A quick thread on the economics of a much higher top rate for the super-rich.
TL;DR version is that @AOC is on very solid ground here.
There is a lot of evidence that from an economic and fiscal perspective, we'd be way better off with top rates approaching 70.
TL;DR version is that @AOC is on very solid ground here.
There is a lot of evidence that from an economic and fiscal perspective, we'd be way better off with top rates approaching 70.
@AOC Starting with the basic fiscal implications, the best and most recent research suggests that rates around 70 percent for top earners will raise the most revenue. At 37% currently, we are leaving a lot of $$ on the table.
Diamond and Saez on this: pubs.aeaweb.org/doi/pdfplus/10…
Diamond and Saez on this: pubs.aeaweb.org/doi/pdfplus/10…
@AOC Trickle-downers will argue that higher taxes on the rich won't raise money because the rich will reduce their work in response, but the evidence is really clear that's not true at all at current rates. Basically, the "laffer curve" doesn't really kick in until past 70.
@AOC On to the broader economic implications beyond budgetary ones.
For the last 40 years, we have been cutting taxes on rich people and expecting those windfalls to eventually trickle down to everyone else. Hasn't happened, won't happen.
For the last 40 years, we have been cutting taxes on rich people and expecting those windfalls to eventually trickle down to everyone else. Hasn't happened, won't happen.
@AOC Instead, we have incentivized the super-rich to grab a larger and larger share of the gains from overall growth.
In groundbreaking research, @S_Stantcheva and co-authors show how top rate reductions lead to higher PRE-tax shares of income going to the rich.
In groundbreaking research, @S_Stantcheva and co-authors show how top rate reductions lead to higher PRE-tax shares of income going to the rich.
@AOC @S_Stantcheva So it's not just that higher top rates raise us more money which we can use better, but they actually make the PRE-tax distribution better.
In other words, raising top tax rates will mean more money in more pockets, even before we account for the revenue effects.
In other words, raising top tax rates will mean more money in more pockets, even before we account for the revenue effects.
@AOC @S_Stantcheva Finally, let's talk about the economic impact of using the revenue from a much higher top tax rate to finance something like a Green New Deal.
The basic question we should ask: Will the investment financed by the higher tax rates generate more good than the lower rate would?
The basic question we should ask: Will the investment financed by the higher tax rates generate more good than the lower rate would?
@AOC @S_Stantcheva The answer here is self-evidently yes.
Lower tax rates on the super-rich, as discussed above, are bad for the economy, so the higher taxes themselves are already better for the economy.
Lower tax rates on the super-rich, as discussed above, are bad for the economy, so the higher taxes themselves are already better for the economy.
@AOC @S_Stantcheva But when you factor in that the revenue will be used to both combat climate change (which will have enormous, painful consequences if left unaddressed) and create new jobs and higher wages now, then it's a very clear slam dunk.
@AOC @S_Stantcheva Last note: There will be many on the right & in the media who will mock @AOC for calling for tax rates at 60 or 70, but they're the ones who are economically illiterate. They're basing their view on an outdated and ideological understanding of taxation, not on the best research.
