June 26, 2019, 11:47

The conservative response to Ocasio-Cortez’s tax proposal has been embarrassingly deceptive

The conservative response to Ocasio-Cortez’s tax proposal has been embarrassingly deceptive

Prominent conservatives lined up to dunk on Rep. Alexandria Ocasio-Cortez (D-NY) after she floated a top marginal tax rate as high as 70 percent during a 60 Minutes interview that aired in full on Sunday. In the process, however, some of them revealed they either don’t understand how marginal tax rates work or are being intentionally dishonest about it.

On Saturday morning, Rep. Steve Scalise (R-LA), posted a tweet claiming 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, posted a tweet claiming 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.

Both tweets were “ratioed” — that is, the number of replies to them is far greater than the number of retweets, which indicates they were not well-received. The reason why is straightforward: Scalise and Norquist are both way off about how marginal tax rates work.

How marginal tax rates work

As explained by Investopedia, a marginal tax rate “is the tax rate incurred on each additional dollar of income. The marginal tax rate for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon their earnings, with low-income earners being taxed at a lower rate than higher income earners.”

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

Marginal tax rates are progressive — they increase with income. So under Ocasio-Cortez’s proposal, a taxpayer on the lower end of the income scale wouldn’t pay the top rate of 70 percent. That rate would be reserved for the ultra-rich — as she described it, “tippy-top” earners who make $10 million or more.

This is not a revolutionary proposal. As Vox’s Matt Yglesias explained, the top marginal tax rate in the US used to be much higher.

“Under Eisenhower, the top earners paid a 91 percent marginal rate, falling to Ocasio-Cortez’s proposed 70 percent under Kennedy and Johnson, before falling to 50 percent after Ronald Reagan’s first big tax cut, and then down to 38 percent after the 1986 tax reform,” Yglesias wrote.

The tax cut bill President Donald Trump signed into law in late 2017 lowered the top tax rate to 37 percent from 39.6 percent. The top rate currently applies to singles with taxable income over $500,000, and married joint filers with taxable income over $600,000.

But taxpayers in the top 37 percent tax bracket do not pay 37 percent of their income in taxes. According to an online marginal tax rate calculator, a single filer with taxable income of $1,000,000 pays just 33.8 percent, not including any credits or deductions.

Conservative spin is impervious to facts

While conservatives have gotten in the habit of attacking Ocasio-Cortez for allegedly not being well-versed in policy details, she in fact succinctly and accurately described how progressive marginal tax rates work while discussing her proposal, which she’s pushing as part of a plan to finance a “Green New Deal,” during the 60 Minutes interview.

“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,” 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.”

Nonetheless, on Monday morning, Fox & Friends continued to push misinformation about what her tax proposal would and wouldn’t do.

“She wanted people taxed as high as 80 or 90 percent if you make $10 million or more, where she calls them the ‘tippy-top,’” host Brian Kilmeade said, ignoring that her proposal would not in fact result in the ultra-rich paying anywhere near that percentage of taxes on most of their income.

Kilmeade’s co-host, Steve Doocy, tried to fact-check him — but Kilmeade was undeterred.

“The 60 or 70 percent rate kicks in at $10 million,” Doocy said.

“That’s great, but I think that one thing she said, if the plan goes forward — and I don’t think it has momentum — what she doesn’t understand, and what Barack Obama nearly fully understood … is that if you actually want to inspire money to make money and be successful and hire other people, don’t take all of their money,” Kilmeade responded. “If you take all of it, there’s no motivation there.”

Beyond his misrepresentation of both Ocasio-Cortez’s proposal and how marginal tax rates work, Kilmeade’s claim is at odds with a bevy of economic and historical studies indicating that relatively high taxes on rich people do not result in them becoming demoralized and withdrawing from economic activity.

As Yglesias detailed, some studies in fact argue a top rate of 70 percent is too low.

Source: vox.com

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