When asked how she intended to fund her Green New Deal, she noted that tax wouldn’t be such a crazy idea; the top marginal tax rate for much of America’s history had been around the 60-70% mark and perhaps the “tippy-top” earners on “$10,000,000 or more” ought to pay that much again. Income inequality in the US now exceeds what it was in the 1920s; only the top 1% have seen any real wage growth in the last 30 years, and it’s among the 0.1% that the increase is most pronounced. If you are in that micro-percentile, you can expect to earn 198 times what someone in the bottom 10% earns.
Not to be outdone, Elizabeth Warren, the presidential candidate and Democratic senator from Massachusetts, proposed a wealth tax on “ultra-millionaires” – 2% on accumulated wealth greater than $50,000,000, and 3% on wealth greater than $1,000,000,000. (I find writing out the actual numbers much more expressive than the near-euphemistic “million” and “billion”; more comparable to what each of us see when we check our online bank accounts). [...]
Ever since, the trend has been for top rate of income tax to fall – and for inequality to widen. When Margaret Thatcher came to power, she dropped the top rate from 83% to 60%. It fell further to 40% under Labour, went back up to 50% after the crash, before George Osborne cut it back from 50% to 45% (with no concomitant easing of his austerity agenda). Osborne later boasted that the measure had recouped £8 billion – apparently because so many top-earners had decided to keep their money in the country. Closer analysis suggest this was more likely the result of clever accounting on the part of the rich (deferring payment from one year to the next) and the actual effect was minimal.[...]
But it’s also true that setting your tax rate low can be utterly disastrous. The infamous Kansas Experiment saw Republican governor Sam Brownback eliminate state income tax and slash taxes for the highest earners in an attempt to boost investment. It resulted in a complete collapse in state revenues, school closures, prison riots, and subsequent shamefaced capitulation. It turns out that sometimes, asking people for less money means that you receive less money.
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