Editorial

AOC’s Modest Proposal

New Rep. Alexandria Ocasio-Cortez (D-N.Y.) has been living rent-free in the heads of right-wing pundits ever since the Democratic socialist former bartender from the Bronx gained notoriety with her upset win over liberal 20-year incumbent Rep. Joe Crowley in the June 26 Democratic primary. But the right wingers really flipped their wigs when she suggested, during a 60 Minutes interview, that the top marginal tax rate be increased to as much as 70% to finance initiatives such as the “Green New Deal” she is proposing to get a handle on climate change.

The ensuing hubbub showed that some prominent “conservatives” either don’t understand how marginal tax rates work, or they were being intentionally dishonest about it, Aaron Rupar noted at Vox.

After a preview of the interview was released Jan. 4, Rep. Steve Scalise (R-La.), tweeted that Ocasio-Cortez’s tax proposal would result in government seizing “70% of your income and [giving] it to leftist fantasy programs.”

A few hours later, Grover Norquist, head of the Americans for Tax Reform, claimed in a tweet that Ocasio-Cortez “wants 70%” of “your production,” and suggested her proposal is akin to slavery. “It’s hard to believe that Norquist, who has dedicated his professional life to tax policy, doesn’t understand how marginal tax rates work, but he is nonetheless misrepresenting it on Twitter,” Rupar wrote.

Conservatives have attacked AOC for allegedly not being well-versed in policy details, but Rupar noted she succinctly and accurately described how progressive marginal tax rates work while discussing her proposal.

“Once you get to the tippy-tops, on your $10 millionth dollar, sometimes you see tax rates as high as 60% or 70%,” she said. “That doesn’t mean all $10 million dollars are taxed at an extremely high rate. But it means that as you climb up this ladder, you should be contributing more.”

Under the current marginal tax rates, the first $9,525 earned by a single filer is taxed at 10%. Income from $9,525 to $38,700 is taxed at 12%. Income from $38,700 to $82,500 is taxed at 22%. The brackets go up to the top rate of 37%, which for a single filer kicks in at $500,000 ($600,000 for a married couple filing jointly).

Paul Krugman, the Nobel Prize-winning economist, in a New York Times column Jan. 5 noted that AOC is advocating a tax rate of 70% 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. … 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%. 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%.

Krugman noted that when America had very high rates on the rich (as high as 92%) after World War II, the economy did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

“Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious,” Krugman wrote.

In 2017, the Economic Policy Institute reported that CEOs at the 350 largest companies in 2016 took home an average of $15.6 million — 271 times what the typical US worker earns. That was up from a ratio of 30:1 before the Reagan-era tax cuts. When Ronald Reagan left office in 1989, CEO compensation averaged 59 times the typical earner. The increasing use of stock options to inflate executive compensation packages has exploded that CEO-to-worker pay ratio since then.

AOC proposed that the top marginal rate of 70% be applied to incomes over $10 million, but that allows a generous ratio of executive compensation at 321 times the median personal income, which was $31,099 in 2017. We would propose that any compensation more than 30 times the median personal income, which would be approximately $932,000, should be taxed at 70%. That would give executives an incentive not only to reinvest earnings in their company, but also to pay their workers more, so they’d get that median income — and the top marginal tax benchmark — up.

After getting the government opened up, the first bill the Democrats hope to pass is a sweeping anti-corruption bill aimed at stamping out the influence of money in politics and expanding voting rights. HR 1 has no chance in the Senate, where Majority Leader Mitch McConnell has already said, “That’s not going to go anywhere,” possibly because Republicans know they can’t win a fair election any more.

AOC and her progressive allies might not get much of their initiatives past the Republican-dominated Senate, but if the progressive coalition can pass some of these bills out of the House, with the cooperation of new Speaker Nancy Pelosi and the Democratic leadership, they can show voters what might be possible if they return Democrats to a Senate Majority and the White House in 2021.

Deadbeat Don Holds Workers Hostage

Another reason why we should not run government like a business was on display during the federal government shutdown. It was no surprise that Donald Trump, who has been a grifter and a deadbeat all his life, sees nothing wrong with leaving nearly five million workers without paychecks for an indefinite period of time.

Trump, who routinely stiffed contractors on his real estate projects, forcing them to sue him to get their payments, has suggested that the shutdown could result in a net savings for the federal government, which shows his misunderstanding of how the government works.

First, most of the federal employees will eventually get their back pay when the impasse is resolved. About 420,000 of the federal workers are classified as essential and are working without knowing when they’ll be paid. About 380,000 federal employees have been furloughed and probably will get back pay when the shutdown is resolved. And they’re not all highly-paid bureaucrats. J. David Cox Sr., president of the American Federation of Government Employees, which represents about 40,000 Bureau of Prisons employees who have been furloughed in the shutdown, told the New York Times his members get an average take-home pay of $500 a week, which leaves little cushion during a shortfall.

Also, an estimated 4.1 million people work for federal contractors, according to Paul Light, a professor of public service at New York University. The contract workers clean offices, serve food and provide security or other services for federal agencies, and they are not expected to receive back pay when the deal is worked out.

In the past, Trump’s father bailed him out of financial trouble until the debts got too great, as Donald managed to lose money on three casinos in Atlantic City as well as the Plaza Hotel in New York City, taking them through bankruptcy a total of six times. Trump said there was nothing wrong with using bankruptcy to handle debts, and insisted he had “used, brilliantly, the laws of the country.” But that’s why he had to turn to Russian oligarchs and Mideastern potentates to finance recent ventures — and now he is desperate to distract the public from the fact that he’s in over his head.

Tell your senators to put the government back to work. — JMC

From The Progressive Populist, February 1, 2019

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