Truth to be told, there is probably no more sexy and enticing a subject to write about, and there is truly no three word phrase more exciting type than, “marginal tax rates.”
Okay, so maybe that’s not entirely true, and most people will spend most of their lives not really involved with what marginal tax rates are and how they work, but if freshman Congresswoman Alexandria Ocasio-Cortez and the growing number of politicians and pundits embracing her economic policy proposals have their way, a lot more people are going to understand this fairly simply concept soon.
In a nutshell, when AOC proposes a 70% marginal tax rate on income made over $10 million, she’s saying that dollar number 10,000,001 will be taxed at 70%, not the entire amount. This extremely simple explanation should be all that’s needed, but there is an entire cottage industry of conservative economists and talking heads that do their best to muddy the waters and insist that a 70% marginal rate would be a 70% universal, flat rate on anyone who makes $10 million or more a year.
Last week, in Davos, Switzerland — you know, the country were Nazi gold gets hidden? — the richest of the rich came together for their annual conference. The week is filled with symposiums and forums on economic issues, and it’s no surprise that Cortez’ 70% marginal rate proposal was talked about quite a lot. It’s almost like the mega-crazy wealthy are getting a little nervous.
One moment from the Davos conference perfectly encapsulates the fight to educate the masses on how marginal taxation works. You would think that a billionaire like Michael Dell, the guy who founded Dell Computers, would understand a simple concept like marginal tax rates, but when asked about AOC’s proposal, Dell scoffed.
“Name a country where that’s worked, ever.” (WokeSloth)
On the panel was Erik Brynjolfsson, an MIT professor of economics who wasted absolutely no time answering Dell’s sarcastic, rhetorical question.
“The United States.”
The panel’s host tried to downplay Dr. Brynjolfsson’s answer, saying that rates were that high for a very short amount of time in the 1980’s, and Dr. Brynjolfsson not having any of that.
“No, no, no. From about the 1930s through about the 1960s, the [top] tax rate averaged about 70 percent. At times, it was as high as 95 percent, and those were actually pretty good years for growth.”
A little later in his history lesson, Brynjolfsson says that while he can’t specifically endorse or criticize Cortez’s specific plan, there’s “a lot of economics that suggest it’s not necessarily going to harm growth.” Considering that for some economic growth is the most important human pursuit, for a highly-educated economist to say he doesn’t see a large impact on growth from a 70% marginal rate is big news
People like Dell have a vested interest in keeping people ignorant when it comes to how marginal rates work. If someone making $40,000 annually thinks they’re going have to pay $28,000 in taxes, they’re going to sympathize with the guy making $10 million because of that rife misconception about progressive taxation.
Will taxing people like Dell at a substantially higher marginal rate fix all our economic woes? Of course it won’t. But as Dr. Brynjolfsson so easily pointed out, even a passing knowledge of how marginal tax rates function, coupled with an elementary knowledge of American economic history, should make just about everyone not making ten million bucks a year a lot less hesitant to tax the rich higher.
Watch the entire exchange between Dell and Brynjolfsson, below, courtesy NowThis Politics.
— NowThis (@nowthisnews) January 26, 2019
Writer/comedian James Schlarmann is the founder of The Political Garbage Chute and his work has been featured on The Huffington Post. You can follow James on Facebook and Instagram, but not Twitter because he has a potty mouth.