Noah Smith debates the 70 percent marginal tax rate with a bunch of us

Here is the Bloomberg link, here is a sentence from Noah on AOC:

Her proposal, which would make the tax structure similar to the one the U.S. had in 1921, is pretty much symbolic — a way of expressing disapproval of inequality, while kicking off a lively discussion of income taxes and redistribution.

We do not all agree.

Comments

I hate to say it but this is the wrong conversation. The income tax system as becoming far too complex, and probably unenforceable anyway. Think of off shoring income.

The US needs to shift federal taxes to sales taxes, property taxes, pollution taxes, Pigou taxes, and tariffs.

'Think of off shoring income.'

Forget about it - for the average American multi-millionaire (think Romney level wealthy), off shoring is essentially impossible at this point. FATCA put the final nail in that coffin - given the choice between needing to complying with all relevant American law or not having a single American customer, foreign banks simply don't deal with Americans.

Corporations can still offshore (in any number of ways, from totally legitimate to totally shady), but it is basically no longer possible for American citizens to do that these days.

'The Foreign Account Tax Compliance Act (FATCA), which was passed as part of the HIRE Act, generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments. The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.' https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca

I work in the back office of an investment management firm, and to this day most staff are baffled by FATCA documentation and have little to no ability to discern what is correct or not on it. Several very large fund administration firms I deal with regularly have perpetual backlogs of FATCA documentation to review, often lasting more than a year after they open accounts and accept cash for investments. We get inquiries from compliance people 18 or even 24 months after an account is open and active asking us to verify details that were submitted so long ago we've shipped the original docs off site to storage. I am sure this is being exploited by some people.

There are undoubtedly ways to try to exploit weaknesses in the system. However, the system changes over time, which is what seems to have caught the eye of the IRS regarding Romney's wife - bank secrecy was crumbling in Switzerland, and the better advised people simply took advantage of an IRS amnesty to avoid being punished.

The basic affects of FATCA are a reason why a growing number of expats are giving up their American citizenship - they simply cannot find the necessary banking services being provided to American citizens outside of the U.S.

There is the further aspect that at this point, it is basically impossible for an American student to transfer the necessary 'deposit' to be allowed to study at a German university, as no German bank will create such an account for an American, yet such an account is mandatory (to prevent the student from being dependent on the state - it guarantees/pays rent, for example).

It all depends on if you embrace the Venezuela model for us or the Trump model. Confiscatory taxes will punish companies and individuals and cause then to look for ways to mitigate that punishment by moving offshore or simply cutting back to pay less taxes. It seems that every generation has people with no clue how capitalism and human nature work and they embrace a socialist model simply buying in to the hype without any understand of the unintended (and intended) consequences. Eventually we will have a large enough percentage of voters who have been dumbed down and/or simply are stupid and we will follow Venezuela into the toilet. Keep watching, After sufficient suffering Venezuela will have a revolution/civil war with terrible consequences. Is that what we want?

FATCA is awful, but it doesn't come close to preventing off-shoring of income for the rich.

Simply set up a business overseas and keep reinvesting the profits rather than taking taxable distributions. Or any number of other ways to not generate taxable US income.

It's sad they came so close to FATCAT but couldn't quite get there.

That's rich. Ben Cole, who last I heard lives in Thailand and no doubt shelters his income, is concerned with off-shore income. How's them turkeys breeding Ben? We ate ours (they are less hearty than chickens, and prone to illness if not free-ranging) and now raise pigeons and chickens as fowl.

Ray Woepez: You raise "pigeons and chickens as fowl"?

I am glad you are not raising the birds as bovines. You are so perceptive!

I gave up on turkeys and chickens. I am big tough cattle man now. And fruit trees. It is harder to be big and tough growing fruit trees, but I do it.

I have not done so, but the way to offshore income is to set up an offshore corporation.

You're not that bright B. Cole, and living overseas has dulled your English. And you're a dullard. Good luck growing fruit trees in the tropics my friend. Only mangoes, mangosteen and a few other tropical fruits, and not even Florida oranges, grow in the tropics, since most fruit requires a winter season to mature. Most fruit, pace bananas, coconuts and the like, are bred over the millennia to grow in four seasons. Enjoy!

All those Filipino cabana boys have dulled your sense of good taste. Who needs to grow fruit when your brain is already a vegetable!

"The income tax system is becoming far too complex"

Is becoming? I bet Randal O'Toole would say that train has already jumped the tracks.

It's been estimated that the super-rich hold over $32 trillion (yes, trillion) in offshore accounts, escaping taxation. Of course, this violates U.S. tax law: residents are taxed on worldwide income, so it doesn't matter that the funds are held offshore. In the discussion, Cowen argues that a 70% marginal tax rate will simply provide wealthy taxpayers with an incentive to convert ordinary income (such as compensation) into income that receives preferential treatment (such as capital gain). Cowen could have mentioned the $30 trillion plus in offshore accounts, but that would have been an acknowledgment that there are offshore accounts of the super-rich and that the super-rich aren't the job creators they are supposed to be. In any case, here is my comment yesterday on the discussion among Cowen, Smith, et al.:

What are taxes for: https://www.bloomberg.com/opinion/articles/2019-01-14/debating-ocasio-cortez-s-70-percent-proposal-what-are-taxes-for Cowen contributes to this four-author discussion about the proposed 70% marginal tax rate. In his opposition to the proposal, he even finds common cause with the Paul Krugman in arguing that deficits aren't so bad. I'm not sure how Cowen can square his preference for future generations while opposing tax increases that would reduce the debt burden inherited by said future generations. I suppose I just don't understand. By the way, it took Noah Smith to point out that the proposal for a 70% marginal tax bracket only applied to annual net income above $10 million. $10 million! I started as a tax lawyer when the maximum marginal rate was 70%. But that rate did not apply to "earned" income, which was subject to a maximum rate of 50%. In other words, the 70% rate applied to interest and dividends, not compensation income, which back then was considered "earned". Of course, the preferential treatment for "earned" income has been turned on its head, with dividends now taxed at the favorable rate of 20% and compensation taxed at the ordinary rate. Strange how compensation was once considered "earned" income and subject to favorable treatment but now dividends are. Indeed, compensation is now subject to unfavorable treatment: it is subject to both income tax and payroll tax. And one wonders why we have gone off the rails when it comes to taxation.

Cowen's concern that a 70% marginal tax rate will be an incentive for taxpayers to convert ordinary income to income with preferential treatment such as capital gains. Speaking of incentives, the Republicans' new tax act includes a 20% deduction for passive income received from a pass-through entity such as a limited liability company that is taxed as a partnership. Uhm, you think wealthy taxpayers might be converting income to passive income received from a pass-through entity.

Taxes on dividends were reduced to match capital gains to make the decision by large, successful, corporations to pay dividends rather than retaining earnings or buy back stock tax neutral.

In turn, the capital gains preference was an approximate compensation for the fact that a significant portion of the capital gains were really nominal price increases due to inflation. I understand that they didn’t just allow indexation of bases was to not increase the complexity too much for retail stock investors, in the seventies when inflation routinely hit double digits.

Unwinding this might be possible, with lots of the tax code now indexed for other reasons.

-dk

Eventually, the bills will come due and the U.S. cannot run trillion dollar deficits forever. Revenue will need to be raised? I'd love to see more discussion of progressive consumption taxes instead.

I think it is immoral to tax more than 49.9999...% of a person's earned income (with a broader definition of 'earned'). That said, it's well established that the highest effective tax rate stays relatively constant regardless of the whack-a-mole shenanigans of the regulators. As far as shifting our tax structure to some sort of consumption tax, what about my Roth IRA? That's supposed to be tax free since I paid the income tax due up-front. Now they want to tax it if I spend it? Over my cold dead body.

Just out of curiosity, what's so special about half?

Also, I assume you responded to a statement about marginal tax rates by saying something about average tax rates on purpose?

I am afraid that for a lot of people, even if they understand marginal rates, the top rate is what they "feel." Regardless of whether they meet the threshold, or their total effective rate.

That might even apply to some economists, who argue that the 70% rate matters independent of the threshold.

True. I would also argue that the 70% rate matters independent of the threshold. It seems like thievery for you not to get at least half of what you earn on any dollar whether the first or the 10,000,001st. Who said economists had no morals?

lol, a tax rate of 1% can be considered to be taking 100% of your last dollars.

That's why we look at the total effective rate instead.

No, it would be taking a penny of your last dollar.

"I am afraid that for a lot of people, even if they understand marginal rates" Be afraid for yourself.

Come on, admit that this kind of thinking is common. Tax Freedom Day is the same thing, flipped.

https://en.m.wikipedia.org/wiki/Tax_Freedom_Day

I was agreeing with you. It is difficult. You know what it is and made the same mistake yourself.

Maybe I should not have laughed, this is a real and common problem.

What is the nudge to get past it? Maybe we should get rid of "top marginal" rates and put "effective rates" on a more gradual curve.

You are wrong. Marginal tax rates are what drive decisions. You will not proceed with a project or investment if the income is taxed at 70%. Economic activity will not happen. Jobs and wealth, along with tax revenues will not occur. Or the investment decisions and structure are done in a way to avoid the high marginal rates, which again are counter productive to the economy and society as a whole.

The people making the decisions are just fine if they don't do the project or investment.

That is why these tax rates don't generate more tax revenue. They are purely punitive, which is why the left love them.

"when comparing self-reported tax rates with those computed from self-reported income, respondents systematically overestimate their ATR while reported MTR are accurate at the mean, the responses are consistent with underestimation of tax schedule progressivity."

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5724773/

"Respondents were given two options: a correct one (“My tax bill would go up a very small amount”) and an incorrect one (“my tax bill would go up substantially”). Only 52 percent got it right."

https://today.yougov.com/topics/politics/articles-reports/2013/01/08/understanding-how-marginal-taxes-work-its-all-part

"The bottom line is that the informed conversation about tax rates is not the same conversation that many in the public hear. People seem to interpret questions about how the world works through a partisan lens. On this issue, Republicans seem particularly willing to believe the worst about taxes. "

At 50% taxation, the marginal utility of remunerative work vanishes. That's why slaves have to be physically coerced. That's also why income tax receipts as a percentage of GDP have always remained roughly the same regardless of marginal rates.

There is no knife-edge where the work-leisure balance flips at exactly 50%, but there is a gradual effect that becomes more dramatic around that rate. I "feel" the balance shift at an average tax rate of 25%, and I don't worry so much about the marginal rate, because I have to write a check (not have the tax withheld at the source) for the average rate.

An adverse change to Roth tax treatment is a risk factor, and one reason to diversify retirement savings by tax status.

Given the importance of Roth accounts to the Democratic professional class, however, I think there would be a lot of reluctance, at least among the saner Democrats, to explicitly taxing Roth distributions. A "wealth" tax, with say a $10 million exemption, might overcome that, but also would raise a lot less money.

Roth funds will not avoid a VAT tax when spent, however, which I suspect is where we are headed eventually.

"An adverse change to Roth tax treatment is a risk factor, and one reason to diversify retirement savings by tax status."

I've always been cautious about fully funding a Roth, because I suspect it will look like a bunch of golden eggs to a future legislature.

That's a suspicion most rational people share with you.

1) “Some 94 percent of Americans who reach “top 1 percent” income status will enjoy it for only a single year. Approximately 99 percent will lose their “top 1 percent” status within a decade.“ https://humanprogress.org/article.php?p=152

2) And when those high earners finally and temporarily hit the 1% after what is usually more work than any of us are willing to do, let’s take their cash and hand it to the dumbest political class in US history.

In just a year we have gone from not knowing about AOC the bartender to soberly debating her tax proposals.

Give it a rest.

You make these statements as if their relevance is obvious. I don't have a clue what to do with 1), but as for 2): Whether the budget should be increased or whether there should be an offsetting tax decrease somewhere else is a distinct question from what the (top) marginal rate of income tax should be. So, for now, nothing is being "handed" to anyone.

Isn't it true that income averaging rules were more effective when the tax rate was high?

For that reason, right?

She probably doesn’t believe in the efficacy of her tax proposal. It is simply symbolic. Do you think the average mouth breathing AOC supporter,or for that matter AOC detractor will dive in to the complexities of implicit and explicit marginal tax rates? The joke is on us. She knew everyone would take her at face value. Point awarded to her.

Cowen and his Bloomberg associates were more than happy to oblige with a serious inquiry in to this proposal because it sure beats talking about the normal conversational miasma emminating from the Trump era.

Somethings as monumentally stupid as a 70% tax rate will command the immediate attention of economists, forcing them to congregate and take it seriously and publish all of their deep thoughts, simply because the idea was shit out of the bowels of a Democrat.

But a concept such as "Gee, maybe enforcing the border would be a good idea"? Nope, we can safely ignore that as racist and move on.

Keep in mind economists are trained to think in terms of "cheaper in price and greater in quantity". So closing the border does not fit that narrative, nor does better patent laws. As I predicted to our host here by email, the Trump trade war would have little or no bad effect on the US economy, but a discernible bad effect on China, since the USA does not depend that much on trade, and is a monopoly buyer. And I was right. But you don't hear that much about that, instead people clamor over free trade like it's essential (keep in mind the Federalists and German economist List correctly pointed out that tariffs would help the USA, and they have, akin in a way to patents helping an economy). Nuff said. I've given up on the USA ever becoming a leader in anything and now just look at preserving my wealth. I have two passports, residency in three countries, am a member of the 1% (working on getting into the 0.5%), and retired in my 40s. Good luck to you.

You're not supposed to take her literally but take her seriously! She's playing 5D chess!

Noah points out that DiamondSaez aim to maximise welfare, not revenue. While ostensibly true, that is not a meaningful distinction here. If you read the paper's "top marginal rate" section, and are familiar with optimal taxation, the first thing they state is that their definition of "top rate" is that the social weight of the rich is negligible and approximated by zero. So:
1/ they are effectively maximising revenue.
1' (corollary) they are willing to raise money from the rich "up to the peak of the Laffer curve", i.e. even when the marginal cost of funds is infinite.
2/ This should be thought of as the upper bound of redistribution, not an "interior" recommendation.

Well, we were told by the last guy that high tax rates weren't about revenue, but about fairness.

I needed help: "A corner solution is a special solution to an agent's maximization problem in which the quantity of one of the arguments in the maximized function is zero. In non-technical terms, a corner solution is when the chooser is either unwilling or unable to make a tradeoff."

1. There's a good argument that lower top rate taxes have led to the spiraling of executive pay with no evidence of any benefit to said higher pay.

2. The idea that people will choose to become nurses rather than surgeons because of high tax seems ridiculous. There may well be more marginal choices that it does effect, but think of some examples and use these

"lower top rate taxes have led to the spiraling of executive pay"

Even if true, so what? There's a populist assumption there that this money is take directly out of the purses of the little people.

When someone says something like, "I can't believe they're paying baseball players $25M when a starting school teacher in Mississippi only makes only $24,000," I just don't even know where to begin.

I think I understand psychologically where these people are coming from, while also understanding on an abstract level reasons baseball players are payed so much more than school teachers. Many of our intuitions about how the world should work are appropriate to life in a small community of a few hundred people. If people discovered that the village clown was making a 1,000 times more money than the village school teacher, I wouldn't be surprised if they decided to no longer invite him to perform at birthdays.

Unless the higher executive pay has, in itself, led to higher growth, then higher pay for them does take money out of everyone else's including "the little people".

I'm glad the argument about CEO overpay exists, because it distracts the people who get dangerous with too much time on their hands.

CEO pay is probably not connected with performance. However, for the megacorps, if there is a 1% chance that they increase performance by 1%, the pay makes up for it.

The money comes from shareholders, who do not give a shit, because 1% of 1% is too petty for them to care about.

I wouldn't have a problem with baseball player salary if the parks were fully paid by the teams, and not by the municipal governments.

I don't think the argument is that executive pay is morally distasteful. Rather, an inefficient dynamic has emerged in which companies are compelled to overpay executives in order to avoid missing out on top tier talent (even though good metrics for measuring executive talent do not really exist). Shareholders would be better off if executives were paid less and companies were not over-committed to such executive "talent.".

CEOs are probably overpaid. But the drag on shareholder returns is incredibly tiny.

(i) I'd think so. (ii) That probably depends how far you chase the problem. If you view it as just a tiny extra outflow of money without any other consequences, fair enough. But I'll bet it isn't.

Why does it seem ridiculous? I chose not to be a doctor because it takes so long and then you are taxed at a high rate. It takes much less time to become a lawyer and you can fit your income in a very desirable place for taxes (above SS cutoff, below top rate) with the potential to do better if you do really well.

The top marginal rate of tax in the UK since the Second World War was 102%. It led to the brain drain, and a great many socialist academics and politiciand wio dering why a large part of the most capable citizens emigrated. Plonkers.

"The top marginal rate of tax in the UK since the Second World War was 102%"

I hope nobody tells AOC about that.

I found the whole thing very unsatisfactory, because it was so mild and abstract. With economic observations like "at some point taxes become negative incentives" or even just "people don't like taxes."

Those sound like strong arguments for continued debt and deficit, boys.

Yeah, the more I think about it, the more it looks like everybody but Noah is arguing for the status quo. Which is pretty sad, because we just reached anniversary of the last tax bill, which did not in fact increase revenue. In fact, that tax bill is now projected to increase deficits by $1.9 trillion over the next decade.

I guess it comes down to which number scares you more, right? 2 trillion, or 70 percent.

Revenue went up .02 T, just like in 2016. If we're increasing the debt, it's a SPENDING problem.

Come on, when two things are supposed to balance, claiming one side is the problem is an idiot's argument.

And in this case a double idiot's argument, because the full Republican government just had their chance to set spending lower, and what did they do?

If they could not cut it, that's the answer. All they showed was it they could cut tax, damn the consequences.

", claiming one side is the problem is an idiot's argument."

"the full Republican government just had their chance to set spending lower"

You aren't claiming one side is the problem are you?

Nice catch.

Terrible, missed, catch.

I'm saying they could have done *anything* to make spending and revenue match, and if "it's a SPENDING problem" as TMC (and most Republicans most days) says, they could have just fixed that.

They could have done the easy "centrist" thing and taken some off both ends, reducing spending and increasing revenue. They didn't do that either.

There are two sides, but that doesn't mean both sides share the blame. We had higher revenue, so the spending side is for sure to blame. I'm not in favor of any deficit, so both sides are wrong when they do it. The republicans claim they are for lower spending, so they are hypocrites, and the Dems are all for increased spending, so they are a bigger threat. Sometimes you get two bad options to choose from.

In which TMC says he'd be rather be for hypocrites, with lower taxes, than honest people who help other people. Modern Republicanism in a nutshell.

Another variation would be "I don't care if we sold out the country to the gangster remnant of the KGB, as long as my taxes get cut."

No, it would be me rathering Clinton to win over Obama in 2008 because, even though she'll sell off favors, she's at least competent. Like I said, sometimes you get two bad options.

And, BTW, the Dems are such hypocrites on everything else, it's a wash or better just on that one criteria.

I think the 0.01% should pay more on capital gains, but the rest of us 1%-ers are Ok. See the link two stories back from me that says the 1% and even the 0.5% have stagnated over the last generation (no rise in share of national wealth), just the 0.1% have profited.

I'm with Ray in spirit. Everyone who makes more than me should pay more.

How about we make people poorer than me pay more? Then it will force them to try to out earn me (I earn a lot). See I'm a tax policy expert who understands incentives.

I agree that it's symbolic and that the symbolism is terrible. Earning a high-income is not to be encouraged and celebrated, it is to be treated with suspicion and punished. The wealthy are not praiseworthy because they start the businesses, do difficult jobs well, and generate growth and dynamism, they are greedy exploiters and useful only insofar as they can be milked to the max. They 'didn't build that' and 'at some point, they already have enough money'.

And Karl Smith's warning that this thinking could infect the right as well as the left is well taken. As with the limits on SALT and mortgage deductions, higher income tax rates will hit Democrats harder than Republicans because the former tend to live in higher-cost, higher-income areas. Most of the $10 million incomes are earned by Democrats living in coastal areas, not Republicans living in red states. How many tech billionaires or even Fortune 500 CEOs are Trump supporters? The leadership at Google, Facebook, and Amazon obviously hate his guts. What if Trump (following Coulter) countered AOC with a proposal for 70% wealth taxes on fortunes worth over $20 billion? How many Trump supporters would be hit? Anybody other than Sheldon Adelson?

That actually raises an interesting question: At what point should federal (income) tax bands be flexed depending on where people live, and has that point already been reached?

At what point should federal (income) tax bands be flexed depending on where people live

Never. Living in an expensive house is a consumption choice.

I meant "where" as in: "what state". Given the limits on how far you can commute, and the fact that not all jobs are available in all parts of the country, living in expensive areas like the Bay Area or NYC is hardly a "consumption choice".

I was deliberately vague, because it is just as much a consumption choice to live in a million-dollar Midwest mansion as it is to live in a million-dollar Manhattan apartment.

"I have no choice!" is a standard negotiating technique but it isn't true. You want the lifestyle associated with rubbing shoulders with rich people in expensive areas. Which, fine, that is your consumption choice. But it your consumption choice.

Its interesting to note that the point in Obama's "at some point you've made enough money" is now demonstrated to be higher than $65 million, which is their reported book deal.

https://www.businessinsider.com/obama-book-deal-2017-2

Most people won't have to worry about transgressing.

So if Obama is still in on higher tax rates, even knowing he is making $65 million, would you be too?

Or would you switch to a different argument?

Personally, I am of the opinion that taxes ought to be voluntary, with an opt-out baseline of 5% flat tax, and the elimination of income tax deduction . Those who believe in higher taxes will put their money where their mouth is, those who don't will have a fair tax system for all.

Overall violence in the tax system will be lessened.

+1 lol Also, I think Engineer was just pointing out Obama's hypocrisy. Let's see if he's like Romney and gives away 30% of it. I'll give him kudos if he does.

Human societies have never been voluntary, and certainly not since the dawn of civilization. With civilization came formal tax, though before that there were rules for sharing and group effort.

Let the social contract be opt-in or opt-out. With bookkeeping in blockchain. Let there be a distributed red state, and a distributed blue state. And a super (mauve?) state for the common defense.

Additional thought -- what if Trump proposed the 'over $x billion' wealth tax and also applied it to foundations and university endowments? Would such a tax hit even one Trump-favoring institution?

I'm looking for a rational level at which to pitch a wealth tax. How much capital does the Clinton Foundation own up to?

The Clinton Foundation doesn't have much of an endowment. They raise billions and then spend it. A large endowment wasn't going to look as good on Hillary's resume as having spent billions of other peoples money for charity and the attending public praise.

It's also noteworthy that the Clinton's don't donate to the Clinton Foundation. They have a personal "Clinton Family Foundation" for that.
....
Yeah, I have no idea what's that about either.

I don’t get why your responses to this proposal consistently avoid actually addressing it and insist on addressing a straw man proposal that is not on the table. What is wrong with giving your honest opinion about the actual proposal and then moving on to the topic you think is more interesting or important? Your current approach smells like evasion. Don’t you have an easy three sentence opinion re why a 70% marginal rate on income above $10M is suboptimal way to raise revenue and/or incentivize whatever class of workers who make decisions with the expectation that they might make that much money?

I don’t think we’re evading actual discussion about the policy. Here are a few reasons why it’s bad policy....

1. If the logic of scarce resource allocation to the highest use value”profitability” is important then a marginal rate of 70 percent on income over 10 million is horrific policy. Crudely stated the wealth creation effects and as Tyler puts it “wealth plus” overwhelm any need for redistributive justice. In fact if wealth creation and wealth plus are ethical pursuits and ends in themselves then most of redistributive justice is a waste of time.

2. Wealthy people will try and shift more income away from labor compensation and towards capital. Why makes over 20 mil in salary as a CEO, go for the stock options. We will just see a ton of mega rich people change the way they are compensated.

3. It enlivens the evasion industry even further. The Democrats have never really championed getting rid of “the game” and going for flat taxes or loophole less income taxes so we’ll get even more gamesmanship from the lawyers and accountants trying to save their mega wealthy clients money.

4. And on an even cruder level it tells middle class people to stay put and stop trying so hard.

You’d be better off having a flat-loophole less rate of 25 percent on income over 10 million. The current game insentivises all kinds of distorting behavior-mega wealthy landlords taking losses on un-leased Manhattan real estate etc.

Putting aside the substance of your comments, which I will get to, these are the kinds of substantive responses to the particular policy proposal that I would hope TC could offer. I still don't understand why he can't offer critiques like these which address the policy proposal on its merits rather than focusing on other policy proposals and banalities.

1. The devil is in the details here. It is not at all clear that compensation above $10M / yr. is always or usually the best use of scarce funds. Executives in the US command a premium far higher than in other developed countries and it does not seem clear that the premium reflects superior value creation. In addition, it is far from clear that such additional compensation is an efficient way to incentivize innovation.

2. True but I presume the proposal is to treat income from wages and capital gains in the same way. Also, there are good arguments for why shareholders want executives to take more compensation in equity than in wages.
3. Maybe. But if this is an efficient way to raise revenue and/or solve a collection action / antitrust problem plaguing corporate America, then we can find ways to deal with it (namely, restore tax enforcement capacity to the levels seen in the 1970s or 1980s). Also if tax avoidance strategies mean more capital formation and less consumption that might be a good thing for long term economic growth.
4. A high marginal rate on income over $10 million will have zero impact on how 99.99% of the population choose to live their lives. I believe less than 20,000 people in the US have incomes over $10M in a year. No one is going to choose to be a nurse instead of surgeon. No one is going to refrain from going to college. If we were talking about marginal rates on income over $300,000 or $1,000,000, I would be much more concerned about this.

While you're at it, how about a 25% loophole-less rate on all income above a generous subsistence level, say a $12,000 exemption per adult and $6000 per child? Have you heard of Steve Forbes?

We are in bed with the super wealthy, without them the banking system could never get the 21 trillion of government debt rolled over.

The space for possible policy outcomes has definitely opened up!

Nice chat, I really wish we saw more ideas around progressive consumption taxes.

Good on ya if you work hard and make money but spend it like a dbag and sure we will tax you f*ck up.

Dulce Tributum Inexpertis.

This whole steaming pile of AOC/progressive nonsense simply is class envy/hate/war and more government control masqyerading as virtue signaling. Mayor Fidel DiBlasio laid it out for us in NYC the other day. The wrong people have the money. And, AOC and DiBlasio will seize it and give it to you.

About 50% of Americans don't pay taxes, or receive government payments greater than their taxes.

"Ah, you don't believe we're on the eve of destruction."

"Upgrading the electrical grid to compensate for the intermittency of solar and wind,"

So wrong. Upgrading the electrical grid expands the market for renewables. That's almost entirely wind, since solar is generally far less concentrated. IE It's about transporting wind power from wind fields to distant cities.

As such, it doesn't compensate for the intermittency. If the wind isn't blowing and the sun isn't shining, you have to rely on power storage or dispatchable plants. Power storage is nearly 100% hydro, either a normal hydro power plant or far more rarely pumped hydro storage. Dispatchable is nearly 100% natural gas.

Potentially, the wind can be blowing in one wind production area and not in another wind production area and if both are linked with the same market, they can somewhat mitigate variability. But you still have plenty of periods when either the wind is blowing fully in both areas and the wind isn't blowing anywhere. So, intermittency can't be mitigated by upgrading the electrical system. You have to have another source of power.

"being a surgeon is not better than being a nurse in a normative sense"

Is this true? What does it mean?

In the U.S. choosing to be a surgeon does not increase the number of surgeons (since the number of medical school and -- especially -- residency slots is fixed by cartelization). So the only benefit of a particular individual choosing a surgical career is whether he or she is better (and how much) compared to the individual they pushed out of a slot. But choosing a nursing career may actually increase the supply of nurses. So I think we have to say choosing nursing is normatively better.

Instead of ever increasing marginal tax rates, I think there should be improved commitment to
taxing the in-kind income that politicians receive. When they get rich with the connections they develop, the completely legal insider trading they engage in, and all the other wealth they acquire while pretending to be sober public servants.
Since they also like to hide this income by delaying the favors they get, I recommend taxing them especially "fairly" on the net income above their projected income before they went into politics for the rest of their lives.

Getting hundreds of thousands of dollars for speaking because of your old political career? Well, you truly and honestly didn't build that!!!

Is sub-commandante AOC enjoying spending her 70%-taxed annual Congressional salary of $174,000?

How is the people's commissar from NYC enjoying the free spending of her available $52,200? (Is she finding the rent subsidies she needs for the DC housing market?)

Found this tidbit, thought I'd share it:

WHAT THEY PAY ‐ The average tax rate (including federal income
taxes, payroll taxes, and excise taxes paid as a percentage of
income) for the bottom 20% of US taxpayers has fallen from 7.5% of
before‐tax income in 1979 to 1.5% of before‐tax income in 2015. The
average tax rate for the top 1% of US taxpayers has fallen from
38.5% of before‐tax income in 1979 to 33.3% of before‐tax income in
2015 (source: Congressional Budget Office).

+1, informative

It'll be interesting to see what the tax cut does to those figures.

I've been searching in vain for the details of AOC's "tax plan". All I can find is her proposal to introduce a new tax bracket of 70 percent for incomes over $10,000,000 (single, married filing joint...)? Is that really a "plan"? If someone has further details of this "plan", please post them here.

Krugman gave her kudos for being on top of tax policy. But, I've got to question a "plan" and a policy expert that proposes a jump from 37 percent for incomes over $612,351 (married joint) that continues up to $10,000,000 and then suddenly jumps to 70 percent. Of course, good tax policy dictates that there should be a 33 percent rate difference between a dollar earned before $10 million and a dollar more.

My conclusion is that AOC doesn't' have a clue much less a "plan". Alternatively, there must be a lot in this secret plan of our tax policy expert that the public has not been informed of. Shame on the media for not pressing her for more details.

I think she has a clue. She's doing politics.

Yes, politics at its worst. But, if given this obvious political ploy, why isn't the media (including this blog) giving her a harder time and pressing her for details? Why do they go along with calling it a "plan"? Shame on Matt Yglesias, et al, and a pox on Vox.

"why isn't the media (including this blog) giving her a harder time and pressing her for details? Why do they go along with calling it a "plan"? "

I'm going with the obvious answer. Attractive, minority female Democrat.

"The other, which they call the “compassionate conservative” model, imposes a marginal tax rate on the highest earners of 18 percent. In other words: What makes these systems redistributive is not punitive tax rates on the rich, but broad-based taxes that are used to fund a universal basic income for everyone."

Looks good to me . Could people reconsider the use of "redistribution" and "punitive." The rich are still going to be very rich, and so punitive is not an apt description. I realize the use of pejoratives and gross exaggerations are sadly acceptable , but a bit of restraint would be highly appreciated. Also, if you're going to offer up an argument from authority, we really do need to know who is offering up the opinion. It's a fallacy and better off avoided, but an anonymous argument from authority is too much.

I would say "it would be funny to watch a UBI get implemented to watch it blow up in the faces of the people who swear it's a good idea," but I already had that happen with people who thought it was good news when Trump won the nomination.

The sad thing is that a EITC style wage per hour wage boost would probably work fine with the appropriate safeguards, since it avoids the obvious pit falls of the UBI. But the UBI enthusiasts seem to share both an aversion to an EITC benefit and actually making a UBI 'universal'.

IE They don't like a work requirement nor the idea that everyone should benefit.

My Basic Income Idea would be Means Tested. It would be guaranteed only in the sense that it would provide a basic income to anyone that actually needs it. I'm not in favor of giving everyone money regardless of need, but it might be better than our current motley system. For me, that's an empirical question, and so I need to see it experimented with in order to take a view. Hence my support for trying it somewhere.

"My Basic Income Idea would be Means Tested. It would be guaranteed only in the sense that it would provide a basic income to anyone that actually needs it."

How is that different than standard welfare?

Standard welfare is mostly in kind (food card, rent subsidizes, Medicaid) and very complicated, with very little in cash. It is hard to get on and hard to get off.

Thank you, Larry. I agree.

What blows my mind is how the left, progressives, whatever you want to call them, do not want to impose a flat tax on the mega wealthy. Take away all of the loopholes, no deductions, credits, depreciation, creating nine layers of shell
Companies, diverting labor to capital income, all of the bs. Just have a flat out 25 percent tax on all capital or labor income over 10 million. You would save so much money in terms of enforcement, dead weight loss and revenue loss with evasion.
.

Improving education, limiting occupational licensure, and deregulating building in America’s most productive cities would be on the list, among other ideas

How much an effect do you think these three factors will improve the lives of the poor? People who are poor today, as a group, do not like education. Reducing occupational licensing is a clear win but I'm not sure how big. Building more buildings is probably the best but, still, how far will it take you?

"Building more buildings is probably the best but, still, how far will it take you?"

https://www.nber.org/papers/w21154

"We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by more than 50% from 1964 to 2009."

That is very dramatic; while I'm sympathetic to the general drift, the magnitude seems way too high and smacks of the notorious one-variable explanation. Following the principle of "always invert," why are high-productivity cities so scarce? Why isn't Cleveland a high-productivity city? It used to be one. If high-productivity cities were more evenly distributed, as they once were, productivity growth rates might be higher because you could move to one without having a six-figure job already lined up.

No way we want to go back to the era of %90 commies like Ike.

Let me guess, Noah gets owned again.

What has not been established is that the way to optimize overall well-being is to optimize government revenue. Also: anyone considering a 70% federal tax rate written such that it would vastly increase federal revenue should imagine what Trump or another like him would do with the money. This is likely what Coulter is imagining, and it terrifies me.

Lotta walls. Walls keeping the good people safe from the bad people.

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