70 percent tax is total fantasy

The Hill

There is an old saying that if you are not a socialist before the age of 30, you have no heart, and if you are still a socialist after the age of 30, you have no brain. So Alexandria Ocasio-Cortez, the newly elected dynamo Democratic representative from New York, who is only 29, can be excused for at least one more year for some of her dimwitted and utopian ideas, such as 70 percent tax rates. AOC, as she has become known, is not old enough to have been mugged by reality. But what explanation is there for the supposedly older and wiser veterans of the Democratic Party and the liberal establishment who are fawning all over her policy prescriptions?

I am referring, of course, to the closely watched “60 Minutes” interview in which Ocasio-Cortez endorsed 70 percent tax rates on the wealthy and socialism for America. The freshman representative in Congress is feisty, charismatic, and quick on her feet. She is fast to note that the socialism she endorses, which includes universal and free health care, day care, college and housing, with high taxes on the rich to pay for the freebies, is not the bad socialism of Cuba, Venezuela, or North Korea. She wants the good kind of Western socialism of Belgium, Sweden, Frace, and Italy.

This is like saying, “I want the good kind of communism, not the Soviet or Mao kind of communism.” Where exactly is good socialism? Has she been to Europe lately? The continent is economically comatose, with no growth and poor living standards. Sweden is moving away from its socialist tax and welfare policies, and its open immigration policies, as workers run out of money needed to pay for their failing workers paradise.

Ocasio-Cortez wants a “Green New Deal” in which the federal government dictates, through command and control economics, that America move from 5 percent wind and solar energy to 100 percent wind and solar energy over the next several decades to power our $20 trillion economy. Again, has she taken a look at Europe? Germany tried this six years ago, and it practically deindustrialized the country, as power costs surged and factories closed or left, many for fossil fuel rich America. Germany has abandoned the radical green energy revolution she seeks for America.

Even more remarkable is the oblivion on the left to the rioting in the streets of Paris by working class farmers, truck drivers, and laborers who are tired of paying higher taxes for $6 a gallon of gasoline to subsidize the new deal of the green elitists. Back here at home, the economic boom under President Trump, unleashed through the “Make America Great Again” agenda of tax cuts, deregulation, and energy development, has produced the lowest unemployment in nearly 50 years and the highest growth rate in years. We now have the biggest wage gains for the middle class in nearly two decades. Our economy is outgrowing just about every one of our rivals. What is it exactly that socialism is meant to fix here?

The worst and most depressing idea of Ocasio-Cortez is her morality play that the wealthy have an obligation to pay confiscatory tax rates of 70 percent or more. Does anyone teach history anymore? She has it partially right that from the 1950s to the 1970s, tax rates were 70 percent to 90 percent. But what she apparently does not recognize is that almost no one paid these high tax rates because of gaping loopholes in the tax code.

What John Kennedy and Ronald Reagan learned by cutting tax rates from 90 percent to 70 percent, and then eventually to 28 percent by the end of the 1980s, was that high tax rates were easily avoided by the wealthy with their armies of lawyers and lobbyists. Amazingly, the richest 1 percent of Americans paid 19 percent in the federal income taxes when the top tax rate was 70 percent. They now pay 37 percent in federal income taxes with the top rate closer to 40 percent. As Kennedy put it in 1963, “Tax rates are too high, and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the rates now.” He was right. At lower tax rates, revenues exploded because of economic improvement.

Also, back in the 1960s and 1970s, almost all nations had 70 percent and 80 percent tax rates, so it was difficult for the wealthy to relocate their money or businesses to lower tax jurisdictions. Now, most nations have tax rates about half of what they were 40 years ago, and some have cut tax rates into the teens. Raise taxes to 70 percent, and with a click of a computer button, trillions of dollars will escape across the our borders and beyond the grasp of the IRS, which will collect 70 percent of zero dollars. That means zero revenues to fund the federal government.

But even if we could force the millionaires to surrender up to 70 percent of their income, would it be fair to do so? It seems unwise and immoral for the federal government to take more than half of the money away from people who earned it through hard work, success, and entrepreneurial acumen. Today, the richest 1 percent of Americans pays more than the bottom 90 percent, according to the Tax Foundation. Democrats keep saying they want to restore the American dream but, if you dare achieve it and get rich, wham, they are going to snatch most of it away from you.

The goal of the Republican tax cuts, which I helped design with National Economic Council director Larry Kudlow and economist Arthur Laffer, was to try to take America from the highest business tax rates in the world to below the international average, in order to make us more competitive. It has worked magnificently. Ocasio-Cortez would take our tax rates back up to the highest in the world and put the brakes on solid economic growth.

As a New Yorker, she should know this from experience. If high taxes were the answer to all our problems, then New York, with some of the highest tax rates in the country, along with other tax hells like New Jersey and Illinois, would be getting wealthy and prosperous, while no income tax states like Florida and Texas would be economic basket cases. However, it is just the opposite. Every day, there are workers, families, and businesses leaving high tax states for low tax states. More than a million New Yorkers have left in the last decade alone. Congresswoman Ocasio-Cortez, please do not do for America what Democrats in Albany have done to New York.

Stephen Moore is a senior fellow with the Heritage Foundation and an economic consultant with FreedomWorks. He served as an adviser to the 2016 Donald Trump campaign. He latest book out with Arthur Laffer is “Trumponomics: Inside the America First Plan to Revive Our Economy.”