Alexandria Ocasio-Cortez's Tax Proposal Isn't As "Radical" As Some Say

In an interview with Anderson Cooper on Sunday's 60 Minutes, Rep. Alexandria Ocasio-Cortez proposed a higher tax on the super-wealthy as part of a plan to finance the Green New Deal program.

Both the tax policy (what we know of it, at least) and the GND are ambitious. The GND is actually one of the boldest climate-change and economic policies to be discussed in Congress — ever. It aims to cut carbon emissions to keep climate change from plunging the world into a complete Doomsday scenario, while providing a federal jobs guarantee and large-scale public investments. It's huge, but progressives consider it a moral imperative given the fast encroachment of climate change.

Republicans (and moderate Democrats, and Anderson Cooper) have questioned how progressives plan to pay for the GND; something that never seems to occur to them when increasing military spending or, you know, trying to build a pointless wall on the Southern border.

On 60 Minutes, Ocasio-Cortez explained that one possible way to finance the GND is a marginal income tax rate of up to 70% on the super-rich.

"There's an element where, yeah, people are going to have to start paying their fair share in taxes," she said. "Once you get to the tippy-tops, on your 10-millionth dollar, sometimes you see tax rates as high as 60% or 70%. 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."

Of course, Republicans are being as offensive and unproductive about the whole thing as expected, comparing the tax proposal to "slavery" and calling the GND a "leftist fantasy program."

But a marginal tax rate, the tax rate for every additional dollar of income, of 70%, while higher than anything we have now, is actually not that radical. As Matthew Yglesias writes over at Vox, top tax rates used to be much higher, with the highest earners paying a 91% rate under President Eisenhower. Under Presidents Kennedy and Johnson, the rate was around 70%, like Ocasio-Cortez's proposal. It's only after President Reagan's tax reforms that it went down drastically.

Recent economic research supports her proposal, too, writes Yglesias. A 2012 paper by MIT’s Peter Diamond and Berkeley’s Emmanuel Saez argues for a 73% top income tax rate for the U.S. The authors say: "This conclusion relies on two subsidiary points. One is the notion that for the very rich, the subjective value of an extra dollar is essentially $0. In other words, while a poor person’s life may get a lot better if he gets a little bit of extra money, someone like Mark Zuckerberg isn’t going to care at all."

However — and this may shock some — many of the GND's proponents don't want the program to be paid for by taxes at all. The U.S. prints its own money and has the right to make as much of it as it wants and pay for whatever it wants; the only thing that's limited are the resources. As long as the country can balance both, we're fine, Stony Brook University economics professor Stephanie Kelton told Vox.

What about the deficit? "If the deficit has to be 4.7% of GDP to create the economy we want, with full employment, low inflation, and poverty going down, who cares?" said Kelton. "If we can create the economy we want with a deficit of 2.1%, that’s fine, too. The budget outcome isn’t the thing that matters, it’s the real economic conditions." This is, after all, how the U.S. "paid for" FDR's famous New Deal, which effectively transformed the country.

The thinking among progressives is that if we don't make ambitious plans now, we will indeed "pay for it" later. We hope the short-sighted in Congress don't deter them from their vision.