Congresswoman Alexandria Ocasio Cortez (“AOC”) recently proposed raising the top marginal income tax rate to 70 percent to pay for her “Green New Deal.” This rate would apply to income over $10 million.
So how much would AOC’s new tax bracket raise? According to the Washington Post, at the most $72 billion a year.
To put that number in perspective, the federal budget for fiscal year 2018 (October 1, 2017 to September 30, 2018) was -as best as I can tell- $4.1 trillion. So AOC’s new tax bracket would raise an amount equivalent to just 1.8% of federal spending. To further put that in perspective, the budget deficit (difference between spending and taxes collected) for FY 2018 is approximately $800 billion. AOC’s new tax bracket would barely put a nick in that.
To further put things in perspective, AOC and her comrades have a spending wish list that would double federal spending. The $42 trillion is over ten years, so the average annual new spending is $4.2 trillion, which would double the FY 2018 budget:
The Washington Post’s estimate of $72 billion a year assumes that taxpayers will not change their behavior, which is a ludicrous assumption. There is no reason to generate an additional dollar of income if government is going to take 70 cents of it, so people will work less. And to the extent that the Post’s estimate includes so-called “passive income” -interest and dividends- people will adjust their portfolios to avoid paying the higher tax rate.
So the tax receipts generated by AOC’s proposal would be far less than $72 billion a year, which as shown above is just drop in the bucket compared to the current deficit and federal spending, never mind all the new socialism AOC and her ilk are promising.
In order to pay for all of this socialism, AOC and company will have to massively raise taxes on EVERYONE. From the Daily Beast:
… In reality, spending like Europe requires taxing like Europe. This means, in addition to federal and state income taxes, a value-added tax (VAT)—essentially a national sales tax—that affects all families. CBO data estimates that raising 15 percent of GDP would require imposing an 86 percent VAT rate, or hiking the payroll tax from 15.3 percent to 56.5 percent. No wonder many spenders prefer the “just tax the rich” fairy tale. … [I]t it is an illusion that American can finance socialism—or even balance the budget—mainly on the backs of the rich. …
The real reason the Left wants to raise taxes on “the rich,” is to provide themselves political cover to raise taxes on everyone else. For example, they can raise taxes on the middle class -let’s say a new 50 percent tax bracket- and sell it with some variation of: a middle class family is still paying far, far less in taxes than the rich.
The bottom line is that when the Left says it is going to raise taxes on “the rich,” they are simply setting the stage to raise everyone’s taxes.