Economists Don’t Know What the Top Tax Rate Should Be
Beware, Alexandria Ocasio-Cortez: Excessively high levies are just punitive and don’t maximize revenue.
A 70 percent top rate probably isn’t workable.
Photographer: Saul Loeb/AFP/Getty Images
When Alexandria Ocasio-Cortez, the Democrats’ new star in the House of Representatives, suggested that the top marginal tax rate on incomes of more than $10 million should be as high as 70 percent, she put the policy of soaking the rich back into contention within her party and beyond. An endorsement from Paul Krugman in the New York Times made it official. She’s talking to “very good economists,” he hears, and in fact the top rate should probably be even higher.
In this new round of a decades-old argument, two main points are getting too little attention. The first is that, despite years of work, economists still don’t know what the “optimal” rate of tax on high incomes should be. The other is that, even if they knew, the finding wouldn’t get us very far.