Starting with the basic fiscal implications, the best and most recent research suggests that rates around 70 percent for top earners will raise the most revenue. At 37% currently, we are leaving a lot of $$ on the table. Diamond and Saez on this: https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.25.4.165 …
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Trickle-downers will argue that higher taxes on the rich won't raise money because the rich will reduce their work in response, but the evidence is really clear that's not true at all at current rates. Basically, the "laffer curve" doesn't really kick in until past 70.
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On to the broader economic implications beyond budgetary ones. For the last 40 years, we have been cutting taxes on rich people and expecting those windfalls to eventually trickle down to everyone else. Hasn't happened, won't happen.
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Instead, we have incentivized the super-rich to grab a larger and larger share of the gains from overall growth. In groundbreaking research,
@S_Stantcheva and co-authors show how top rate reductions lead to higher PRE-tax shares of income going to the rich.Show this thread -
So it's not just that higher top rates raise us more money which we can use better, but they actually make the PRE-tax distribution better. In other words, raising top tax rates will mean more money in more pockets, even before we account for the revenue effects.
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Finally, let's talk about the economic impact of using the revenue from a much higher top tax rate to finance something like a Green New Deal. The basic question we should ask: Will the investment financed by the higher tax rates generate more good than the lower rate would?
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The answer here is self-evidently yes. Lower tax rates on the super-rich, as discussed above, are bad for the economy, so the higher taxes themselves are already better for the economy.
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But when you factor in that the revenue will be used to both combat climate change (which will have enormous, painful consequences if left unaddressed) and create new jobs and higher wages now, then it's a very clear slam dunk.
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Last note: There will be many on the right & in the media who will mock
@AOC for calling for tax rates at 60 or 70, but they're the ones who are economically illiterate. They're basing their view on an outdated and ideological understanding of taxation, not on the best research.Show this thread
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*Economically* solid ground. Politically it may be difficult, of course. (I like this policy, just see it being too difficult to get it passed, no matter how much sense it makes.)
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Don't be so sure. A large majority of Americans think the rich don't pay enough in taxes, and support significantly higher taxes on millionaires, billionaires and wealthy corporations.
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The pitch is to get people to add up what they’re paying in taxes plus healthcare premiums/out of pocket, plus student loans/tuition, plus savings if there was useful transit and compare that to what they’d pay under a new system that provided all those things
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Sir, the government has no need for the income of the wealthy - the government issues the currency and can fund any project so long as the workers, raw material, and equipment are available. There are good reasons to raise the top tax rate, but funding the government is not one.
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I understand and appreciate that point of view. It's why I didn't limit my discussion to the fiscal impacts. That being said, even if one agrees with your viewpoint, for the moment there is a political economy problem that raising revenue helps to solve.
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Hello ML, if you understand the reality of how the government operates, then why have you posted tweets that state that the government uses tax receipts to fund programs? This is a false statement, sir.
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What I said was I that I understand and appreciate your point of view. That doesn't mean I subscribe fully to it.
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Fair enough. I would start with answering the question "where had the dollars come from that I use to pay my taxes?"
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You overlook the fact the vast majority of the population believes the federal government's budget runs like their own, or like a business. Ergo, the public perception is taxes are required to pay for programs, and any current discussion has to be based on that premise.
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You may be right that many people hold a mistaken belief - which is all the more reason to correct and challenge those who have the opportunity to shape and form those decisions. Just because folks once thought that the Sun revolved around the Earth doesn't mean we argue that way
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thanks for digging that oldie up. Drew that a decade ago
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Damn, Reagan was nuts
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Dangerously so. We're still paying the price of his 'leadership' ~4 decades later :(
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You have no idea what you're talking about. Yeah, we were denied another four years of the fine leadership of Jimmy Carter.
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Thanks for letting me know how you really feel.
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