The Corner

Economy & Business

The Middle Class, Not ‘the Rich,’ Is Where the Money Lies

Representative Alexandria Ocasio-Cortez (D, N.Y.) waits for a ceremonial swearing-in picture on Capitol Hill in Washington, D.C., January 3, 2019. (Joshua Roberts/Reuters)

Alexandria Ocasio-Cortez, who is enjoying something of a honeymoon at the moment, wants to introduce a new 70 percent tax bracket that would catch only “the rich” in its clutches. Her proposal is somewhat vague, but in some interviews she has mentioned “ten million dollars” as the starting point. Were she to get her way, this would mean that anyone earning up to ten million dollars per year would see his tax liability remain the same, while anyone earning ten-million-and-X dollars would see the $X portion taxed at 70 percent.

It is easy to see why this idea might be popular in a democracy: Almost nobody earns ten million dollars per year, which makes this one of those perfect “do this to them, not me!” policies that incur no obvious costs to the majority and that might ostensibly bring it some benefits. But it is much less easy to see why the proposal is being entertained seriously, or to grasp why its defenders are rushing to insist that it’s not in any sense “extreme.” There is a reason that other nations in the Anglosphere do not have anything close to such a tax — even as they spend in a way that would appeal to Ocasio-Cortez — and that is that such taxes do not really do much good. Most people who make tens of millions of dollars rarely derive the lion’s share of their money from traditional income — and, should such a bracket be added to the books, the few who do would quickly restructure. The top tax rates in comparable Anglosphere countries such as Britain, Canada, Australia, and New Zealand are 45 percent, 33 percent (federal), 45 percent, and 33 percent respectively. There is no 70 percent rate in any of those countries — on millionaires, on billionaires, or otherwise. Hell, there is no 50 percent rate, either.

This is not to say that there is no difference between the way that those nations operate and the United States operates. On the contrary: Unlike the United States, those nations do have much higher taxes — on their middle classes.

Why? Well, because that’s where the money is. The U.K.’s 40 percent tax rate kicks in at just $59,178 (I’ve adjusted for U.S. dollars, here and below), and its 45 percent rate starts at just $191,521. In addition, Britain has a 20 percent value-added tax that makes pretty much everything annoyingly expensive. Australia charges 32.5 percent at $26,377, 37 percent at $64,162, and 45 percent at $128,324. New Zealand’s top rate of 33 percent is levied on earnings above $47,319, while Canada charges 26 percent after $69,794, and 33 percent after $154,153 (this is on top of considerable provincial income taxes).

Those who oppose this arrangement are told in response that Brits, Canadians, Australians, and New Zealanders get nice things in exchange for their money, and that Americans could too if they weren’t so myopic. In principle, this is a fair argument, though I disagree with it strongly. But it is also an argument that never seems to be made in earnest to the public. If the Democratic party wants the United States to be more like its Anglosphere cousins, it needs to stop talking stupidly about “the rich,” and begin making the case for the considerably higher middle-class taxes that will be needed to pay for the considerably higher social spending it covets. Thus far, Democrats have done no such thing. Instead, Democratic aspirants point excitedly at the health-care systems and family-leave policies of Britain or Canada, while promising not to raise taxes on anyone making $250,000 or less per year. This is an impossible, unsustainable combination.

When Alexandria Ocasio-Cortez won her seat, I was told by a number of smart progressives that she would be useful precisely because she was not in hock to the tired “neoliberal” consensus to which the Democratic party’s older guard allegedly continues to cling. Well, she has time, I suppose, but I can’t say I’m impressed yet. By insisting that we can pay for sweeping changes by tapping solely into the magic pool of money that rich people supposedly control, Ocasio-Cortez sounds like every other Democrat of the last three decades. Naturally, it is tough to tell people that they’ll have to hand over more of their money if they want what you’re telling them they should have. In fact, it’s probably politically suicidal. But if the Democrats want what they want, they’re eventually going to have to come clean. It is not a good sign that even the “rebels” can’t bring themselves to try.

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