Last week, Democratic congresswoman Ocasio-Cortez proposed a seventy percent tax on earned income above $10 million. Naturally, conservatives had a major panic attack (SNOWFLAKES!), and many people demonstrated, either honestly or dishonestly, that they don’t understand tax brackets (one of the nice things about the predictable idiocy of movement conservative arguments is that I can just link to posts I wrote years ago–stupidity is timeless). Cries of TEH SOCIALISMZ! went out, even though, as some asshole with a blog noted, this is just another instance of what yoostabee called liberal Democratic policy (circa 1990s and early 2000s).
To put Ocasio-Cortez’s tax proposal in context, let’s compare income taxes for married couples in 1954 to those in 2018 (tax brackets from here, and here). You know, the Good Old Days of 1954 when
straight Christian white people could treat everyone else like shit with impunity America Was Great. Here’s how much income tax, in adjusted 2018 dollars, these households would have to pay under each regime:
Zoiks! Taxes are higher! But here’s the interesting thing about a progressive tax code–it reduces income inequality, which, when it comes to things like inelastic goods such as housing in many areas and college education (which are driven by the high end which are definitely inelastic), means prices will also be lower. Let’s look at after-tax income of higher levels in terms of units of what a family making $50,000 keeps (e.g., a value of 2.0 means that family has twice as much after tax income as the family making $50,000 does):
The 1954 tax code was obviously much, much more progressive, especially at the high end. MAGA!
Keep in mind several things. First, Ocasio-Cortez is not proposing anything remotely like this: all she is suggesting is that people with earned income over $10 million would pay 70 cents on the dollar for every dollar past $10 million (e.g., $10,000,001 would yield an additional 70 cents in tax compared to $10 million). In other words, the scary table from when America Was Great would not apply to almost every American. Second, much of the income of people who have over ten million dollars of annual income would not be targeted by this proposal. Most rich people’s earnings are, in part (often a very large part), in the form of dividends, which are taxed at much lower rates (if I ran the zoo, I would keep the 10% dividend rate up to $100,000, and then have a second bracket that is much higher above that. Fifty percent seems good). So many people who have let’s say $20 million in income still wouldn’t be affected by this proposal. Finally, who can’t get by on $6.4 million/year plus thirty percent of the additional earnings above $10 million? This really isn’t hardship territory. If it bothers you that much, then work less and give someone else a shot. Yes, I’m judging. That’s what one does in public policy.
Anyway, I guess we’re about to find out who certain pundits and politicians really work for.