
Alexandria Ocasio-Cortez Wants to Raise Taxes on the Rich and Americans Agree - iron0013
https://fivethirtyeight.com/features/alexandria-ocasio-cortez-wants-to-raise-taxes-on-the-rich-and-americans-agree/
======
gnicholas
> _It’s perhaps not surprising that Americans would support higher taxes on
> top earners given that tax rates on high income brackets were once much
> higher than they are today._

The nominal rates were much higher once, but the effective rates were never
that high. Before the '86 tax reform, there were many "investments" available
to wealthy people that entailed zero risk but yielded guaranteed tax benefits
— we now rightly call these "tax shelters".

We should shed no tears that they are gone today, but we should also remember
that the economic effects we saw previously were based on the effective tax
rates (factoring in the sheltering activity), not the nominal rates. Now that
these passive tax shelters are not available, the effective rates would be
much closer to the nominal rates.

Also, as a tax-lawyer-turned-startup-founder, I can guarantee that if we saw
rates like this again, the biggest beneficiaries would be the lawyers and
accountants who would restructure contracts to avoid these taxes.

~~~
michael_storm
I've seen this point before, but it's not an argument for keeping rates low.
"If we raise rates, the rich will just find ways to avoid them!" People find
new ways to try to murder and steal all the time; that doesn't mean we throw
up our hands and make it legal to do so.

The solution is to raise rates _and_ fix loopholes, difficult a political lift
as that may be.

~~~
adventured
Show me how high taxes in France have made them better off at the median. US
wages are far higher at the median, US wage growth has been far higher for
decades, US unemployment is routinely 1/2 their rate, US growth is routinely
3x-4x higher. They've seen nearly zero inflation adjusted growth for 20 years
and have among the world's highest tax rates.

Their people are rioting week after week, because their system of high taxes
has failed them, their middle class is being crushed anyway. What are they
going to do, raise taxes further? The only thing left is to begin confiscation
of wealth directly and then they're just the next Venezuela in waiting,
accelerating their collapse.

I've seen zero evidence the US Government can be responsible with spending and
allocate it to proper use as things are now. They've been wildly irresponsible
for 40-50 years running, including in stealing trillions of dollars from
Social Security over decades (and then lying about it) and on wasting
trillions on unnecessary military spending. Why would I give them more money
until they prove they can be good stewards with the $4.x trillion they get to
spend now? Let's see them take the $750 billion in military spending down to
$450 billion where it should be and redirect those resources to infrastructure
et al.

~~~
avmich
> I've seen zero evidence the US Government can be responsible with spending
> and allocate it to proper use as things are now.

It's hard to argue one can get the same performance - on the same scale - as
US government in projects it does.

How, for example, you measure overall lack of wars and general growth in
prosperity, health etc.? What's the US part in that? Even if, say, Sweden
manages lots of projects more efficiently per capita, how would you argue
scaling that won't be worse than what US is doing?

It's a rather common opinion that governments are less efficient than private
organizations. Still for some things we keep governments and keep trying to
make them efficient, having headwinds which aren't typical in private world.
Not sure if starting with "first reach efficiency..." won't get us to the same
situation as US government is in right now - i.e. a prolonged shutdown.

------
larrywright
Controversial, but I’ll say it anyway: the fairest tax is a flat tax. Take,
say, 15% across the board for anyone making above a threshold. Then combine
that with eliminating most if not all of the current tax deductions, so that
everyone actually pays the amount they should. Someone who makes $100k/year
pays $15k in taxes. Someone who makes $1M/year pays $150k. That’s fair.

I’m certainly not the first to propose this, and I seem to recall that Intuit
and others (H&R Block likely) lobbied hard against any attempt to simplify the
tax code, as their services wouldn’t be needed any more.

~~~
dpcx
But not really. If the person who now makes 85k is struggling to survive on
that amount of money (ignore the fact that it's 85k... it could be 40k after
taxes for example), then while its "fair" in that they both pay their
percentage, the person who is struggling to survive gets the worse end of the
deal.

~~~
larrywright
Kind of. You could leave in the current credits you get for dependents, for
example, so that a person making $85k with a wife and three kids doesn’t pay
quite as much as someone making $85k and single.

It’s hard to imagine how a single person making $85k would be struggling if
they weren’t mismanaging their money, but I’m willing to be convinced
otherwise.

~~~
bryanlarsen
It's not the brackets that make taxes complicated, it's the exemptions. And
all current exemptions are in there for a reason, so once you start cherry-
picking some exemptions, it'll be hard not to bring across most of them...

------
avar
Whatever anyone thinks about this policy proposal, most articles on this are
really shallow, and e.g. don't mention:

1) That the French backed out of a similar tax recently[1]. Not discussing
another major economy's recent experiment with this (well, 75% not 70%) seems
strange.

2) The lack of discussion about how those subject to this tax might
restructure their assets to avoid it. If you earn more than $10 million/yr you
can hire a team of accountants to restructure things for you, has anyone
speculated as to how the tax code will stand up to that if only this single
variable is changed?

1\. [https://www.theguardian.com/world/2014/dec/31/france-
drops-7...](https://www.theguardian.com/world/2014/dec/31/france-
drops-75percent-supertax)

------
peterwwillis
_raises hand_ Uh, I know where we can find money before we start adding more
taxes.

China, Russia, Saudi Arabia, India, France, United Kingdom, and Japan,
_combined_ , spend less on their military than we do.

I get that she's a politician and all politicians have to play to their base,
but can we not all agree, in any political arena, that the _674 Billion
dollars_ spent on the military (over half of federal discretionary spending)
is perhaps too high?

I mean, what the actual fuck? How can anyone justify this? We're not even
fighting any real wars, our Navy is in fucking shambles, our brand new fighter
planes are a joke, and we're soon going to hire more contractors than actual
soldiers. Just replace heating oil with $100 bills from the military
industrial complex's pockets, it'll do more good for us.

~~~
jki275
DOD is 27% of the US budget. Using the "discretionary spending" trick is being
disingenuous. Let's fix SSDI and other entitlement abuse spending first.

And the Navy needs more ships, but it's not "in shambles", and the JSF is the
best aircraft that's ever been built, even if it did cost too much and take
too long to get to IOC.

------
Rooster61
What frustrates me about income taxes (and really taxes in general) is that
proponents often automatically presume that a larger amount of money flowing
into the government is a wholly beneficial effect. I trust current US
government officials to effectively use my tax dollars about as far as I can
throw it. Entirely too much money is squandered on things that do no benefit
whatsoever to those who pay into it, rich or poor. It's a deal-breaker for me,
without even going into the problem of tax evasion available to the obscenely
rich.

~~~
superqd
I imagine it like being in a boat. There are people in the boat running around
drilling holes in the bottom and then there are those trying to cover the
holes, the Leak Fixers, but they do this very poorly, and sometimes their
efforts create just as much water leakage as the hole drillers.

Then there are those who are bailing water out of the boat. Most of them have
small cups, some have nothing but spoons, but some have enormous buckets, and
all are bailing as much as they can.

Then the Leak Fixers turn around and see that their efforts are not yielding
the results they expected. Rather than stop the hole drillers, or improve
their hole fixing, they turn to the Large Bucket Bailers, and demand that they
double the hours they spend bailing water.

If I was holding a large bucket when that happened, I would be very very
angry.

~~~
sharemywin
And then there is Amazon selling all the buckets and the drills in a water
proof bubble.

~~~
sharemywin
stop down voting me Jeff you got better things to do.

------
rayiner
Matt Yglesias’s podcast has a great segment in this. One point they make that
isn’t mentioned in the article is that it wouldn’t raise all that much money,
certainly not enough to fund broad social programs. Not enough people make
more than $10 million a year to raise that much money from higher marginal
rates. Its’s really more about punishing billionaires than raising money for
social programs.

[https://art19.com/shows/the-weeds](https://art19.com/shows/the-weeds)

~~~
jonahhorowitz
It's not about punishing anyone. It's about restructuring the tax code to
incentivize paying workers more. It sets an effective salary cap of ~$10m.

~~~
briandear
Tim Cook made $12 million in total comp last year. Apple has 132,000
employees. If he made $0, that would be an extra $90 per year for each
employee. And, after taxes, that would mean more like an extra $60 per year
per employee. Basically an extra $2.30 per paycheck.

Want to increase worker pay? Cut taxes.

~~~
dorchadas
> Want to increase worker pay? Cut taxes.

Sure, because worker pay has been increasing so much (adjusted for inflation)
since the 80s.

------
lambdasquirrel
Why the focus on income as opposed to capital gains?

It's always struck me that only the very-very rich count on investment income.

~~~
RickJWagner
I don't like the idea of taxing capital gains.

Buy-and-hold (and eventually sell) is one of the few paths to financial
independence that are available to the common wage-earner. Many people have
adapted the strategies suggested by Buffet, Bogle, etc. Many have succeeded.

Don't kill one of the few publicly availble golden geese, please.

~~~
dorchadas
I wouldn't say it's available to the "common wage-earner", given that they
live paycheck to paycheck.

------
plainOldText
So many politicians confidently propose solutions to complex systems such as
the economy, yet some do not even understand basic things, such as the three
branches of the government. [1]

I saw recently on Paul Graham's twitter feed a paper that made the case for a
29% tax rate.

From the paper: _" the rate that incorporates innovation and maximizes a
utilitarian social welfare function is just 29%."_ [2]

I'm not saying I agree with the paper, but at least it provided a mathematical
framework for studying taxation and considered important things such as
incentives, innovation and economic growth, which in my view is a good
starting point.

[1]
[https://www.youtube.com/watch?v=N2xDm-Y4l_4](https://www.youtube.com/watch?v=N2xDm-Y4l_4)

[2] [https://www8.gsb.columbia.edu/faculty-
research/sites/faculty...](https://www8.gsb.columbia.edu/faculty-
research/sites/faculty-research/files/finance/Macro%20Workshop/toptax.pdf)

------
AimForTheBushes
I think raising taxes is a good idea but arbitrarily making up the number is
not. The idea that this would cover some 'Green Deal' ignores the 800 lbs
gorilla in the room- a trillion dollar deficit year after year. We really need
to figure out how to make the government more efficient and work in the
allotted funding for it. Every politician wants to spend a whole bunch of
money trying to push their agenda but it's always on credit.

~~~
mempko
Trillion dollar deficit means there are a trillion dollars extra floating
around in the private sector. Trillion dollars more in people's bank accounts.
If there was no deficit spending, there would not be money floating around in
circulation that isn't debt issued bank notes.

~~~
AimForTheBushes
Once the deficit eclipses the total GDP it won't matter if there is extra
money floating around because inflation will spiral.

~~~
millstone
Did you mean debt? The deficit is nowhere close to GDP.

Japan has a much higher debt to GDP ratio than the US, and inflation of <1%.

------
RickJWagner
I'm generally pretty conservative, but I wouldn't mind higher rates on the
very top earners. (Say 500k and above. When you get to the 1M tier, put taxes
into the 90s.)

But there's a catch: I'd also like decreased spending, at least until the
Golden Fleece Awards stop finding easy targets. It would be nonsense to raise
taxes on anyone unless the money is put to good use.

------
tomohawk
Sure - raise rates to 100% on wealthiest 5%. It still wont pay for what she
wants.

------
blue4
I think it's common for people to want to tax people that have more,
especially when the wealth gap is only widening. The state of things is the
ever increase of the poor unable to break out of their class and the rich only
getting richer.

Maybe it would be a good idea to provide the ability to have an option to
suggest where/how the funds will be used based on some of the nation/state
level priority needs.

------
cpr
Looked at from a higher level:

[https://moneymaven.io/mishtalk/economics/progressive-lies-
li...](https://moneymaven.io/mishtalk/economics/progressive-lies-like-free-
college-and-medicare-for-all-hide-cost-of-debt-0vidqfvLIEK3kpaUPdycFA/)

~~~
millstone
How does that apply? AOC's proposal to raise taxes on the rich would not
increase the debt.

------
Chikodi
Hard to identify with people who find this controversial

~~~
claydavisss
You might find it more challenging when they will eventually consider you
"rich".

There's no way there's enough money in the top 1% to fund the programs and
plans she wants. The only way will be through the upper middle class. YOU.

~~~
geofft
Are there many people who support this policy and don't support it for
themselves, should they be upper-middle-class? I personally support a 70%
marginal tax on all income over $100,000, and I make well over that.

In particular the primary reason I support this is that the primary reason I
want more than $100K income is competing in housing markets like SFBA and NYC.
If _everyone_ making over $100K is taxed heavily past that point, then the
people competing for the same housing are on the same playing field as I am -
if anything, I'm more competitive with people who make more than I do - and it
also makes income equality better in general. (I don't actually care if the
money goes to the government; you may as well burn it. The effect I'm
interested in is changing post-tax incomes, not getting more revenue for the
government)

~~~
pascalxus
are you just trolling for responses? well you got me.

You can't possibly believe that 70% marginal on > 100k is anywhere near
reasonable. Here in CA, that means, you're income taxes would be 83% plus
medicare and social sec urity which is +8%, and let's not forget the company
pays another 7% of your salary on top of that (you don't ever see that 7% -
that's the part they pay), and that's not even counting all the other taxes
you pay after that. at that point, everyone would have to quit their jobs. to
say that it would ruin the economy is the biggest understatement of a
lifetime.

~~~
anth_anm
They wouldn't be 83%, because it's a marginal rate.

~~~
pascalxus
it's more than 83% when you take into account all the other taxes: there's not
just federal and state income taxes, please take a look at your pay stub,
there's a lot of other stuff on there.

~~~
geofft
Please take a look at your 1040. My comment was about _marginal_ rate. I would
like _the portion of my income above $100K_ to be taxed at 83%, and my income
below $100K to be left alone. I would not like all of my income to be taxed at
83%.

------
dragonbonheur
From [https://investinganswers.com/](https://investinganswers.com/) \--

The marginal tax rate is the percentage of tax applied to your income for each
tax bracket in which you qualify. In essence, the marginal tax rate is the
percentage taken from your next dollar of taxable income above a pre-defined
income threshold.

The marginal tax rate includes federal, state and local income taxes, as well
as federal payroll and self-employment taxes. This differs from the average
tax rate, which is the total tax paid as a percentage of total income earned.

------
briandear
Milton Friedman (who is a few steps above AOC when it comes to economic policy
knowledge):

"All things considered, the personal income tax structure that seems to me
best is a flat-rate tax on income above an exemption... I would combine this
program with the abolition of the corporate income tax, and with the
requirement that corporations be required to attribute their income to
stockholders, and that stockholders be required to include such sums on their
tax returns. The most important other desirable changes are the elimination of
percentage depletion on oil and other raw materials, the elimination of tax
exemption of interest on state and local securities, the elimination of
special treatment of capital gains, the coordination of income, estate, and
gift taxes, and the elimination of numerous deductions now allowed."

However, this won't happen because those on the left and the right (i.e.
"politicians") use the tax code as a means for punishing and rewarding to
garner favor with contributors to their political campaigns.

Here's Friedman speaking on that:
[https://youtu.be/TruCIPy79w8?t=13](https://youtu.be/TruCIPy79w8?t=13)

~~~
geofft
> _Milton Friedman (who is a few steps above AOC when it comes to economic
> policy knowledge):_

AOC has a degree from Boston University in economics. Friedman was a
professional economist, of course, but as in any field there are lots of
professional researchers with strong opinions in lots of directions, and we
still listen to the folks with bachelor's degrees. You can find many computer
scientists with many opinions on programming languages, but you wouldn't
ignore people who got a bachelor's in CS simply because the professional
researchers exist. (Otherwise we'd just shut down this site and read journals
all day.)

~~~
masonic

      AOC has a degree from Boston University in economics. 
    

Wikipedia says " _International Relations and Economics_ ", which is not the
same as graduating as an Economics major.

~~~
geofft
Correct. It's not the same thing. It's a double major. It means she's as
qualified as someone who solely majored in economics, but she worked even
harder.

------
iscrewyou
This has been done before and it works. Taxes need a correction.

But it’s hard to explain to the public or the ones who are against this
because they listen to certain opinions. They need to have a simple message.
Like three bullet points that anyone can read and get a message. No percentage
comparisons between social classes, no comparison between old and new tax
rates. None of that. Public tunes right out.

E.g. (1) If you make over x in a year, you’ll be taxed at the new 70% rate,
(2) if you make less than x, your taxes won’t change, (3) that’s it!!

~~~
smacktoward
_> They need to have a simple message._

It's hard to imagine a simpler message than "people who make more than $10
million a year should pay more taxes."

~~~
briandear
Except the top 1% of taxpayers accounted for more income taxes paid than the
bottom 90% combined. The top 1% pay almost 40% of all income taxes.

~~~
millstone
$10 million is in the top .01%, who pay a lower rate than the top 1%.

