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.
It doesn’t need to be a competition.
Why not both!
While I love Warren’s idea, I don’t for a moment think it would work. The wealthy will be endlessly inventive in squirreling away their money in various loophole investments around the globe, probably spending billions in money-moving costs to avoid paying millions in taxes. The only ones who will wind up better off will be the financial advisers and loophole stuffers.
I don’t think there is enough poetic justice in these proposals. How about, instead of paying 2% of their wealth over 50 million dollars to the government, the wealthy individual has to eat 2% of it on the first day of the new tax year? In ten dollar bills, obviously. Your banknotes are still made of paper, not polymers like those of the civilised world, so they’re perfectly digestible.
Anyone who has not finished their portion by the end of the day has to forfeit fifty times the value of what’s left on their plate, thereby bringing everything back to equilibrium again.
The whole spectacle could be televised -- The Feast of Mammon we could call it. That horrid shouty man from the noisy food programmes could host.
Mano Singham says
Yes, I do support both. What I meant was a competition to increase the taxes on the wealthy from all sides.
Marcus Ranum says
New income over $10mn; they get to keep what they already have stashed in Grand Cayman.
Pierce R. Butler says
… the massive wealth that the oligarchy have accumulated …
In turn, readily (if not rapidly) addressed with steep inheritance taxes (known to Palinites & other morons as “death taxes”).
Odd that none of these economic reformers have, sfaik, yet to bring up antimonopolistic “trust-busting” measures to break up giant corporations.
Alexandra Ocasio-Cortez’s proposal is rather modest but it is a first step. It seems to me that just getting the USA to admit that raising ANY tax would be an amazing accomplishment.
Given the hysterical reactions of some billionaires and talking heads in the media to Ocasio-Cortez’s proposal I would expect Warren’s idea to be crushed without something like Ocasio-Cortez’s proposal to show that it is not the end of civilization as we know it if taxes go up on the super rich.
jrkrideau @#7: Actually, it *might* be the end of “civilization” as we currently know it if taxes go up on the super rich. But I’m thinking that might not be such a bad thing!