Yep. It’s one of those blogs about everyone’s favorite Leftist, Alexandria Ocasio-Cortez. This time, I’m tackling her latest economic idea, raising the marginal tax rate on anyone making over $10 million to 70% of each dollar above that threshold to help fight climate change as part of her Green New Deal.
Leftists are already jumping on board because it combines two of their favorite causes: environmentalism, and socking it to the rich. And, as Leftists are quick to point out, the marginal tax rate was much higher in the 50s and 60s when we had tremendous growth, and Ocasio-Cortez’s suggestion is lower than the marginal tax rates back then. So, it has to be a great idea, right?
Not even close.
The problem is the way her critics are striking back isn’t effective either, as it fails to make a distinction between tax rates and marginal tax rates. I, however, will do my best not to fall into that trap.
Here’s how a marginal tax rate works. There is a threshold set where any income above it gets taxed at a different (and usually higher) rate. You are still being taxed for the income made below the threshold, just not at the higher rate. Under Ocasio-Cortez’s plan, the normal tax rate applies up to $10 million, and then the 70% kicks in at $10,000,000.01. Imagine trying to take 70% of a penny. I’m sure the IRS already has.
This is where critics fail or attempt to deceive people, depending on how much you trust your politicians. Republicans and conservatives insinuate the 70% marginal tax would apply to all income above $10 million, when it only applies to a portion of it. Even so, the same person is being taxed twice for the same income, one at the “regular” rate and one at the higher rate, all because of some arbitrary threshold set by someone who has an economics degree, but can’t tell her assets from a hole in the ground. This is where the argument against Ocasio-Cortez’s idea should start. If you want to throw in that last part about her assets, be my guest.
The key flaw in her idea is it ignores the source of the income from the marginal tax rate: the people making over $10 million a year. Thanks to lobbying, accounting tricks, and tax loopholes big enough to drive a Brinks truck through, it’s entirely possible the only people paying the marginal tax rate are those who do it voluntarily or those who don’t know how to avoid it. And, contrary to Leftist belief, there are a lot more in the latter group than there are in the former.
That may be one of the reasons Ocasio-Cortez is linking this marginal tax rate to her Green New Deal idea. The concept of protecting the planet may guilt more people into paying the tax than might normally do it. Even then, the question becomes what happens to the money. Will it be distributed to tech companies to develop cutting edge green energy technology? Will it be used to incentivize more people to use alternative fuel sources? Or will it just go to environmental subcommittees and organizations with track records of inactivity and/or failure? That’s just it. Nobody knows, least of all the young woman proposing the marginal tax rate. And the Green New Deal initiative is poorly drawn out to the point of being little more than a proposal in search of an action plan. It’s like trying to build a race car by telling people how fast it will go once built. At some point, you’re going to have to learn how to build a car, and right now, Alexandria Ocasio-Cortez doesn’t even have the help of Mr. Horriblewrench, let alone Mr. Goodwrench. But she does have an idea that will throw a wrench into our economy.
Raising the marginal tax rate for any reason when we have evidence of wasteful spending that needs to be addressed is folly and reveals the true intention of Ocasio-Cortez’s idea. It’s not to help the fight against climate change; it’s about taking people’s money all because they committed the great Leftist sin of making it one way or another. And if your rebuttal involves anything resembling “paying their fair share,” let me remind you there are close to half of American adults who pay little to no federal income tax at all. When these folks start paying into the federal coffers more than they’re taking, then we can have this talk.