On Thursday, Rep. Alexandria Ocasio-Cortez (D-NY) appeared on the series premier of SHOWTIME’s “Desus & Mero.”
During her segment, Ocasio-Cortez talked about the Green New Deal, and explained her support for a marginal tax rate of 70% on individuals making more than $10 million a year:
If you make more than $10 million in one year, which is a pretty good year … your ten millionth and one dollar gets taxed at 70%, which, by the way, we used to have marginal tax rates under Republican presidents of 90%, and it was when we experienced some of the largest rates of economic [growth in the United States].
…It really comes down to the question of, isn’t $10 million enough? Like, when does it stop, right? At what point is it immoral that we’re building Jeff Bezos a helipad when we have the most amount of homeless people in New York City?
Progressives frequently claim that because high marginal tax rates didn’t appear to dampen the economic growth of the United States in the 1950s, Americans shouldn’t fear a similar marginal tax rate today. This is wildly misleading for two reasons. First, the way in which the tax system was designed in the 1950s meant that a high marginal tax rate didn’t have the same impact as it would today. Second, the United States economy benefited dramatically from a post-war manufacturing boom.
American Enterprise Institute’s (AEI) James Pethokoukis has cited the following two points in many of his writings about the economy of the 1950s.
First, according to a 2007 paper written by economists Thomas Piketty and Emmanuel Saez, and published in the Journal of Economic Perspectives:
Interestingly, the larger progressivity in 1960 is not mainly due to the individual income tax. The average individual income tax rate in 1960 reached an average rate of 31 percent at the very top, only slightly above the 25 percent average rate at the very top in 2004. Within the 1960 version of the individual income tax, lower rates on realized capital gains, as well as deductions for interest payments and charitable contributions, reduced dramatically what otherwise looked like an extremely progressive tax schedule, with a top marginal tax rate on individual income of 91 percent.
…in contrast to the United States, the very high British top marginal rates prevailing in 1970 were not tempered by tax deductions and tax loopholes.
Second, according to the National Bureau of Economic Research (NBER), as a result of the industrial and economic crippling of Europe and Japan during World War II, the United States became the prime producer of goods in the world during the following years. However, those circumstances that allowed 1940s and 1950s America to flourish economically are not desirable today.
To compare a proposed 70% marginal tax rate in 2019 to the approximately 90% marginal tax rates of the 1950s is disingenuous and misleading.
When someone like Rep. Ocasio-Cortez suggests that a $10 million annual income prior to a 70% marginal tax rate should be “enough,” and that it’s “immoral” for someone to be as wealthy as Amazon CEO Jeff Bezos, one should ask two questions:
- Why is it immoral?
- Who decides what is “enough”?
Barring any obvious wrongs (swindling, cheating, etc), why is the acquisition of a certain amount of wealth viewed by some as inherently immoral? Ask any progressive this question, and they will likely give you a boilerplate answer involving “wealth inequality.” This is an unsatisfactory reply because it doesn’t actually answer the underlying question, which is, why is wealth immoral?
The reason that there isn’t a satisfactory answer to the question is because one doesn’t exist.
Further, who decides what constitutes “enough”? For Ocasio-Cortez, annual income of more than $10 million is “enough.” But why? Once again, ask any progressive why the line should be drawn at $10 million, and they will likely offer you an explanation that begs more questions.
“With $10 million a year, someone can be more than comfortable for the rest of their lives,” they might say. “Why should someone be allowed more than that?”
Here’s the rub – almost anyone can say the exact same thing about individuals who earn more than they do. Someone making $100,000 a year might say that an annual income of more than $1 million is “enough.” Another person making $20,000 a year might say that an annual income of $100,000 is “enough.”
What is “enough” is entirely subjective.
One can certainly study and debate solutions to the issue of wealth inequality, but to create an arbitrary standard of what constitutes “too much” wealth, then penalize those who rise above that arbitrary standard is unfair and, perhaps worse, fosters class-based enmity among Americans.