IBD caught reading the forum? The growth rate dropped by 40% when Democrats passed the 90% tax rate and we had 3 recessions in the 1950s ever while we essentially no international competitors. Did Nobel Laureate Paul Krugman ever tell you that?? If not, why not?
https://www.investors.com/politics/editorials/70-tax-rate-socialists-class-warfare/70% Tax Rate? Another Awful Idea From Congress' Socialist Caucus
70% Tax Rate: A new poll shows that most Americans support the idea of raising the marginal tax rate to 70% or higher on the very highest incomes. It shouldn't be surprising that most people support higher taxes on others. It's called envy. What's surprising is how many people don't.
The Hill-HarrisX survey taken earlier this month found that 59% of registered voters support newly elected Rep. Alexandria Ocasio-Cortez's call for a 70% tax rate on high earners, starting at $10 million.
"That doesn't mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder you should be contributing more," Ocasio-Cortez helpfully told CBS' "60 Minutes."
[As you rise up the ladder, you ARE contributing more!]
And, as The Hill notes, "Ocasio-Cortez has not introduced any legislation to enact the concept but the (Hill-HarrisX) survey shows a broad cross-section of Americans supports it, at least presently."
True enough. Even Republicans in the survey gave it 45% support, versus 55% saying they wouldn't support it. Independents approved of the idea by 60% to 40%, while a whopping 71% of Democrats favored it.
70% Tax Rate: Opposed By 41%
But a number of things strike us about this poll, not least of which is this: 41% of Americans reject the idea out of hand, even on those earning $10 million, who make up far less than 0.01% of all tax returns. Americans' common sense tells them that raising tax rates on success isn't wise. Especially if it goes to finance the utterly useless and money-wasting "Green New Deal" the Democrats plan to push now that they control the House.
It's truly amazing how little those who propose such taxes understand about the real economy. For instance, Ocasio-Cortez, socialist Sen. Bernie Sanders, New York Times columnist Paul Krugman, and others on the far left, like to cite the fact that high income Americans faced a 91% marginal tax rate during the 1950s and early 1960s.
Didn't we do OK back then? Yes, we did OK. But it had nothing to do with high tax rates on the rich. Because — and this is important — the rich didn't pay them.
Start with this: the number of those earning the equivalent of $10 million or more back in the 1950s or even today is actually quite small. So calling for a marginal 70% tax rate on them today is simply class warfare and envy.
It's About Envy
Indeed, if you look at the level of income taxes paid as a share of GDP, it barely budges from year to year, bouncing from around 7% to just above 8.3% since 1970. No matter what the top marginal rate. It's the same for federal taxes overall:
we pay about 18% of GDP in total taxes, not much more, not much less, no matter what rates we impose.
How can that be? Shouldn't higher taxes on the rich bring in much more tax revenue?
A widely circulated paper from 2017 by economists Thomas Piketty, Emmanuel Saez, and Gabriel Zucman estimated that while the tax rate on the highest earners hit 90% on the top 1% during the 1950s, the effective tax rate — that is, what they really paid — was just 42%, or less than half.
These economists, by the way, believe that a combined rate of 70% (that is, all taxes combined, not just federal taxes) or higher on top incomes would be "optimal."
But their own research suggests that their "optimal" rate is wrong, since no one really pays it.
Well, no rich people, that is. Other Americans pay because when tax rates rise on the wealthy, the wealthy change their behavior.
Changed Behavior
They send money overseas. And they put it in tax-advantaged investments, like government bonds. They find loopholes in the law that let them profit on investments that actually lose money but gain them tax writeoffs. (The solar and wind industries come to mind.) Some just don't report all their income. Still others defer taxes into the future.
They do all this instead of investing in profit-maximizing businesses or working longer hours, things that make everyone better off and create more tax revenue. That means less overall investment, fewer jobs, lower incomes, and less government revenue.
Showing they don't understand fundamental human psychology, the left imagine that smart, accomplished people with high incomes will simply bend over for big tax hikes, like the dorky fraternity initiates in "Animal House," and say, "Thank you, sir, may I have another?"
Of course, by the time the left is through raising taxes, the middle-class inevitably discover that magically the left includes them among "the rich." It's an old trick, but people fall for it every time.
What's 'Optimal'?
Even the very idea of an "optimal" tax rate on high incomes, whether it's $500,000 or $10 million, is questionable. As Ryan Bourne recently noted at Reason.com, depending on your "philosophical assumptions" about what constitutes "optimal" tax rates, the rich could pay anywhere from 73% to as little as 3%.
So, no, economists don't "agree" higher taxes on the rich are good. Quite the contrary.
Worse, the comments made by various far-left proponents of ultra-high tax rates show they don't understand economic history at all.
Take their insistence on picking the 1950s and early 1960s as some sort of economic golden age due to high tax rates on the rich.
Contrary to the Democrats' rhetoric, the
1950s was no golden age for the economy. In fact, we
suffered three recessions during that decade, despite being the only fully-functioning industrial power on earth after World War II.
About The '50s...
And just look at what happened before and after Democrats imposed the 90% top marginal tax rate in 1951. In the four years before the tax hike went into effect, the economy grew on average 5.1% a year. For the next 10 years, before the rate was cut, GDP growth averaged just 3.1%.
President Kennedy, a Democrat supply-sider, came into office in 1961 vowing to slash the top 90% tax rate by a third. His tax cuts set off one of the longest economic booms in our nation's history, known as the "Go-Go 60s." (For a quick history of tax cuts, view the video link above).
A fluke? Hardly. Go back all the way to the 1920s, when Warren G. Harding and Calvin Coolidge cut tax rates broadly and deregulated the economy after it looked as if the U.S. might go into a depression following World War I. The "Roaring '20s" were the result.
The same thing happened with President Reagan, who likewise slashed top marginal rates early during his two terms, after the "stagflation" of the 1970s. Reagan's across-the-board cuts set off a nine-year jobs and growth boom.
And it's happening again today, under Trumponomics.
Tax Code: It's Unfair
The point is, despite fawning media coverage of Ocasio-Cortez and other neo-socialists, many Americans don't buy into the class warfare argument for taxing the rich. They know that the top 1% are pulling more than their weight.
The data support this. As the nonpartisan Tax Foundation reports, in 2016 the bottom 50% of all taxpayers earned just 11.6% of total income. But they paid only 3% of all income taxes.
The top 1%, by contrast, earned 19.7% of all income. But they paid 37.3% of all federal income taxes. The U.S., contrary to what the left says, has one of the most progressive tax codes in the industrial world. The top 1% pay more taxes than the bottom 90%. It can't get any fairer than that.
U.S. prosperity has come not when we raise tax rates on the rich, but when we lower them. Americans would be wise not to follow the Pied Pipers of U.S. socialism, who seek to destroy success in America in the name of income equality. But if they do follow them, the success they destroy will be their own.
