Ocasio-Cortez tax plan is not radical.
On the Jan. 6 edition of “60 Minutes,” congresswoman Alexandria Ocasio-Cortez floated the idea of setting the highest marginal tax rate to about 60 or 70 percent to make the richest Americans pay a higher rate.
This proposal to raise the highest marginal tax rate would be to fund her environmental agenda called the Green New Deal.
Many conservatives took the ball and ran with it, but I believe there have been some misunderstandings about Ocasio-Cortez’s proposed tax plan.
Rep. Steve Scalise, who is the GOP’s minority whip in the House, tweeted “Republicans: Let Americans keep more of their hard-earned money. Democrats: Take away 70% of your income and give it to leftist fantasy programs.”
Ocasio-Cortez replied by saying Scalise does not know how marginal tax rates work and that Republicans work for corporate CEOs and not working people.
This tax plan would mostly affect the highest earners—those who earn more than $500,000 a year—not middle-class Americans.
But that doesn’t mean 70 percent of that $500,000 is taxed. The tax rate is applied to the last dollar earned.
“The first portion of any taxpayer’s taxable income is taxed at a 10-percent rate,” said the Center on Budget and Policy Priorities. “The next portion is taxed at a 12-percent rate…up to a top marginal rate of 37 percent.”
For example, when a single person earns $600,000 a year, the first $9,700 will be taxed at a rate of 10 percent.
The highest bracket at 37 percent taxes income over $510,000. So of the $600,000, only $90,000 is taxed at the rate of 37 percent.
Looking at the last century, history favors plans like that of Ocasio-Cortez.
In 1913, the 16th Amendment established a federal income tax.
During World War II, people who made over $200,000 were taxed at a rate of 94 percent.
For the next three decades, the top tax rate stayed above 70 percent.
The highest tax rate in the Eisenhower administration was about 91 percent. This made the economy boom for the 1950s.
Then, everything changed in the 1980s during the Reagan administration, which cut the highest tax rate to 50 percent and eventually down to 28 percent.
In the 1990s, the highest tax rate jumped back to 39.6 percent, and it remained there until recently.
The highest income tax rate is now 37 percent due to the tax reform bill passed by the last congress.
Since the 1980s, Congress has slashed tax cuts for the wealthy and masked it as tax relief.
But it’s only tax relief for a few thousand people who make all the money.
Income inequality is as bad it has been since the 1920s.
According to inequality.org, “America’s top one percent holds nearly half the national wealth invested in stocks and mutual funds.”
Ocasio-Cortez’s plan is not radical—it’s been done before by both democratic and Republican presidents. And tax plans like that work.
The spreading of misinformation by conservatives like Rep. Steve Scalise comes down to two possibilities: either he doesn’t know how marginal tax rates work, or he’s spreading misinformation on purpose to misinform his constituents.