Hey everyone!
So there’s been a lot of hype in the media around Alexandria Ocasio-Cortez’s proposed
70% marginal tax rate.
And I’m really glad that’s happening because I want to see mainstream discussions going
on around the topic of taxing the super wealthy, but I’m also seeing a ton of misunderstandings
about how tax rates work.
And from some Republicans, even just flat out lying.
I know taxes seem daunting and confusing, but I promise you that in this case, they’re
easier to understand than you might think.
Republicans just want you to be confused about it so that you don’t understand how badly
rich people are ripping you off.
So first of, a 70% marginal tax rate means that only your income above a certain level is taxed.
There are currently 7 tax brackets, but to keep things simple, let’s say there are two.
So the first tax bracket is for anyone making anywhere between $0 and $999,999.
So if you make less than a million dollars a year, you’re in this tax bracket.
Let’s say that tax bracket is 0%.
So you pay no taxes.
Then, the second tax bracket is for anyone making $1,000,000 a year or more.
For that tax bracket, let’s say it’s taxed at 90%.
So if you make $1,000,010 dollars in a year, your first million is tax free, and then everything
after that, so $10, is taxed at 90%, so you get $1.
At the end of the year, you’ve still got $1,000,001 dollars in your pocket, which is
still super wealthy, despite a 90% marginal tax rate.
Now let’s say you make $2,000,000 in a year.
That first million is taxed at 0% and the second million is taxed at 90%.
10% of that second million is $100,000, so at the end of the year, you have $1,100,000.
Again, still a ton of money despite the 90% marginal tax rate.
What I think a lot of people are afraid of when they hear “70% marginal tax rate”
is that they think it takes away 70% of your entire income, but that’s not true.
It only takes away income above a certain level.
So if you’re taxing the super rich, they’re still going to be super rich afterwards.
It’s not going to take away 70% of their entire income.
But Republicans are really trying to make it seem like that.
A former Republican Governor, Scott Walker, said this on Twitter: “Explaining tax rates
before Reagan to 5th graders: “Imagine if you did chores for your grandma and she gave
you $10.
When you got home, your parents took $7 from you.”
The students said: “That’s not fair!”
Even 5th graders get it.”
God, I know this is like the least serious part of this but he actually put two spaces
after the period in his tweet like he was writing on a fucking typewriter.
It’s 2019 dude you only need one space after a period.
But anyway, Alexandria Ocasio-Cortez was then quick to point out that actually, the situation
would be more like, you get $10, you keep the $10 because it’s only $10, and the local
billionaire gets taxed more to help your community.
But the fact that Scott Walker even tweeted that, and then hasn’t apologized for explaining
it wrongly, shows how much the Republican party is willing to lie to people to get their way.
Because I would assume as a former politician, he knows how marginal tax rates work.
He has to, and yet he’s saying this stuff anyway.
Republicans always talk about taxes like this because they want to scare people who aren’t
rich, even though the high top tax rate would only affect the super super wealthy.
Ocasio-Cortez’s proposed 70% marginal tax rate is only for people making over $10 million a year.
If you make under $10 million a year, it literally will not affect you.
And most people don’t make over $10 million a year, especially 5th graders.
But if you’re honest with people about the policy, it doesn’t sound as scary.
And Republicans rely on fear to push their agenda.
They want you to be afraid of an evil government taking all your money and squandering it.
But the fact is, that money doesn’t just sit in the government.
Taxes are used to help people through public services and initiatives.
That money is redistributed to people who need it.
Because if you make $10 million a year, $30,000 isn’t a lot of money to you.
It would not affect your quality of life at all to give up that much money.
But to someone only making $30,000 a year, it would double their income and be life-changing.
Income inequality is a massive problem in the US.
The super wealthy are becoming wealthier and the rest of us are worse off because of it.
When the super rich hoard their money, it doesn’t help their quality of life at all,
but it does put a huge dent in the quality of life for the rest of us.
And the money from a high top tax rate could go to any number of other things.
Ocasio-Cortez wants to fund a Green New Deal to fight climate change, which would beneficial
for literally everyone because we all have to deal with the consequences of climate change.
That money could also be used to help fund universal healthcare and save the lives of
people who currently can’t afford to go to a doctor.
We need to put the rights and wellbeing of the vast majority of people, ahead of the
excess luxuries of the wealthy.
Taxing the super wealthy could help so many people, could save the lives of so many people,
and it would only slightly inconvenience the super wealthy.
Like, oh no, they might have to make due with only like $15 million instead of $30 million,
how will they ever survive?
But the taxes they pay could do so much good for tons and tons of people.
And this isn’t some lofty unattainable leftist goal.
The top marginal tax rate in the US used to be much higher.
It was during the Reagan years in the 80s that those tax rates were slashed.
You may heard that referred to as “trickle-down” economics, the idea being that if you give
rich people more money, that money will eventually trickle down to the not-rich people.
But, uh, it turns out, it doesn't.
Rich people just hoard their wealth, and then we suffer.
It didn’t work in the 80s, and it’s not working now.
And for the last 10 or 20 years, not much has changed for the highest marginal tax rate.
It’s currently at 37% and we have horrible income inequality.
The highest marginal tax rate was 94% in 1944.
Actually, I found a really great graph, let me show you.
So here you can see the green line is the highest marginal tax rate, and it corresponds
to the percentage on the left.
You can see that nowadays it’s much lower than it used to be.
That purple bit indicates what the highest tax bracket was, and it corresponds to the
dollar amount on the right.
So for example, in 1944 the top tax rate was 94% for any income above like $4 million ish dollars.
At the time it was $200,000 but inflation has happened, so this chart shows everything
adjusted for inflation in 2016 dollars.
You’ll notice that the highest tax bracket also used to be way bigger.
In the 30’s, there was a 79% tax on all income above about $85 million.
But since 1942, that highest tax bracket has been much lower.
Today, the highest tax bracket is $500,000.
So income from $500,000 to $2 million is taxed at the same rate as income from $10 million
to $20 million.
What Ocasio-Cortez is proposing is creating a new tax bracket for people making over $10 million dollars.
That would make the purple part of the graph come back up to a level not seen since like
1941, and it would mean that anyone making under $10 million would be unaffected.
And a 70% marginal tax rate for that bracket would move the green line up to where it was
in the 70s.
So we’d have the high tax rate of the 70’s, but only applied to people making over $10
million instead of people making over $1 million ish dollars like it was in the 70’s.
Oh and if you’ll notice that blue line, that’s the lowest bracket.
So currently, in the US, if you make under about $9,700, you still pay a 10% tax.
What the fuck?
Why is someone making so little money still required to pay so much of it to taxes?
If someone only makes $9,000 and you take away 10% of that, they’re only making a
little over $8,000.
At that income level, every dollar counts directly towards your ability to live.
And yet, we’re taxing them?
That makes no sense to me.
As far as I know, Ocasio-Cortez’s proposal doesn’t say anything about the lowest tax
bracket, but can I just say, that should really be zero.
The lowest tax bracket shouldn’t be taxed.
In fact, in Australia, anyone making under $18,200 Australian dollars, or about $13,000
US dollars, isn’t taxed at all.
That’s not a weird leftist concept, it’s a normal thing that other countries have figured out.
Poor people need their money more than rich people.
You take money from poor people, and they starve.
You take money from rich people, and they only buy one private jet instead of two.
Anyway, I hope that could clear up some confusion around the proposed 70% marginal tax rate.
If you’re still defending it, because, I don’t know, you think you might be a multi-millionaire
someday, I don’t know what to tell you.
You probably won’t be, in all likelihood.
And those who are already there should be helping the rest of us.
At the end of the day, this all kind of comes down to compassion and what you value as a person.
Are you a “Fuck everyone else because I’m okay” kind of person, or are you a “Do
everything you can to help those who are less fortunate than you” kind of person?
Only you can really decide that, but I hope that we can at least have a serious discussion
about taxing super rich people to help the rest of us, without lying about how marginal
tax rates work.
So thanks for watching this video, and I’ll see you next time.