugman) January 8, 2019
In practice, hardly anyone is willing to make the libertarian argument against progressive taxes honestly; they almost always slip in the false claim that taxing the rich severely damages the economy too. And that's why doing the economics right matters 4/
— Paul Krugman (@paulkrugman) January 8, 2019
I've also gotten some pushback from Sanders supporters, who complain that I criticized some of his proposals but praise something AOC said — and say that's inconsistent. But you know, economic ideas have substance as well as a political lean. 5/
— Paul Krugman (@paulkrugman) January 8, 2019
I'm not going to praise anything that comes from the left; it depends on what the proposal is. As it happens, the case higher tax rates on top incomes is backed by solid economics. 6/
— Paul Krugman (@paulkrugman) January 8, 2019
America has spent years taking a narrow view of tax policy, increasingly making changes that just help corporations and billionaires. Ocasio-Cortez is expanding the conversation in a sensible direction — and it is time we discussed it seriously.
