A 70% Tax Rate Is Not Enough

Alexandria Ocasio-Cortez has proposed a 70% tax rate for the highest earners recently, which has sparked a lot of debate among the sycophants of the rich who think it will affect them in some way. If you earn enough for that to affect you, you’re probably not reading what I have to say about it.

First of all, most Americans do not understand how our incremental tax system works, even though it probably does affect you personally.

This is just an example and does not use real numbers. With an incremental tax system, if you earn $10,000, you pay no tax on that income. If you earn $50,000, you pay a 20% tax rate. But that only applies to the amount between $10,000 and $50,000. You still pay no tax on the first $10,000.

Tax brackets continue to increase from there but the same rule applies all the way to the top tax bracket. If you earn $1 billion a year, you pay no tax on the first $10,000, then 20% on the next $40,000 and so forth. The tax rate being suggested does not affect anyone unless they make something like $500 million. So they would only pay a 70% tax on anything above $500 million.

Hence the actual tax rate on the first $500 million is far lower.

However, that is not enough. No by far. There are still many loopholes which a person making that amount can use to avoid paying that tax rate. For one thing, this does not change the capital gains tax rate, which is far lower, especially for long term holdings. Nor does it change the tax on dividends, which…