We have seen that new congresswoman Alexandra Ocasio-Cortez’s proposal to raise the marginal tax rate on incomes over $10 million to 70% has raised alarm bells among the oligarchy that could be heard even as far away as in Davos, Switzerland during their annual get-together. I mean, this is a tax on incomes over $10 million, for crying out loud. Nobody, absolutely nobody, would suffer if the tax were made even higher. But nothing is ever enough for these people.
The self-declared Democratic socialist has proposed rectifying some of that inequality by taxing income above $10 million at a 70 percent marginal rate. CNBC reported that billionaires attending the World Economic Forum in Davos, Switzerland, were “scared” by the proposal and even more concerned by the “momentum” the proposal may have by next year’s presidential election.
“It’s wild that some people are more scared of a marginal tax rate than the fact that 40% of Americans struggle to pay for at least one basic need, like food or rent,” Ocasio-Cortez quipped on Twitter in response to the report.
Even the head of the IMF Christine Lagarde has sensed trouble brewing and warned of the dangers of escalating CEO pay and an unrelenting focus on increasing their profits and ignoring rising anger.
“We’re hearing that loud and clear from civil society, from the millennials, from many, many corners around the planet and I think any sector, the financial sector alike, has to have that purpose.
“It can’t just be single-mindedly the pursuit of profit, it has to be multifaceted and it has to take into account multiple stakeholders.”
But Ocasio-Cortez’s proposal addresses only income and, while that is a good first step, it does not do anything about the massive wealth that the oligarchy have accumulated from the tax cuts and other benefits given to them by the government.
A paper distributed by Warren’s campaign announcing the proposal notes that the United States contains “an extreme concentration of wealth not seen in any other leading economy.” As UC Berkeley’s Emmanuel Saez and Gabriel Zucman have demonstrated, the top 0.1 percent has had their wealth share nearly triple between the late 1970s and 2016.
Now senator Elizabeth Warren has decided that things need to be taken further and is proposing a progressive tax on wealth, a proposal that has the approval of economist Thomas Piketty, author of the hugely influential 2013 book Capital in the Twenty-First Century.
THE ULTRA-MILLIONAIRE Tax, as Warren’s campaign describes it, would impose a 2 percent annual tax on household net worth on all dollars above $50 million. An additional 1 percent surtax would kick in above $1 billion in income. Wealth is defined in the plan as “all household assets … including residences, closely held businesses, assets held in trust, retirement assets, assets held by minor children, and personal property with a value of $50,000 or more.”
These are marginal tax rates, which conservatives have busily tried to misconstrue during the debate over Alexandria Ocasio-Cortez’s proposed 70 percent income tax rate above $10 million. Households with exactly $50 million in wealth would pay zero dollars in wealth taxes; the first dollar above that would trigger a tax of 2 cents.
That the Warren tax would raise far more than Ocasio-Cortez’s plan is a function of the extreme concentration of wealth in the United States. “While we must make income taxes more progressive, that alone won’t straighten out our slanted tax code or our lopsided economy,” the Warren proposal paper explains.
The Washington Post credibly estimates that Ocasio-Cortez’s 70 percent income tax bracket would bring in $720 billion over a 10-year period. The wealth tax above $50 million, according to Saez and Zucman’s estimate, would raise $2.75 trillion, a number that is around 1 percent of national gross domestic product.
It is great to see a competition to raise taxes on the wealthy. That is a competitive sport I can totally get behind. Again, what Warren is proposing, like Ocasio-Cortez did, is extremely modest. But it is in the direction we should be going.