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Tuesday, January 08, 2019


New old ideas

by Tom Sullivan

Hadrian's wall just east of Cawfields quarry, Northumberland in October 2005. Public domain.

Here's some news that isn't from Huffington Post:

America has been doing income taxes wrong for more than 50 years.

All Americans, including the rich, would be better off if top tax rates went back to Eisenhower-era levels when the top federal income tax rate was 91 percent, according to a new working paper by Fabian Kindermann from the University of Bonn and Dirk Krueger from the University of Pennsylvania.

The top tax rate that makes all citizens, including the highest 1 percent of earners, the best off is “somewhere between 85 and 90 percent,” Krueger told The Huffington Post.
The above appears under the headline, "Economists Say We Should Tax The Rich At 90 Percent." The article dates from October 2014.

Nobel laureate in economics Paul Krugman believes 2019 data suggests the ideal figure is more like 73 percent, or maybe 80 percent, depending on which experts one consults.

Rep. Alexandra Ocasio-Cortez (AOC, for short), Democrat of New York, is the occasion for the discussion, you may have heard. In an interview with Anderson Cooper of 60 Minutes, AOC proposes a "Green New Deal" for moving the U.S. economy to renewable energy in 12 years, funded with a top marginal tax rate of "60 or 70 percent."

Thus, in her first week in office, AOC set conservatives' hair ablaze by saying the U.S. tax structure should resemble something more like the radical days of Dwight Eisenhower. The retired World War II general initiated construction of the now-crumbling interstate highway system in 1956. That national investment paid for in part by a more progressive tax policy has produced untold economic benefits for the country ever since, and explosive growth that would have been impossible without the 41,000 miles of tax-funded roads.

The alarmism and retro red-baiting on the right over AOC's proposal elides that little detail, writes The Week's Ryan Cooper. Sensible countries use such rates to pay for things such as "roads, bridges, trains, airports, and so on," national goods that benefit almost everyone. "Deliberately leaving the benefit part out of the tax equation is a hallmark of a great deal of conservative 'policy analysis,'" Cooper writes:
Sweden, by contrast, has a top marginal tax rate of 70 percent that kicks in at a mere $98,000 (and does not suffer any notable economic harms as a result, by the way). Here's how one Swedish person thinks about the high tax level:
Indeed, a friend in Massachusetts once brushed off the state's outdated reputation as Taxachusetts. She did not mind paying state taxes and felt the state-funded services were of real benefit, especially her kids' schools. No big deal. Grover Norquist would be drowning himself in the bathtub.

Cooper continues:
The second thing missing is that most Americans still have to pay for the things they don't get through taxation. Americans still need health insurance, child care, a college education, and so on (depending on circumstances) — we just have to finance some or all of that privately, and it often strains Americans' budgets terribly.
That minor detail is missing from plans for privatization of public services, public-private infrastructure partnerships, and fee-based access to what used to be covered by Americans pooled taxes. But no, the anti-tax gospel demand middlemen nickel-and-dime us — and hold our health and safety hostage — for what civilized countries provide as a matter of course. Free-market cultists believe America can no longer afford Americans.

And yet, the inquisitors of government waste, fraud, and abuse partially shut down the government until the deal-less president gets billions in taxpayer funding for a yet-undesigned wall (or fence or barrier, depending on the speech and day of the week) of indeterminate length that Mexico was supposed to pay for. This, to help us to keep out people who desperately want to be Americans, contribute to our economy, and pay into our treasury by requesting entry at official gates in the wall.