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[flagged] A majority of Americans support raising the top tax rate to 70 percent (thehill.com)
46 points by laurex 30 days ago | hide | past | web | favorite | 102 comments



For anyone else who may be wondering, the Washington Post estimates that this would affect ~16,000 households and generate (on the high end) $72 billion annually in additional tax revenue.

https://www.washingtonpost.com/business/2019/01/05/ocasio-co...


I'm all for high taxes for the rich but this particular scheme is fairly unlikely to generate that much additional tax revenue and I think it's even possible that this will reduce tax revenue. Because income in the form of unrealized capital gains is not taxable at all and corporate tax rates are going to be much lower than 70%, it will certainly cause people to shift personal income into one of these forms. Income tax beyond a certain point is almost always going to be regressive because of the fixed costs involved in converting one type of income to another. A much better approach is making taxes relatively flat and spending more progressive - this is basically how it works in Europe.


It seems very unlikely to actually raise much directly. As the article quotes someone saying,

> You’d certainly see some people under that system change their behavior to avoid the higher rate, which could significantly impact how much revenue it generates

Which is the real point. It's intended to do something to rein in out of control executive compensation. Particularly stock compensation which gives execs an incentive to do short term price manipulation.

(Edit: that's what it did the last time the top rate was this high before Reagan cut it. CEO pay was more like 30x ordinary workers, not 300x)


So some CEOs defer cashing out for one year and then it’s back to regular business as they cash out last year’s comp at capital gains rates? It’s basically a no-op.

This sort of talk is just pure envy driven fantasy.


Maybe so, but I do believe if you're paid in stock (not options) you pay taxes immediately, then capital gains is applied to any difference in value when it's sold. I could be wrong, I have no special expertise here.


Doesn't seem like much of an impact then.


The government is currently shut down over a $5B disagreement, so I'd say $72B isn't something to scoff at.


The disagreement would likely persist even if it was $5M. I haven't heard anyone object to the issue because of its price. The US government spent $4T last year. So yeah, an extra $72B does seem like a drop in the bucket.


7-8% of our budget deficit is not a small number. $72B would let you triple the NIH's budget, quintuple NASA's...


Looked at from the deficit, I suppose. Though I'm not persuaded by arguments based on what extra funds could do; there's a lot we could do by just rearranging the already ginormous amount the government collects. It's not going to happen, though.


You don't actually think that's what they would do with the money, do you?


$72 billion is more than the GDP of some EU member countries.


If the government received [1] $3.422 trillion in revenue last year, this could increase it at most by 2%.

I'm not convinced they could achieve much with 2% more.

[1] https://www.thebalance.com/u-s-federal-budget-breakdown-3305...


This isn't going to do much but hurt professionals like doctors, lawyers, software developers, traders, small business, etc who work for income.

The truly wealthy people do not gain their wealth through income. They get it through capital gains ( stocks, homes, asset value increases ). Capital gains ( long term ) are taxed at 20%.


I find it hard to believe that any of the professionals you list make $10 million in taxable income. There are a few outliers but to act like all lawyers and doctors would be poor from a 70% rate over $10 million is just wrong.

Your sentiment that the truly rich make their money outside of a typical paycheck is correct though. It’s a balancing act of how do we tax people who have accumulated so much wealth in capital vs taxing capital so much that people don’t invest in it.

I don’t pretend to have the answer there but spreading disinformation that professional working people would be hurt by a 70% rate on every $1 over $10 million is pretty irresponsible.


Can anyone recommend a good resource that talks about the trade offs between raising capital gains tax vs income tax? If the goal is wealth redistribution, it seems to me like a no brainer that capital gains is the more effective route.


Please, stop using talking points like "disinformation". So sick of it. The point is that if you create a new tax bracket that is $10 million, there will be many new tax brackets between $10 million and the current top tax bracket of $500K. It is extremely naive to believe that creating such a high tax bracket will be a one off and it's extremely naive to believe creating such a high tax rate won't drag the lower ones a tad bit higher.

Just like lowering the highest tax bracket and tax rate lowered the tax brackets and tax rates below it. Creating a new highest tax bracket will do the opposite.

But then again, it's my opinion not "disinformation".


Nobody has mentioned anything about other brackets between the current upper end and $10 million.

To make statements that a 70% bracket above $10 million would negatively affect professions that are typically upper-middle class (not $10 mil/year) is misleading at a minimum.


When you say "This isn't going to do much but ..." in response to an article about a specific policy proposal, and don't say what you mean by "this", the common-sense interpretation is that you're referring to the policy proposal in the article, not some other policy you think is likely to be enacted as a result.


Why couldn't just a new tax bracket at 10mil be added? No need to stretch or modify any others.


Seriously. These are things that are defined. There is really nothing stopping us from saying "Ok. Up to 500k is unmodified. Here is the curve that will be created above that level".


What we're talking about here is Ocasio-Cortez's suggestion for a 70% marginal tax rate on income over $10M, right? Because this would be a new tax bracket, it would only apply to the money you earn over $10M.

So first: how many doctors, lawyers, software developers, traders, small businesspeople, or etc. make over $10M in income? (You wrote "small business," but to be clear, we're not talking about business tax rates, we're talking about personal income.) In 2016, less than 20,000 IRS returns showed combined adjusted gross incomes of $10M or over. (That includes married couples pooling their income.)

So for the incredibly vast majority of taxpayers, adding another tax bracket higher than the ones established now would have no effect at all. Period. Given that the top tax bracket in 2019 doesn't kick in until an AGI of $510K (or $612K for married), what are we talking about? Say, a new 50% tax bracket that starts at 5M and a 70% one that starts at 10M? How many people would truly be affected by this? Far under a million. Quite likely well under 200K.

My mother had a financial adviser years ago who half-joked that his life goal was to pay personal income taxes of $1M a year. That gets at an essential truth that people who think that this tax would "hurt" people seem to miss. If I was in a position where a 70% marginal tax rate on income over $10M a year had any material effect on me whatsoever, it's not an exaggeration to say that I'd be too rich to care.


The top rate would apply to annual income of $10,000,000 and above. Maybe you know something I don't, but at least of the people I know there aren't many doctors, lawyers, software developers, etc hitting those numbers.

The super rich make about half their income via capital gains, and the rest via various forms of income such as dividends, business income, etc. So such a change would certain impact at least a reasonable portion of their income. It does raise the question of whether a flat rate for capital gains makes sense.


> The truly wealthy people do not gain their wealth through income. They get it through capital gains ( stocks, homes, asset value increases ). Capital gains ( long term ) are taxed at 20%.

That just means that the capital gains tax needs to be made progressive like income tax to cover those people.

If we're reforming income tax, there's no reason to not reform the capital gains tax at the same time.


How many doctors, lawyers, software developers, traders, and other small business people do you know who work for incomes which are substantially greater than $10 million per year? We're not talking about 1%-ers here, nor even all of the 0.1%-ers; the people who would be affected by the proposed top marginal tax rate at all are an extremely elite group. This article claims there were about 16,000 people who earned $10 million or more in 2016: https://www.fool.com/investing/2019/01/09/who-would-pay-a-70...


> The truly wealthy people do not gain their wealth through income.

Yes, they do. Gaining wealth is income. (It may be income that is subject to favorable tax treatment, but it's still income.)

> They get it through capital gains ( stocks, homes, asset value increases ). Capital gains ( long term ) are taxed at 20%.

You can add a new top bracket and tax long-term capital gains as normal income at the same time. Though if you do the latter, you should also:

(1) Allow recognizing expected income for tax purposes in advance of realizing them, and also allow deferring large windfalls over a period of years, and

(2) Inflation-correct asset basis values and balances of anticipated income on which tax has been prepaid.


Great. Increase that too.

Not many devs are making 1m+ salaries.


I'd consider someone with $10M annual income to be fairly solidly in "truly wealthy" category, assuming they're not being stupid with it.


I'm not worried about software developers at all: taxation was already one of the main reason I didn't move to US from Switzerland (Swiss pension system is also amazing). I guess this would just mean even more innovators moving to Switzerland.


Wait, software developers make $10 millions a year?


No. The current top bracket is a few hundred thousand.

https://www.bankrate.com/finance/taxes/tax-brackets.aspx

Edit: To the people downvoting, I'm well aware that the current bracket won't be taxed at 70%. But there is a lot of room between $500K and $10 million. And I have feeling that there will be many brackets between the current top bracket and the new one.


> And I have feeling that there will be many brackets between the current top bracket and the new one.

So, you are arguing against your feeling, and not the actual proposal at issue?


Nobody I’m aware of is suggesting we tax the current top bracket at 70%, but that we make a new top bracket.


There is already a thing called AMT so a new top bracket makes zero sense.


The AMT's top rate is 28%, a far cry from the proposed new 70% bracket.


The polling is not about raising the current highest tax bracket to 70%, it's about adding a new one. From the article:

> The New York Democrat kicked off a debate within her party in a Jan. 6 interview with "60 Minutes" during which she said she would support setting the highest tax, which she said would kick in at individuals 10 millionth dollar of income, at 70 percent.


The question used in this poll seems to be "Do you favor a 70% tax rate to the 10th million dollar and above?"


It is unfortunate that the poll asked about changing the highest tax bracket, whereas Ocasio-Cortez suggested creating a new $10m tax bracket. They are very different things.

Edit: I stand corrected. The picture in the article doesn't mention the new $10m tax bracket, but the actual poll question did.


From the embedded results table at the bottom of the article:

> "AB2: Currently the top tax rate is 37%. Would you favor or oppose a tax proposal that would apply a 70% rate to the 10 millionth dollar and beyond for individuals making $10 million a year or more in reportable income?"


That was the question. Scroll down and you'll see the details of the poll. The question was about taxing past $10M/year income.


I don't really follow this conversation, but just by eye-balling Twitter it's astonishing how many people do not understand how marginal tax rates work.


It’s also amazing how many people on Twitter clearly do not remember the 90s where we raised the top marginal rate and experienced an unprecedented run of economic expansion.


I remember the 90's. I think it takes a revisionist to say raising the top marginal rate was what caused the economic boom. I would guess the big drivers were low oil prices and that dot com thing.


> I remember the 90's. I think it takes a revisionist to say raising the top marginal rate was what caused the economic boom. I would guess the big drivers were low oil prices and that dot com thing.

But it doesn't take a revisionist to see that shows that raising the top marginal rate won't doom the economy, like many incorrectly claim.


No, it takes a person given to speculation. I think it's disingenuous to use the dot com era as your example because of the shear magnitude of value that was being created during that time period.


The 90s had a lot of factors that led to economic expansion. Do you have data/research that explicitly links tax rates to that expansion? The numbers don't seem to add up like that to me.


The OP didn't say the expansion was caused by the increase in marginal tax rates.

The coincidence does falsify the argument that raising tax rates would prevent economic expansion.


It doesn't falsify that at all.


Particularly egregious is Congressmen (https://twitter.com/SteveScalise/status/1081579535114608640) and Governors (https://twitter.com/ScottWalker/status/1085199713463422981) pretending they've never heard of the concept.


Both Scalise and Walker are Republicans, of course.

It's almost like they have an ideological reason to sow confusion on this subject!


I find the poll kind of funny. Of course it is going to be in favor of taxing people who make more that $10 million. Odds are if you polled for 70% tax rate for people over $1 million it would swing the same way. Why?Because it does not (directly) affect most of us as most dont make that much money. So it is easier to let the people above us do the heavy lifting.

The estimates i have read online say that it should raise like $70 to $100 billion a year. However does anyone here really believe someone making $40 or $50 million a year are not going to find tax shelters for their income and are going to stand paying 70 cents on the dollar in taxes.

Also when the article states they make more they should give more. What about a lottery ticket winner. Like the one who won $1.6 billion, so like $1.1 billion of that would be paid in tax. That is a great scheme for the governement.

I just dont think it will generate the money people think it will and will incite more class warfare.


> However does anyone here really believe someone making $40 or $50 million a year are not going to find tax shelters for their income and are going to stand paying 70 cents on the dollar in taxes.

You'd think so given how frequently the "it was once 91%!" phrase comes up. Regardless of tax rates, the amount of GDP gathered from taxation revenue has been pretty stable: https://en.wikipedia.org/wiki/Hauser%27s_law


This would never pass due to Grover Norquist & Americans for Tax Reform's strangle-hold on the Republican party. They have a "Taxpayer Protection Pledge" they leverage Rep. candidates into signing. When they are elected, if they ever vote for anything that could be viewed as a tax increase, ATR campaigns heavily against them in the next election.


This tactic may work in the 90s and 00s era where crowdsourced campaign funding and modern online organizing didn’t yet exist.

Nowadays people can pressure their friends and family to vote and dilute lobbying pressure.

How impactful was the Norquist crowd in 2018?


A lot of the GOP seats that were held in this past cycle were in very, very strongly held districts. Those are the politicians that are most worried about upsetting the Norquist based SIG. Furthermore, as long as the Senate is still majority GOP it really doesn’t terribly matter to the GOP even if it was 80%+ Democrat in the house. They should be generally comfortable that the judicial branch is now solidly in their favor for decades even if they lose an entire branch now.

You can talk about policies all you want but the GOP are substantially better politicians than the DNC could ever hope to be.


You might be right. Looking at opensecrets.org, it looks like their activity has really dropped off in the last decade. It would nice to finally be free of them.


As long as our votes are secret, you can't "pressure" anyone to vote any way about anything.


> Currently the top tax rate is 37%. Would you favor or oppose a tax proposal that would apply a 70% rate to the 10 millionth dollar and beyond for individuals making $10 million a year or more in reportable income?

This simple yes/no question doesn't allow an accurate response. How about splitting it: Would you favor/oppose the rate hike if other tax rates were reduced? Would you favor/oppose the rate hike even if other tax rates weren't reduced? Or, to put it another way, would you favor giving the federal government more money via more taxing on the rich without any reduction in other taxes?

The difference in the answers will often tell you what side of the financial political line people fall on and their confidence in government. Of course, even this is too general of a question.


Even if this became the law no one with more than a half of brain would ever pay 70% tax. People earning north of $10M usually have a team of tax advisors, and a lot of options of avoiding income tax: offshore companies, charity foundations, etc. The discussion about this is just a distraction from more pressing matters.


So, in summary, what you're saying is "we shouldn't try do to anything about it because the really rich people are going to find loopholes anyway"? I'm not trying to be a jerk, I'm actually trying to confirm that that's your point.


The point is valid. Every measure has a cost, including changing the tax code. If there's some certainty that the cost of implementing this tax hike won't be offset by the actual new revenue, there's no point on implementing it.

I don't know if that's true. But it makes sense that people earning more than $10M don't show it in the W2.


Close the loopholes, not hike the taxes.


"Loopholes" are often things that benefit society though. It's sort of an indirect tax. Like donating to a charity. Basically the government is saying that they'll lower your tax burden if you use your money in a way that benefits society as a whole instead of just enriching yourself.


Thing is, the very existence of a company benefits society as a whole: it produces and trades goods that people need and want, and also gives stable source of income for sometimes dozen thousands of its employees.

That's why we should be carefull with excessive taxes for bussiness - if some companies go bankrupt, or lay off 20% of their workforce as a result it might be a net loss to society.

And before you start arguing that sometimes companies make money on shady things: yes, they do, but then you don't punish them for that with taxes, there are criminal laws for such things.


There are thousands are companies that exist solely as a tax dodge for some other company or in order to prevent paying workers at a different company. Some companies exist to just play games with money on the market, which has at best only very indirect benefit to the society as a whole and has a definite chance of being a harm to society. Some companies exist simply to drain all of the money out of other companies before they go bankrupt.

None of this is illegal, but it's hard to argue a benefit to society in general.


Each loophole has a base, people who care deeply about it. Against this is a vast population that doesn't even know it exists. Closing each loophole is an enormous political battle with very little payoff in tax revenue. If you add a new tax bracket or raise the capital gains tax, you get much more revenue for the same political lift. This is setting aside the marginal value of a dollar for the different populations taxed and the effect of economic inequality on corruption, democratic institutions, and social cohesion.


No one would ever pay 70% tax, even without the accountants and advisors, because 70% would be the top marginal rate. Their first $10M would be taxed at a lower rate.


I might be wrong but I think that's part of the reason why the proposed rate is 70%. If they're just going to obscure so much of their capital anyway, you might as well tax what they can't at an especially high rate to compensate for that.


If any of that is true why did they bother lowering the rates last year?


For most families (who earn under $200k/year or so), the extra return and/or reduction in taxes actually spur spending, which drives growth. The top earners spend less, meaning less whole-economy growth.

Personally, I don't think it's right to have more than 50% tax rate at any level, and beyond say $50k/year would say that a 20-30% tax all the way up without deductions would be better. Eliminate corporate taxes, limit corporate capital holdings requiring either reinvestment or divestment to shareholders (who are then taxed).

Simplifying and automating the system better would work better for everyone involved. But confusion keeps Intuit/H&R Block and others in business.


> Even if this became the law no one with more than a half of brain would ever pay 70% tax. People earning north of $10M usually have a team of tax advisors, and a lot of options of avoiding income tax: offshore companies, charity foundations, etc. The discussion about this is just a distraction from more pressing matters.

It's a fallacy verging on propaganda to argue that a reform should not be pursued because another policy can be used as a loophole. All that means is that the reform needs to be more holistic to be successful.


If you frame it as a simple question, then sure almost everyone would say tax someone else at a high rate and they will assume they will pay less tax. But, if you go by how it actually will work out in the real world... Ask if you support a 70% tax on the highest incomes, if it results in less tax being collected on high incomes and MORE being paid by the lowest incomes, then it probably would not get such a high percentage. Need to lower the tax rate for higher earners, so that everyone works harder, pays more tax and yet gets themselves into a LOWER bracket. If you want to tax something, tax luxury goods and contributions to political candidates.


The motivation is the money, not the rate of taxation on your income above a certain threshold. People still work to be somewhat richer even if there's a headwind. History and logic demonstrate this. The point at which the rich say "meh, screw it" is short of 100%, but it's not like we need a regressive set of tax tables to get people to work.


There are different sets of motivations for different people.

Saying this differently and with purposefully fake numbers, if (at your current pre-tax income) increasing your income by 50% would only give you 5% of that in cash you can use, would you really do that? Or do you have alternative use of your time (like leisure) that would give you more happiness?

You may say you would, but the reverse calculation then applies: if you would lose 5% extra cash by cutting your pre-tax income by 50%, wouldn't you do it? Many people would. Just look at the number of people who want to work 4 days or less.

Of course this assume income is a function of time spent working but it is very often the case.

The resulting elasticity will be different for everyone, but there will be a non null elasticity at the population level.


I don't see where we disagree.


We disagree in that at any non 0% tax rate, some people will respond by adjusting the amount of work supplied.

The effect may only be measured at the population level to take into account the difference between people, even if we can predict it is likely to be very low close to 0% and very high close to 100


Yes, but it is important to close the tax loopholes first. Because it is also quite logical to spend 10% of your income on a fancy tax expert if they can save you an extra 11% on taxes.

That work is of little value to society or the government.


The U.S. marginal tax rate in 1960 was 91%


Yes, but the _effective_ tax rate was only about half that, 49%-ish, because there were so many exemptions.


> because there were so many exemptions.

The effective tax rate was lower primarily because 91% was the top marginal tax rate. Even those who paid the top marginal rate still had most of their income taxed at lower marginal tax rates, just as it is today.

Also, a large number of exemptions still exist today.


It used to be that all interest was deductible.


This seems ripe for tax evasion. Two parties could loan each other the same amount, through different shell entities, and both could deduct the interest on the payments to the other.


Piketty’s paper [1] gives a break out of U.S. tax 1970 vs. 2004. It looks like this proposal would effectively return the U.S. to postwar pre Reagan era norms? If I’m reading the table correctly the effective rate in 1970 for the highest bracket is 74.6%.

[1] https://eml.berkeley.edu/~saez/piketty-saezJEP07taxprog.pdf


> they will assume they will pay less tax.

[citation needed]


Imagine how much the conversation would shift if we instead focused on increasing tax revenue, rather than increasing tax rates.


An alternate shift could be to focus on decreasing expenses. There is A LOT of bloat in the US budget, but it's rarely ever even referenced because so much of it is political poison to some subset of constituents.


I completely agree. I was just trying to avoid getting up on a soapbox :)


Or decreasing the deficit? Last time we managed to balance the budget was under Bill Clinton.


I completely agree. And as far as I know, the Clinton balanced budget was kind of a red herring. I'm sorry I can't remember where I had run into that. Doesn't change your point, and at least it was something they considered useful as a political goal. Unlike now.


Clinton was definitely riding a bubble, but at the same time he didn't introduce a giant giveaway to billionaires the same way Bush Jr and Trump did. So it's not so much that he created the situation as he didn't screw it up.


It appears I am in the minority.

I do not support raising taxes on anyone. I support cutting spending and removing most government programs. Raising taxes has always had the impact of removing disposable income which impacts businesses and eventually impacts the individual. [1] I would rather see all government expenses become fully transparent, in addition to showing all money spent on lobbying down to the cent. Every government project should have public documents that detail a full project break-down and what money what spent specifically on what.

[1] - https://www.infoplease.com/homework-help/social-studies/fisc...


Doing one doesn't prevent from doing the other.

I'm also in the minority but my view on this has changed a lot in the past few years. I don't understand why there isn't a "maximum income" regulation actually. If you make $20M/year, do you really need more?


Why should someone be punished for making more money? I see this as a big hammer that could hurt innovation.


On the contrary. Without the lure of an 8 figure income, a person might choose to go into research science, engineering, medicine, teaching, etc. instead of becoming a hedge fund manager.


> Why should someone be punished for making more money?

Taxes are not a punishment, though they may be a disincentive. Taxes are also not a payment in exchange for services.


Taxes may not be meant to be a punishment, but they are certainly presented as such in certain cases.

"Those one-percenters make too much; make them pay their fair share!" "Smoking is bad; raise taxes on tobacco products"


> Taxes may not be meant to be a punishment, but they are certainly presented as such in certain cases.

> "Those one-percenters make too much; make them pay their fair share!" "Smoking is bad; raise taxes on tobacco products"

That first pseudoquote is not presenting taxes as a punishment. It's presenting them as a fulfillment of social responsibility to "pay a fair share." The second one is presenting them as a disincentive for a harmful behavior.


When somebody makes $20M/year, do they really do it for the money at this point? Is it really what keeps them going? If so, I would argue that these people are mentally ill.

Do we have any study or proof demonstrating that if we applied a 100% tax rate above $20M/year people would just stop working?

And I don't see that as a punishment. The money not spend on crazy CEO incomes can be used to pay other workers better, or invest in innovation since that's what you brought up.


> Do we have any study or proof demonstrating that if we applied a 100% tax rate above $20M/year people would just stop working?

I would likely stop working. Pay me $20M + $1 and let's check...


You're not at all in the minority: the (interesting) US president was elected in large part because enough people were sick of ever-expanding federal government that they got to the polls and voted.


What a strange take.

The 2016 campaign had absolutely nothing to do with the size of the government. Trump's campaign promises included $550 billion federal investment in infrastructure, deporting all illegal immigrants, and providing health insurance for everybody, paid for by the government.


Even if this was the reason everyone voted for Trump (a dubious claim at best), that still wouldn't make it the majority opinion because the majority of voters didn't vote for him.




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