Fighting for a U.S. federal budget that prioritizes peace, economic security and shared prosperity
Since coming into office last month, freshman Rep. Alexandria Ocasio-Cortez has been upending decades of conventional political wisdom on the role of the federal government.
And on one particular issue -- raising tax rates on the rich -- others in the political world seem ready to dance to her moves.
Ocasio-Cortez initially caught flak for floating a 70 percent top marginal tax rate on the richest Americans -- it’s currently 37 percent.
But many were quick to point out that a 70 percent top tax rate would return the United States to levels that lasted for much of the 20th century--historically, the top tax rate was well above 60% from 1932 to 1981.
Indeed, fellow freshman Rep. Ilhan Omar and others quickly chimed in to point out that the top tax rate has even peaked above 90%: the peak rate on wealthiest Americans was 94% from 1944-45, stayed above 90% from 1951 to 1964, and didn't dip below 70% until 1981.
Decades of free-market ideology since the 1980s--massive tax cuts & a slow dismantling of social safety nets, while militarizing the budget-- have masked how well high taxes on the rich worked for much of the 20th century.
Many proponents of raising the top tax rate aren’t even framing it as a way to pay for nice things like a Green New Deal, avoiding the “how to pay for it” trap of balanced budgets. They suggest the point is actually to reduce the spending power (and polluting power) of the wealthy, suggesting it’s inherently good to tax top rates to prevent oligarchy & promote a more equitable society.
But whether or not it’s framed that way, it is a solid way to maximize federal revenue.
How much could a 70% top tax rate actually bring in?
An economist at the Tax Policy Center estimates that doubling the 37% top marginal tax rate on people earning more than $10 million could bring in about $720 billion over a decade, or $72 billion per year.
According to the National Priorities Project’s Trade-Offs tool, that’s enough to pay for a year’s worth of 971,999 jobs in clean energy -- adding almost a million to the 3.2 million Americans 3.2 million Americans already working in clean energy jobs.
$72 billion is enough to pay for enough new solar electricity capacity to power 50.1 million households for a year. Or 81.1 million households with wind energy -- that’s over 60% of all households in the United States.
Or it could hire 890,846 elementary school teachers. Or fund 8.08 million Head Start slots for children. Or pay for VA medical care for 6.7 million veterans, or Medicaid for 30.37 million children.
So many options, just by skimming off the untaxed wealth of the 16,000 Americans making more than $10 million!
Of course, it’s possible that wealthy Americans could find ways around paying a much-higher tax, which could impact how much revenue it generates.
But raising top tax rates is just one way to pay for nice things. There are plenty of other ways to raise federal revenues.