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Tyler Cowen, Karl W. Smith, Noah Smith, and Michael R. Strain

The 70 Percent Solution: What Are Taxes For?

At the very least, Alexandria Ocasio-Cortez has started a debate over what a better system might look like.

The last time this happened.

The last time this happened.

Photographer: Bloomberg/Bloomberg

Representative Alexandria Ocasio-Cortez’s proposal to tax income above $10 million at 70 percent has generated a lot of debate. In Bloomberg Opinion, Noah Smith has argued that it’s a mainstream idea well worth discussing, while Tyler Cowen has contended that any talk of raising taxes only helps Donald Trump. But what about its effect on the economy? On government programs? On actual taxpayers? Joined by their colleagues Karl Smith and Michael Strain, Noah and Tyler continue the discussion below.

Michael Strain: I’d like to set aside the politics of Ocasio-Cortez’s proposal and look at the practical economic impact. The most prominent recent research comes from economists Peter Diamond and Emmanuel Saez, who argue for a much higher top rate. But things can get tricky when applying the findings of economic research to real life. For example, if the government will take 70 cents of every dollar you earn above a certain income threshold, why go to college? The threshold obviously matters, of course, but the basic point about the decision to acquire advanced skills remains.