For a preemptive “TL; DR”: I don’t think it’s a bad idea, but I have reservations.
If you feel satisfied with that, thanks for reading. If you want a more thought-out opinion with reasoning, read on.
At first glance there’s really no good argument against her proposal. If you’re living off of over $10 million a year, you’re probably pretty comfortable. My impression of AOC’s proposal is: if someone makes (say) $12million a year, they get taxed “normal rates” for the first $10 million, and the other $2million gets taxed at 70%. So, of the $2million, you pay $1.4 million in taxes, leaving you with $600,000 plus whatever’s left over from your $10million that got taxed at the “normal rate”. I’m not 100% sure what the “normal rate” is right now, after Trump and the 2016-2018 legislative branch did their thing with tax reform, so let’s be generous and say the $10million gets taxed at…ohhh…40% (in reality, I think it’s more like 15%, but let’s go all out for smiles and giggles)? So, you’re left with $6million plus the $600,000 and I think we can all agree that someone can live very comfortably off of $6.6million a year. And so, AOC’s idea seems pretty good. You get to (theoretically) have more funding for social works (e.g.; Social Security, public schools, Medicare/Medicaid). And $12 million is just barely over the $10million threshold, so imagine all the money you’d (theoretically) be getting from a billionaire, right? (P.S., for $1billion in a year, it’s about $693million just from the $990million being taxed at 70%.) But not a lot of people make $1 billion in taxable income. Not a lot of people make $10million or more, either.
Here’s the thing, though: People are greedy. People who make lots of money don’t, on the whole, like to give up a lot of money. People spend thousands upon thousands (and sometimes millions) on tax attorneys and accountants and financial advisors to sift through labyrinthian tax codes in an effort to find ways to pay as little as possible come tax season. People put money in tax havens and overseas accounts to pay as little as possible. They find investments (some legitimate, some fraudulent) to invest in to reduce their tax burden. So on and so forth. This is why I keep typing “normal tax rates” in quotes. Just because there’s a tax rate, it doesn’t mean people actually pay everything they’re supposed to pay at that supposed “normal rate”. If people with over $10million a year are feeling like they don’t want to pay 70% on their additional earnings, do you think they’ll say “Ah, well…here’s the money, government!” or do you think they’ll say “I think it’s time to open an account in the Caribbean (or where-ever) where the government can’t touch my cash!”? I’m not asking what you’d HOPE they would do, I’m asking what you think they would realistically do. And if people DID start putting that money someplace else in an effort to avoid taxation instead of taking the 70% hit on their “excess income”, you’d end up with less money being injected into the system via taxes than you would have if you had just left the system alone.
I have other reservations, too. Mostly they involve the vagaries of the marginal tax…idea (I called it a proposal earlier, but honestly…it’s not a proposal. It’s an idea, and even AOC says she doesn’t have any real plan and that she’s just trying to start a dialogue).
As I said before, you would have to completely overhaul the tax system, and enforcement of that system, to ensure that people would actually pay the amount they would owe under the idea of a marginal tax system like the one AOC is dialoguing about. You would have to do something like threaten jail time for off-shore banking. You would basically have to make tax havens illegal, up to and including taxing religious institutions (controversial opinion: I would have no problem with taxing religious institutions. “Render unto Caesar”, right?). You would have to have a new, huge network of operatives making sure people aren’t breaking the new rules (which, in turn, would probably cost billions of dollars to run which could conceivably negate a fair share of the gains that the marginal tax rate would make). I think the IRS and associated agencies do a fine job of (ahem) keeping the books, both literally and figuratively, but even if all those folks worked at peak efficiency all day every day year-round, you would still need much more infrastructure than what we currently have to truly combat the inevitable trickery people would try to pull to keep from having to spend more in taxes. Building that additional infrastructure…that takes planning and training and lots of pay checks. And that’s before you even start the actual work of keeping the system honest.
I’m not trying to be “Donny Downer” here, but I just don’t think the marginal tax idea will be the salvation of America that some people seem to think it will be. I think the “Tax the decamillionaires more than everyone else” phrase sounds good, and I think it would be a good idea to seriously consider a valid way implement something like that to help alleviate some of the stress on our economic system, but I’m just not convinced the benefits will be what people seem to think. I don’t have all of the numbers, so I can’t do all of the arithmetic, but I’m pretty sure AOC’s plan will (in the absolute best-case scenario) help our existing system of publicly funded benefits break even. At best. There wouldn’t be more money to spend; we would be breaking even (again, for maximum emphasis, that’s the absolute BEST-case scenario). Our system runs on a deficit every year. The system won’t be getting upgraded; there won’t be new hospitals or schools popping up everywhere with state-of-the-art tools. The system will be only be paying to maintain what it has already.
By way of analogy: If the American public assistance programme system as a whole (Medicaid/Medicare, SSI, etc.) was your house or condo, and you represented America, right now you’d have massive unpaid mortgage payments due AND you’d be gaining more and more debt because you’re still not paying the new mortgage payments. In fact, even though you don’t have any money AND you’re in massive debt, you’re spending more and more each day on food and shelter and clothes and water and all the other things that are necessary to live. So, say you get a $10,000 a month bump in pay at work. At first glance that seems significant, but it turns out it’s just enough to break even every month. You still owe back-rent that’s gaining interest. You can’t fix, say, the leak in the roof because you don’t have extra to pay to fix the leak in the roof (much less upgrade it). You only have enough to continue doing what you’re doing without getting foreclosed upon. Not a cent more. You can choose to divert funds to the roof from, say, your food fund, but then you’re eating 1 meal a week for some stretch. Just to break even. That’s all the “70% tax on every dollar over $10million” deal will give you AT BEST. You will, with the wild-crazy-extra-Swayze emphasis, AT BEST break even. But you’ll still be in massive debt and you won’t be able to make much of a dent in that debt for a while. [sub-rant: yes, as a small-l, left leaning libertarian, I believe social services and the systems that allow them to function (e.g.; FICA) are necessary. I mean, got to eat food because of services like WIC when I was a kid. I know these services are important. I just think there are better ways to run those systems and that those systems need to be more fluid and adaptable to a world where things like innovation (of all types) and international economics aren’t exceptions, they’re the norms. An economy where, say, Ford is ONLY based in America isn’t going to work the same way when Ford is just one small part of an international amalgam of formerly disparate auto manufactures that decided to merge together. Maybe some day I’ll expand on that when I really get down to explaining my overall political/economic/social-triad philosophy. End of sub-rant.]
Like I said before, I just wish people who start conversations like this would give the whole picture. And if their politicians starting this conversation, then they have to be extra careful to both be informed and to inform correctly. I dislike false hope. I dislike seeing people think this will somehow make the public assistance system flush and we’re going to have something more than what we have now if this idea were to come to fruition. I just feel like people think that, given the above analogy, they’re going to be able to fix the roof, upgrade the water system, re-landscape the lawn AND add an addition if the marginal tax idea were to come to fruition…. And that’s just not possible.
Ok. So, word count tells me I’m over 1,500 words right now. I need to stop. But before I sign off, I want to say two things:
1) The above isn’t a diatribe against the marginal tax idea AOC floated (see: the preemptive “TL; DR” at the beginning of this piece). Read through again and you’ll see that, in general, I think it can be a benefit to the system even if though I don’t think it will be anything close to a cure-all. I just wanted to shed the light of reality on the situation. To temper the lofty hopes that the idea has provoked. Like I said, I dislike false hope.
2) I don’t dislike AOC. I don’t know enough about her or her stances to have any real opinion on her. Honestly, all I know about her is: a) she won an election she supposedly had no chance of winning, b) she likes to make precious videos with her friends where they copy the corny dance scene from that one corny movie (I’m 99% sure it’s the Breakfast Club [no, not the radio show hosted by Angela Yee, DJ Entry, and Charla-yaman the Earth]), c) she likes to talk about the Republicans the same way I season my fish….extra spicy, and d) she’s from the Bronx via the suburbs via the Bronx (way to complete the cipher, AOC). Sincerely, I hope she does well. One of the young men up at the LB Harris Black Cultural Centre and I were talking about her, and he made a comment about how she might be a breath of fresh air for Congress, since she’s not jaded like a lot of our Congresspeople (and other politicians) are. I had to agree. I just hope she can find a way to balance that freshness and idealism with realism so that she can be a true game-changer. I think, given her age, she’s in a position to be the template for what the next generation of politician could or will be. I hope she accepts that burden and takes it seriously. I hope she chooses the right way over the “likes” way (meaning I hope she chooses to be upright and realistic and honest over winning a public opinion popularity contest). And that’s officially 1900+ words I’m writing for free AND just giving away. I’m not even getting a grade in a class for this. Sheesh. I might have to start rethinking this whole “blogging” thing. And so…. that’s officially my “word to the poor righteous teachers” sign off. Thanks for reading. Peace.
[update 1/25/19: I saw a bit on Elizabeth Warren's proposal for a 2% wealth tax on wealth above $50million and 3% for wealth above $1billion. I like that idea a bit better. I'd be interested to see some fleshed out tables and numbers for the theoreticals on this idea, but just from what I've read so far.... it's a pretty good idea. It definitely gains more money than AOC's while affecting less people.
That said... I don't know if Warren's the one you want running for president against Trump. I think, personality-wise, she's too much like Hilary Clinton: she just isn't charismatic enough. And when she tries to be charismatic, it comes off as forced (like it did with HRC). I think she'd be a good vice-president for sure. I just think she's got that same "tons of intelligence, but a dry personality"-vibe to her. Like HRC had. I don't see that beating Trump in 2020. I think Kamala Harris has the most charismatic personality of all of the people who've currently declared candidacy for the Democratic primary. I think Harris/Warren beats Trump/Pence in 2020. I like that Harris has a background in law (even if I don't agree with a lot of her rulings...) I would vote Democrat on that ticket. I just think a presidential race against Trump ends up being less about issues and more about personality (like 2016 was). Harris has the right amount of charisma and moderate-to-left stance on issues to beat Trump. As for Bernie Sanders.... I don't know. I'm just not sure he wins a presidential election. Does he have charisma? Yes. But I don't think he's as moderate as Harris, which hurts his chances, in my opinion. The only other (possible) candidate I see winning aside from Harris is Cory Booker. He's both moderate and performative (see his movie and subsequent reality-t.v. miniseries on his time running for, and acting as, mayor of Newark). But honestly, I think (right now) he's a better vice presidential candidate than presidential candidate (I'd vote Harris/Booker). I don''t know enough about Beto O'Rourke or other "outlier" candidates to have an opinion. I guess Joe Biden would be my "If not Kamala, then...." choice. I just feel like he's a bit too...emotional? I just feel like he'd be too easily goaded into potentially damaging exchanges (see: Biden's comments in 2016 about taking Trump behind the gym and beating him up, or whatever). I'd vote Biden/Harris or Biden/Booker or even Biden/Warren.
[Update 2/9/19: Not a fan of AOC's Green New Deal. Not at all. Totally unrealistic on so many levels. The real kicker is that the people who would be most adversely affected by her proposed policies are the very same poor and/or marginalized communities that the Green New Deal is supposed to help. I read this copy (link) of the Green New Deal proposal, and....I just don't have to time or space to unpack everything that's wrong with it. An example of one of my (many) criticisms of the proposal relates to the "every car will be an electric car" sub-proposal. I've said it before, but I'll say it again: requiring every car to be electric would most likely be more harmful to the environment than not. You have to dig up all the materials to replace every car, you have to actually produce all of those cars in existing (non-Green) factories, and then you have to throw away all of the fuel combustion cars. That's basically the definition of unsustainable. A better bet would be focusing on retro-fitting older/non-Green vehicles with hybrid engines. You only have to produce new engines, not a complete car. That doesn't even get into affordability issues (and the resulting population concentration that would almost definitely ensue because, well, not everyone can afford a new car or a new retro-fit engine). Anyway... Do I think we have to shift the energy industry to a MUCH more sustainable model? Yes. Do I think we need to find a way to make cars much, much more fuel efficient? Absolutely. But that Green New Deal thing I linked to.... that's not do-able. I get that she wants to start conversations and that's good. But she's a politician, not an opinion columnist (or a math student who casually blogs about these issues, for that matter). Her opinions and stances aren't just opinions and stances any more; they're potential policy and laws that will affect millions (if not billions) of lives. Like I said before, I hope she can become more realistic. I hope she can learn that money isn't just a bunch of paper you can print when you need whatever (side note, I was reading a Vox article that said, because we use a fiat money system, we can print as much money as we want! THAT"S NOT HOW IT WORKS!!! All printing more money does is devalue the currency! If you have, say, a "1 Dollar to one Euro" currency exchange, and then you double the amount of dollars in the American money system, the currency exchange becomes "2 Dollars to 1 Euro". That's textbook devaluation (which almost always leads to unsustainable inflation).
Anyway, I do hope the best for AOC, but right now.... I'm just feeling like she might be better suited for a career as a non-profit activist group organizer than a politician. She seems like she's just "BlueTrump". More of a celebrity than an actual politician. Maybe a year or two will help her grow up or give her time to make connections with real researchers and experts and come up with a realistic plan... but I don't know... I really want her to succeed, but (again) she needs to temper he passion with realism.]
[update 2/1819: Another issue I have with the Green New Deal is...how do you address the inevitable shift in trade dynamics with oil-producing countries we have economic ties with? This is something I haven't seen addressed at all. Yu can't just say "Sorry, but in 10 years we're just going to stop needing the primary good you trade to us." and expect everything to be sweet. It doesn't work like that. Unless there's a real plan-within-the-plan to address that issue (and right now there isn't), you're looking at an issue that can seriously hobble both the fragile international co-operation and the domestic economy in the near future. Cause and effect. This is an issue I'd like to see addressed. Any realistic plan would address this issue.]