Like many of you I’ve been fired up by Rep. Alexandria Ocasio-Cortez’s proposal to increase the marginal tax rate to 70% to fund a Green New Deal. I’m glad to see that her proposal is generating so much attention, since it’s not often that tax policy makes it into mainstream conversation, much less an explicit proposal to tax the rich more to fund public infrastructure for all of us.
So what’s Resource Generation’s take on all of this? I’m glad you asked.
1. First of all, check out this handy illustrated cartoon on how marginal tax rates work — I gotta admit, I was confused too until I saw this.
2. 70 percent isn’t even the highest the marginal tax rate has ever been. Before Reagan and the rise of conservative power and neoliberalism (a political and economic ideology that backs deregulation and privatization, attacks public social programs and services, and increases criminalization and state repression), the rich were taxed much higher. For example, from the 1940s-60s the highest marginal tax rate was above 90%. Although there was still wealth inequality in this time period, the gap between the rich and the poor was much smaller and has exponentially increased as there have been massive tax cuts on the rich, with the top marginal tax rate at 37% in 2019. Here’s another great graphic on how tax rates have changed over time.
3. Trump’s tax scam bill made regressive taxation even worse. It cut the corporate tax rate from 35% to 21%, doubled the threshold for the estate tax (making it possible to pass along 11.2M in assets tax free), and made many more changes that gave tax cuts to the wealthy. The bill was called “the biggest tax scam in history” because “the only big winners [are] the wealthy — especially those who mainly collect income from their assets rather than working for a living — plus tax lawyers and accountants who would have a field day exploiting the many loopholes the legislation creates.” Check out our webinar to learn more about the bill and how young people with wealth can take action.
70 percent isn’t even the highest the marginal tax rate has ever been!
4. The marginal tax rate is on income, not on wealth or net assets, so it doesn’t make a dent on concentrated wealth inequality. According to this article, since so much of wealth is accumulated through income-generating assets (real estate, stocks, bonds), “increases to income tax rates, while important to curb income inequality, are mostly irrelevant at capturing capital income, or breaking up concentrated wealth.” That’s why we’re excited by Sen. Elizabeth Warren’s proposed wealth tax which would impose a 2 percent annual tax on household net wealth on all dollars above $50 million. This would raise $2.75 trillion over ten years, a number that is around 1 percent of national gross domestic product. Imagine the public resources we could generate if the wealth tax started at $1M instead of $50M.
5. But the U.S. government is horrible, so why should I fight to pay more taxes?: Check out this blog post on “You Can’t Starve the Beast: Why we fight for higher taxes on the rich even though the US government sucks” and I’ll share one of my favorite quotes: “Taxes are the only way we have right now to enact wealth redistribution to scale, and to do it in a way that is not just based on the whims, good intentions, or guilt of rich people. We need to fight for mandatory wealth redistribution through taxes, and redistribute power so rich people aren’t the only ones deciding where money goes. Taxation is a critical systemic way to end the creation of more billionaires.
6. Like Rutger Bregman says, if rich people really care about “solving” inequality, then we should “stop talking about philanthropy and start talking about taxes, taxes, taxes.” Notice the way in which this statement strikes fear in the heart of the wealthy elites in the audience. As Anand Giridharadas writes in his book Winners Take All: The Elite Charade of Changing the World, mainstream philanthropy, which is inherently undemocratic, individualistic, and voluntary, can very easily become a “substitute for and a means of avoiding the necessity of a more just and equitable system and a fairer distribution of power.” Engaging with taxes means engaging with core questions about the distribution of resources and power, and implicates wealthy people in designing a system that so unfairly and amorally benefits us at the expense of everyone else. Tax policy should strike fear in the hearts of wealthy people, and AOC’s proposal causing a billionaire freakout means she’s onto something.
7. While we’re at it, let’s have a 100% estate tax and abolish inheritance.
Resource Generation (RG) is the only organization in the U.S. organizing young people with access to wealth toward the equitable distribution of wealth, land, and power.
As a result of becoming a member of Resource Generation, our members end up giving away 16-times more money to economic and racial justice organizations than they did before. Learn more and support our work by becoming a member here. If you need help figuring out your class background, check out our definition of wealth and/or fill out this intake form to have one our national organizers get in touch with you.