As you’ve likely seen, the now-ubiquitous Alexandria Ocasio-Cortez is now floating a 60% to 70% marginal income tax rate on income over $10 million a year. I think this is a great proposal whether or not it ever goes anywhere or whether this particular price point makes sense simply because it opens up the tax policy conversation in ways it’s been closed for a few decades. It is simply crazy that the progressivity of the tax code currently tops out at $500,000 a year incomes.
At present, every dollar an individual makes over $500,000 is taxed at 37%. ($600,000 for joint filers). That’s a small bump up from 35% for income over $200,000 ($400,000 for joint filers.) That top rate came down a bit in the 2017 tax bill. But it’s not so much the rate at I’m focused on here as the income cut off. In an era of skyrocketing inequality, it simply doesn’t make sense that there’s no step-up from what we might call the ordinary wealthy at plus-$500,000 and the stratospherically wealthy at plus-$10 million a year in annual income.
Of course to make these changes meaningful you’d need to work a little more holistically with the tax code since money gets shunted into capital gains or protected in other ways. But don’t let anyone tell you it’s not possible in policy terms to increase the effective tax rate of the super wealthy. Politically is a different question. But it’s doable.
In any case, Jeff Stein has a helpful piece in the Post trying to work out how much revenue these various proposals would generate and what policy initiatives they might pay for. As you might expect, exact numbers aren’t really possible since any changes spur various kinds of tax avoidance and in some cases we don’t really have good data on how much income or wealth is even out there. In any case, it’s a good starting point for important policy discussions.