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Ocasio-Cortez sparks debate with talk of 70 percent marginal rate

The Hill logo The Hill 1/12/2019 Naomi Jagoda and Juliegrace Brufke

a group of people looking at the camera: Ocasio-Cortez sparks debate with talk of 70 percent marginal rate © The Hill Ocasio-Cortez sparks debate with talk of 70 percent marginal rate House Democrats are treading carefully when it comes to talk of a 70 percent marginal tax rate on income above $10 million, an idea floated by freshman Rep. Alexandria Ocasio-Cortez (D-N.Y.) in a recent "60 Minutes" interview.

Many Democrats are supportive of the freshman phenom's call for higher taxes on the rich, but even some progressives are stopping short of endorsing that high a marginal rate.

Rep. Pramila Jayapal (D-Wash.), a co-chairwoman of the Congressional Progressive Caucus, said she thinks "the fact that people are not paying their fair share is a problem and the millionaires and billionaires are the ones where that has to rest."

Rep. Raúl Grijalva (D-Ariz.), a leader of the progressive caucus in the last Congress, said that while it's important to make sure that "everybody's carrying their load," he didn't know if 70 percent "would be the right number or not."

House Budget Committee Chairman John Yarmuth (D-Ky.) said he wasn't sure about a specific top rate but said that Ocasio-Cortez is "not off-base."

Other Democratic lawmakers were more critical.

"I thought it was comical," said Rep. Bill Pascrell (D-N.J.), a member of the tax-writing Ways and Means panel.

"You can have reasonable taxation, and then you can send signals that we're just going to go after people who have a few dollars," he said.

Rep. Ro Khanna (D-Calif.), who is first vice chairman of the Congressional Progressive Caucus, said he would take a different approach to raising revenue, such as repealing past tax cuts on high earners, taxing corporations on foreign earnings that currently aren't being taxed, creating a financial transactions tax and reducing U.S. military involvement overseas.

"My view is one that there are better ways of getting to the revenue" than a 70-percent tax on high incomes, he said.

Ocasio-Cortez floated the idea as a way to help pay for a "Green New Deal," a proposal aimed at taking action on climate change.

More broadly, the new lawmaker has argued that a progressive tax system with higher taxes on the wealthy is well worth considering as the country looks for ways to pay for initiatives on health care and other safety-net issues.

She also made the argument that such high rates are hardly unprecedented.

"You look at our tax rates back in the '60s and when you have a progressive tax rate system your tax rate, you know, let's say, from zero to $75,000 maybe 10 percent or 15 percent, et cetera. But once you get to, like, the tippy-tops - on your 10 millionth dollar - sometimes you see tax rates as high as 60 or 70 percent," Ocasio-Cortez said.

She noted that a high marginal rate wouldn't hit most Americans, and that it would also only pinch a portion of a wealthy person's income. A 70 percent marginal rate on income of $10 million would be effective only on a person's income above $10 million.

"That doesn't mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder you should be contributing more," she said in the "60 Minutes" interview.

Ocasio-Cortez spokesman Corbin Trent told The Hill that the congresswoman's remarks on the show were "more conceptual" than a specific proposal for a 70 percent marginal rate.

The top marginal tax rate in the United States was above 90 percent in much of the 1950s and early 1960s, and the rate was 70 percent as recently as 1980.That year, the 70-percent rate applied to income over $215,400 for married couples.

During Ronald Reagan's presidency, the top rate was first cut to 50 percent and then lowered again to 28 percent.

In the last 25 years, the top rate has been in the mid-to-high 30s, with President Trump's tax law lowering the top rate from 39.6 percent to 37 percent. In 2019, the 37-percent rate applies to income over $612,350 for a married couple filing jointly.

Ocasio-Cortez's call for a 70 percent marginal tax rate does have the support of another freshman progressive lawmaker: Rep. Ayanna Pressley (D-Mass.), who said she could potentially see herself introducing or sponsoring legislation down the line.

"I think we have a decisive mandate from this electorate, this 116th Congressional class to be bold. I think every creative solution needs to be on the table," Pressley told The Hill. "And from a values based perspective to tax those, you know, who earn $10 million a year, I think it's exactly what we should be doing."

Pressley said while she and most members are currently focused on the partial government shutdown, she looks forward to continuing having a dialogue with like-minded members as they consider crafting policy.

Freshman Rep. Ilhan Omar (D-Minn.), when asked about a top rate, noted that there had been a rate of 90 percent in the past and thinks that lawmakers should be "as bold as we can so that we can implement the courageous policies that are going to usher in prosperity for all Americans."

Rep. Jan Schakowsky (D-Ill.), who offered a bill in 2017 that would have created a 49 percent rate for income over $1 billion, said that she hasn't proposed rates as high as 70 percent in the past but "would not reject that out of hand."

Some Ways and Means Committee Democrats said that the focus should be on holding hearings looking at the tax code following the enactment of Trump's tax law, rather than pursuing Ocasio-Cortez's idea.

"I think what makes sense is for the committee to step back and start holding hearings on what's out there right now, seeing what the impact is, whether that meets our needs and obligations as a country, and maybe not just pursue policy because a newly minted freshman thinks it's a good idea, who isn't on the committee," said Rep. Ron Kind (D-Wis.), who is also a member of the moderate New Democrat Coalition.

Rep. Lloyd Doggett (D-Texas), a Ways and Means member who belongs to the progressive caucus, also said that lawmakers should focus on reviewing Trump's tax law.

"I think we're better focused on that than a rate that many people will view as a little over the top," Doggett added.

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