A moral problem of punishing the rich

New Rep. Alexandra Ocasio-Cortez has started demanding that the top tax rate for rich people be switched back to the pre-Reagan 70%. Leah McElrath notes that AOC has by herself changed the discussion and spooked the rich and their defenders. McElrath and others talk about the Overton Window, a concept that says some ideas on the extreme right and left are too far out there and won’t be discussed. Shifting the Overton Window means a shift in what is permissible to discuss – extreme ideas aren’t so extreme anymore.

Of course, as McElrath reports, GOP Congresscritters are already misleading the public – the government will take more of your money!!! Well, no. This only affects people who earn more than $10 million in one year.

Patrick Iber notes that the 70% tax rate was in effect “through some of the best years of growth for the US economy in the postwar era.”

I’ve heard it explained elsewhere (I’m dredging it up from memory, so no link) that a high tax rate means corporate executives have a low incentive to skim the profits of the company for themselves and their stockholder cronies. Instead, they invest the money in their companies and in their workers. Everyone benefits, not just those at the top.

Of course there is pushback with the worn out phrase, “a moral problem of punishing the high income earners.”

Twitter user toast magnate handles that one:

How is still being extremely rich after paying higher taxes “punishment”? Take a look at these two graphs & tell me who suffers more when the rich don’t contribute back to society vs when they pay taxes. Trickle down doesn’t work. Hoarding wealth is bad for society.

I’ll let you click on the link above to look at the graphs.

More pushback: this forces a man to pay more than his fare share. They don’t have access to the dollars they earned. Good friend toast again:

Severe income inequality is detrimental to the economy and to society. Even conservative economists understand this. Allowing the extremely rich to hoard at the expense of society in general will ultimately harm the extremely rich, as well.

Another defender of the idea noted that the Reagan tax cuts in 1981 “also tracks closely with the rise of the current Republican Party and the start of the wealth inequality insanity leading up to now.”

Dianna Anderson, in a Twitter thread, notes the rich are freaking out, so let’s do the math.

In America we have a tax system based on a bracket. Only money above the bracket limit is taxed at a higher value. The rich won’t have to give up 70% of their income. The GOP is depending on you to misunderstand that 70% is not a flat rate.

Anderson uses Dwayne “The Rock” Johnson as an example. He earned $65 million last year. Let’s assume that 70% applies to income above $10 million. That means $55 million taxed at 70% leaves $16.5 million. $10 million taxed at much lower rates leaves maybe $5 million. Anderson rounds it to $20 million in income for the year.

Johnson bought a Florida house for $3.4 million in 2012. He has, perhaps, $104K in annual property taxes. Says Anderson:

He could buy that same home over and over every two months for a year and still have money left over to put a weight room in each property. That’s with the money he has LEFTOVER after a 70% tax rate.

Put it another way:

The Rock would pay almost enough in taxes in a single year to completely solve Flint’s water crisis.

He could fund the Smithsonian’s annual facilities maintenance budget for 7.5 years.

And that’s the Rock. He’s the second highest paid actor in the country (or was, in 2017). Imagine what would happen if we were able to tax ALLLLLLL billionaires, and people above 10mil/yearly at that rate.

We could fund hospitals. We could fund libraries. We could fix broken infrastructure. We could implement so many programs to ensure children don’t go hungry. And yet, somehow, we don’t, because it’s important that The Rock be able to buy his own house 7x over annually. Somehow.

Of course, there is pushback – we might need to get people off the dole. Mike Evans has that one:

Corporations make additional revenue by not paying their workers a living wage (i.e. a wage where basic needs can be afforded) & forcing the rest of us to supplement the working poor's income using welfare. That's socialism benefitting corps instead of citizens.

Minimum wage workers didn’t used to need welfare. But minimum wage hasn’t kept up with inflation.

Dina Finato adds:

What if we just... didn't let rich people get that rich? I'm not saying the Rock doesn't work hard, but what about Bob at the factory? Why should Bob's CEO Pete make 20000x more than Bob does? Does Pete work 20000x harder than Bob? Without the 100s of Bobs on the factory floor Pete wouldn't make any money at all. It seems like labor should be valued. People doing their jobs should be paid. CEOs should not be allowed to exploit their labor. Bob shouldn't have to live in a rundown shack when Pete lives in a mansion. Bob deserves a nice house.

More pushback – Bob should get an education and a better job. Finato again:

That is the myth, of course, that Bob doesn't deserve living wages. You're assuming that everyone can go to college. You're assuming everyone can be a CEO if they just work harder. You can't have CEOs without workers. We need janitors and clerks and maintenance workers etc.

Again, the claim of punishing the successful. Daniel Hazard this time:

Not letting a ceo earn several thousand times what a factory worker makes is not “punishing” them. Who would ever think that??? Crazy CEO rates are a recent phenomenon. They did just fine in the past w/o earning $100 mil a year for downsizing companies.

From my perspective all this talk making sure we don’t “punish” the rich means we do “punish” the poor. Giving the rich high salaries and letting them keep it is a way of taking the money away from the poor.