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Other Editors: Visions of a 70% tax rate

 

Wall Street Journal

 

 

By now readers have heard that progressive luminary Alexandria Ocasio-Cortez (AOC for groupies) supports a 70% top marginal tax rate, which she says will help finance a "green new deal." Higher taxes on the rich is the stock socialist answer on how to pay for any project, though a reminder arrived this week that soaking the wealthy will barely register as a down payment. 

 

The Tax Foundation on Monday did Ms. Ocasio-Cortez the favor of taking her proposal seriously and asked: How much money would the government reap from a 70% tax rate on income above $10 million? Authors Kyle Pomerleau and Huaqun Li looked at two scenarios -- one if the rate applied only to ordinary income like wages and interest, and another if it also applied to income from capital gains. 

 

The best case scenario: a 70% rate would raise less than $300 billion in revenue over 10 years, which is less than half of the $700 billion that has been cited in press reports. Progressives aren't eager to put a price tag on the green new deal, which includes modest proposals like a universal jobs guarantee. But you can bet that ridding the economy of carbon will cost into the trillions of dollars. 

 

A 70% top rate would generate even less revenue if extended to capital gains. Investors only pay when they realize gains by selling assets, and they are especially sensitive to tax rates when deciding whether to sell. High rates can leave money locked into a current asset instead of flowing to the next good idea. 

 

When the Tax Foundation authors considered the effect on behavior and incentives -- why bother with that extra investment if most of the money will go to government? -- they found that a 70% top rate on all income would lose the government $63.5 billion over 10 years. 

 

Ms. Ocasio-Cortez won't admit it, but she and her socialist friends will eventually have to go where the real money is: The middle class. That means higher tax rates on even modest wage earners; taxes on retirement savings like 401(k)s or college savings accounts. 

 

Remember this the next time a Democrat or columnist who claims to be conservative says he'll finance a program by hitting the 1% of earners who already pay more than a third of America's income taxes. Sooner or later they're coming after you.

 

 

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