A new tax bracket tabled by Bronx Democrat Alexandria Ocasio-Cortez started a debate about the age-old question of “Where should the government get more money?”
Almost none of the people in the House question the urgency for a new profit-producing strategy. The budget decrease is already at $1 trillion in 2019 and is even expected to lower even more in the next years.
Ocasio-Cortez took her place in the House this month as the Bronx House Representative. But the 29-year old agitator has already made a debut in the newspaper headlines by merely suggesting raising tax rates to as high as 70 percent. This rate is to fund a “Green New Deal.” The suggestion was ridiculed by House GOP Whip Steve Scalise. He even asked Ocasio-Cortez to give 70 percent from her income and allocate it to “leftist fantasy programs”.
Ocasio-Cortez wants the rate to be applied to earnings higher than 10 million dollars, which means that anyone making under that amount will not be affected in any way.
The highest tax rate was over 90 percent in the 1950s. This was just lowered because of tax avoidance and deductions over the decades. The Tax Foundation describes the taxes on the rich back then were not much higher.
During the initial year of Ronald Reagan’s administration in 1981, the top percentage was kept at 70 percent. The most affluent people paid much lower rates, averaging at 30.5 percent, as found out in a Tax Policy Center report. As Reagan left the office in 1989, the highest recorded rate only peaked at 28 percent, despite the average rate just dropping slightly to 27.9 percent.
Three decades later, with the top rates at below 40 percent, a big leap will pose tremendous political and economic risks. Senator Bernie Sanders, a self-proclaimed socialist, peaked at 54.2 percent for the incomes exceeding $10 million in his campaign proposal for the 2016 presidential race. On the other hand, Hillary Clinton from the Democratic party nominated a 43.6 percent for earners with income above $5 million.
Keeping President Trump’s low approval rating in mind, the House Democratic majority avoided the problem in their first legislative agenda. Unfortunately for the 2020 candidates for the position, they will not have much of choice but to prioritize it.
Former Representative John Delaney from Maryland, the single formally announced Democratic candidate, hopes to finance property projects by boosting the recent 21 percent top rate up to 25 percent. Californian Senator Kamala Harris has suggested curbing the income inequality by nullifying the tax cuts made by Trump and expand the tax credits for middle-class earners instead.
Betsey Stevenson, economic adviser to former-President Barack Obama, suggested capping deductions for the rich and ruling out the option for stepping up the valuation, when combined, will raise more money in 10 years and will make better sense economically than the idea suggested by Ocasio-Cortez.
Republicans, on the other hand, express their worries over the new taxation prospects. Former Fed chairman Alan Greenspan thinks that the 70 percent ceiling income tax rate would dampen the country’s economic activity.
Another expert, Douglas Holtz-Eakin, a former adviser to ex-President George W. Bush, also agrees to the idea that whichever party will hold office, the government will still need additional profit. His take on the issue includes taxing the American consumption in place of incomes with economic grounds. He also warned that the introduction of any kind of new taxation system would put a strain on the polarized American political system.