Dems are starting to endorse confiscatory taxation of the 'rich'
The left wing of the Democrats is playing with fire, advocating revenge against those who have succeeded in making a lot of money by taking almost all of it away. Yesterday, a probable candidate for president (and a former Obama Cabinet member) one-upped even Alexandria Ocasio-Cortez, who broke the ice on public discussion of stratospheric income tax rates by suggesting a marginal 70% federal rate on incomes of ten million and up. That would yield an effective rate over 80% for residents of New York and California, the states that produce the highest number of super-earners.
Julián Castro, the former mayor of San Antonio and HUD secretary under President Obama, makes her look like Grover Norquist, appearing with George Stephanopoulos yesterday:
Screen grab, video and transcript via Grabien.
STEPHANOPOULOS: You laid a lot of programs there. One of the questions you're going to face if you run is how are you going to pay for them?
Let me show you the newest – youngest member of the congress right now, Alexandria Ocasio-Cortez, said that's going to air on 60 Minutes tonight about how to pay for things.
(BEGIN VIDEO CLIP)
REP. ALEXANDRIA OCASIO-CORTEZ, (D) NEW YORK: You look at our tax rates back in the '60s, and when you have a progressive tax rate system, your tax rate, you know, let's say from zero to $75,000 may be 10 percent or 15 percent, et cetera, but once you get to the tippy tops, on your 10 millionth dollar, sometimes you see tax rates as high as 60 percent or 70 percent.
(BEGIN VIDEO CLIP)
STEPHANOPOULOS: Can you support a tax increase like that, once you hit $10 million, 60, 70 percent?
CASTRO: Oh, I can support folks at the top paying for fair share.
As you know, George, there was a time in this country where the top marginal tax rate was over 90 percent, even during Reagan's era in the 1980s it was around 50 percent. So do I support, in order to have something like Medicare for all, that we ask folks that are in the top .05 percent or .5 percent or top 1 percent to pay more?
And, also, that we get more serious about making sure the corporations pay their fair share, and that we're smart about understanding how instead of folks having to pay sky high premiums to companies that are seeking a profit to deliver health care that we can have a better system where people can get good health care and have peace of mind, even if that means that we rearrange where those dollars go? Yeah, I support that.
And, you know what? During this campaign, if I run, I'm going to be very up front with the American people on how we would do that, because I think that they are owed that, but it is worth it. It is worth it in this country for us do that to do that.
The high rates that Ronald Reagan cut (and triggered a boom thereby) were paid by almost nobody, because the tax code of the times was full of generous loopholes. Those loopholes were mostly closed in exchange for lowering the marginal rates. Thus, any comparison of marginal rates then to what would be their effect now is fatuous.
Castro deserves to be taken seriously, for the Democrats yearn for a vehicle to inspire voter registration and turnout among Hispanics the way Barack Obama did for African-Americans.
A 90% federal rate would result in a 100-plus-percent rate in a few places, but realism obviously is not a strong suit of these vengeful ideologues.
In a way, even more worrisome is the 180-degree shift on these ultra-high rates by Paul Krugman, a Nobel Prize-winner in economics and now a New York Times columnist. On Saturday, he wrote:
The controversy of the moment involves AOC's advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like ... um, Peter Diamond, Nobel laureate in economics and arguably the world's leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it's a policy nobody has ever implemented, aside from ... the United States, for 35 years after World War II – including the most successful period of economic growth in our history.
To be more specific, Diamond, in work with Emmanuel Saez – one of our leading experts on inequality – estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama's Council of Economic Advisers, estimates it at more than 80 percent.
David Bernstein, writing at Instapundit, calls out Krugman for changing his views radically:
Krugman argues in favor of marginal tax rates in the 80% range for the "rich." Economist Bill Anderson comments on my Facebook page (reprinted with permission): "At the 2004 Southern Economic Association meetings in New Orleans, I asked Krugman in a room full of economists if he believed we should go back to the 1980 top rates [of 70%]. His answer: 'Oh, no! Those rates were insane!' His exact words. So, it is official; Krugman now endorses insanity. How appropriate."
What Krugman formerly understood but forgot is that one of the major reasons America soared past the then-most advanced nations of world in Europe to become the most advanced and richest power in the history of the world is that Americans have avoided the bitter class politics of the old world. We never had an aristocracy whose class privileges were part of the legal and social structure for centuries. Thus, we have avoided vengeance-generated policies that hinder the creation and accumulation of wealth by others.
Anyone who studies how businesses and individuals make investment decisions and evaluate risk (not one of the tools of macroeconomics) knows that confiscating most of the returns of investment kills off most new investment. No investment means no new jobs, and ultimately a diminishing pie to be split into pieces.
Like every socialist nation.