70%---A Fair Share

Alexandria Ocasio-Cortez kicked off her first week in Congress with an appearance on 60 Minutes calling for the imposition of a 70% income tax rate on the super rich.

She said that tax rates must become much more progressive in order to pay for her "Green New Deal" ideas to fight climate change.

I particularly liked the look on Anderson Cooper's face as he listened to this. It seemed to me as if he was quickly adding up in his head how much these far-left ideas were going to cost him.

There actually seems to be a bit of fear in Anderson's eyes as he listens to AOC explain how she thinks he should pay more.

After all, it is great to talk about these things in the abstract. However, at the end of the day, someone actually has to open up their wallets and pay.

We already saw this with the Trump tax bill last year. Big, liberal states like California, New York and Illinois are filled with people who vote Democrat. From their votes you have to believe that they think they should be paying more in taxes.

However, as soon as they lost their unlimited deduction for state and local income taxes all they talked about was how "unfair" it was.

Ocasio-Cortez got a fair amount of people expressing shock at the 70% tax suggestion. However, liberals came to her defense and stated, "Don't worry, that rate would just be imposed on incomes over $10 million---the truly super, super rich. She is only talking about a marginal rate of 70% on a small group of the rich."

I'm sorry. Progressive taxation systems don't work like that.

They are, by definition, progressive. Each dollar of additional income is exposed to higher levels of taxation.

These are the current marginal tax rates.

If you were to enact a 70% top rate you would undoubtedly need a number of additional brackets leading up to 70%. A 40%, 45%, 50%, 55%, 60% and 65%.

Enacting a 70% marginal tax rate on income above $10 million but having a 37% tax rate at $9,999,999 would insure that most people would make sure that the did not earn $10 million. You can count on it. There would have to be additional brackets to make the rate progressive to that point. Otherwise, the 70% tax rate is a cliff tax, not a progressive tax.

The current brackets also might have to pushed downward.

Why?

There simply isn't enough tax revenue to be had at the higher levels of income to enable the socialists to spend want they want to.

In the latest IRS data available (2016), there were only 16,000 individuals who reported more than $10 million of income. Even if you doubled the effective tax rate on the income tax collected from these individuals it would only bring in $120 billion in additional revenues. That only represents 2.7% of current annual spending. It is about the same as an annual inflation adjustment on the federal budget.

The Washington Post is more conservative with their numbers than I am. They suggest a 70% marginal rate would raise $72 billion annually if just applied to income over $10 million.  That is about 1.6% of the budget.

As stated above, all of this also assumes that there would still be 16,000 taxpayers with $10 million in income. My prediction is that number would fall drastically with a 70% tax rate.

To get the kind of money Ocasio-Cortez and her fellow Socialist Democrats want you have to tax everybody much higher across the board.

As I saw Ocasio-Cortez make her argument for much higher income taxes I could not help but think back to the post I wrote last year on Tax Day on the zip codes that pay the most in income taxes.

We always hear that the Republicans are the party of "the rich."

I wanted to do some research on how those high earners voted in the last Presidential election to see if it was those "rich people" who put Donald Trump in The White House.

I am also curious to see how those rich people, in those high income zip codes, think about a young, high profile Democrat arguing they need to have their income tax rate doubled.

This is the list of the highest income zip codes in the United States.

This is the vote for Donald Trump in the ten richest zip codes according to the voting analysis interactive tool that The New York Times has online.

Miami Beach, FL (33109)     52%
Atherton, CA (94027)            23%
Palm Beach, FL (33480)       64%
Palo Alto, CA (94301)           10%
Harrison, NY (10577)             4%
Gladwynne, PA (19035)         37%
Los Angeles, CA (90067)      20%
Kenilworth, Il (60043)           38%
Weston, MA (02493)             28%
San Francisco, CA (94111)    12%

If you take a rough average from the 10 highest income zip codes, Trump only got 28% of the vote from those rich Republicans  Democrats.

Looking at these numbers, if I were Trump, I would call Ocasio-Cortez and tell her I was onboard with her idea to implement the 70% top rate. However, he should propose that only half the revenue raised would go to Green New Deal infrastructure spending. The other half would be allocated to the border wall and any excess funds would be used (in equal shares) to shore up the Social Security Trust Fund, the Medicare Trust funds and reduce college loan interest rates.

There would be a lot of excess funds to spread around. Trump is only asking for $5 billion for border wall funding in this budget. It is estimated that the entire wall would cost $25 billion. Using the Post's estimates, the 70% tax would raise three times that in one year!

It is called the "Art of the Deal".

Let's see any Democrat candidates for President put a better proposal than that together for attracting votes for 2020.

Would it fly?

Of course not. However, I enjoy thinking of scenarios where President Trump could drive the Democrats absolutely crazy.

After all, it is only fair.