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Krugman writes: "The mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad - and in their madness they're inadvertently revealing their true selves."

Economist Paul Krugman. (photo: Forbes)
Economist Paul Krugman. (photo: Forbes)


What Does Alexandria Ocasio-Cortez Know About Tax Policy? A Lot.

By Paul Krugman, The New York Times

08 January 19

 

have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.

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+17 # Concerned Citizen 2019-01-08 11:58
AO-C ... more than adequate to the occasion!
 
 
+11 # Gailhen 2019-01-08 14:10
What's the big deal here? AOC's generous offer shouldn't harm any of these rich people (not exactly the word I'm actually thinking). When the revered hero of WWII, Republican Dwight Eisenhour (sp?) was president back in the late 50's he advocated and got a tax on the income of the rich of 99%. I just don't understand why reactionaries and so-called "conservatives" (the word does mean to conserve) don't read their history and the history of their own party. GAILHEB
 
 
-10 # dbrize 2019-01-08 19:01
Quoting Gailhen:
What's the big deal here? AOC's generous offer shouldn't harm any of these rich people (not exactly the word I'm actually thinking). When the revered hero of WWII, Republican Dwight Eisenhour (sp?) was president back in the late 50's he advocated and got a tax on the income of the rich of 99%. I just don't understand why reactionaries and so-called "conservatives" (the word does mean to conserve) don't read their history and the history of their own party. GAILHEB


Wrong.

Eisenhower inherited a 91% income tax rate and it was never 99%.

It’s irrelevant anyway because no one paid it. The highest effective rate during the Eisenhower years was 47% and it went steadily down from there.

It would do us all well to study our history a bit closer. Much on the surface if filled with half truths and untruths. What is especially rankling is when people like Krugman do it.
 
 
+11 # wrknight 2019-01-08 19:38
Ummm, close but not quite. The highest tax rate ever was 94% during 1944-45 and that was applied only to incomes about $200,000 (equivalent to about $2.5 million). Incomes below $200,000 were taxed at a lower rate that gradually increased from 0% to 94% at $200,000. However, the tax rate on the highest incomes during Eisenhower's presidency was as high as 92% in 1952 and the top rate didn't drop below 70% until 1981 courtesy of Ronald Regan.

https://files.taxfoundation.org/legacy/docs/fed_individual_rate_history_nominal.pdf

However, your point is well taken.
 
 
-6 # dbrize 2019-01-09 09:41
Yes, WWII rates were higher and figures on what was actually paid are skewered somewhat by a wartime economy though all agree it was considerably below the marginal rate.

And I referenced not WWII but the Eisenhower years which were the years Gailhen introduced.

Appreciate the input and I think we both agree on the important point which is the fallacious persistent belief that these high rates were actually paid.

The fact that Nobel Krugman ignores this fact I find particularly galling.

Anyone with a passing knowledge of this issue knows that the “rich” get most of their riches from capital gains.

Krugman is shilling for his corporate benefactors like the NYT’s who are only too happy to keep the focus on the income tax rather than capital gains. AOC can be excused, she is still an innocent among the wolves, Krugman not so much.
 
 
+2 # evolver 2019-01-08 14:19
:-)
 
 
-9 # dbrize 2019-01-08 16:56
This is not only Krugman at his most disingenuous, it’s worse because he knows he is leaving out the part of the story that distorts his entire premise.

The marginal income tax rates of 90%-70% from the 1950’s on were never paid by the “rich”. It is the effective rate paid that determines tax receipts.

Piketty and Saez (no flaming conservatives for sure) confirmed this in their work. They found that in 1960 for example, the “rich” paid an EFFECTIVE rate (what actually went in) of 34%.

https://eml.berkeley.edu//~saez/piketty-saezJEP07taxprog.pdf
Pages10-12


Further work by congressional study group demonstrates that the “rich” since 1952 have paid an effective rate ranging from 42% to our current 25%.

http://online.wsj.com/public/resources/documents/r42729_0917.pdf
Pages 6-7.

The marginal rate can be 100% and it’s irrelevant if it’s never paid.

Krugman is well aware of all this information. And this crock he’s feeding is beneath ridiculous. If he and AOC were serious about taxing the “rich” they would be pushing capital gains increases, this is where the “rich” get much of their gains.
 
 
0 # dbrize 2019-01-08 19:06
A minor erratum:

The effective rate from 1952 to current ranged from 47%-25%. Not 42%. I’m sure those that read the sources will pick up on that.
 
 
+6 # Rodion Raskolnikov 2019-01-09 07:25
DB -- good point. You are correct. Effective tax rates are much more important than nominal tax rates. This is especially true for corporations which nominally are taxed at the same rate as individuals, but they are allowed to deduct EVERYTHING from their income so effectively they pay nearly nothing in tax.

To me, what Krugman misses most is the general social context of AOC's call for 70% taxes on the wealthy. This is part of the larger movement against neo-liberalism. There's right wing opposition to this as well as left-wing opposition.

Back in the 80s, the innovators of neo-liberalism, Reagan, Thatcher, and the Chicago school, called for zero taxation on corporations and wealthy people. They were called the "job creators" and social innovators. Societies should give them as much money as possible so they can innovate and create.

Now that mythology is totally bankrupt. No one on the right or the left any longer believes corporations and the rich are creators. They are predators and parasites.

Liberals have always known that capitalism only works when it is heavily regulated. Tax rates are a from of regulation of the economy. Corporations and the very wealthy should be taxed at rates that benefit society.

Go AOC. I think most people liked her dancing video. Only the prudes in the major media did not like it.
 
 
-2 # intheEPZ 2019-01-09 11:14
When have the rich ever paid their fair share? Nothing new here. Stop whining.
 
 
0 # dbrize 2019-01-09 16:43
Quoting intheEPZ:
When have the rich ever paid their fair share? Nothing new here. Stop whining.


I’ll take that as a vote to let the rich be rich, “nothing to see here”.

Brilliant deduction, speaking of deductions. Impressive.
 
 
+1 # backwards_cinderella 2019-01-09 06:17
Krugman NEVER mentions that AOC graduated from Boston University CUM LAUDE with a BA in international relational & a minor in ECONOMICS. Which gives her some economic cred of her own. I mean, OF COURSE she has been "talking" to people who knows about economics. Even when he's being supportive, he's being patronizing.
 
 
+4 # Porfiry 2019-01-09 09:19
The rich own the country, including the government, to serve their interests. The Republicans are their subservient lackeys in this process. Did not Adam Smith say that governments were set up by the wealthy to protect their wealth from everyday folk?
 
 
+3 # C. H. Winslow 2019-01-09 11:33
Although I agree with Krugman that the wealthy should pay taxes at a much higher rate and that GOP histrionics is aimed at keeping them as low as possible, there is a real difference in the economic context between the post WWII period and today. At that time, American capitalists had almost no foreign competitors and could pay large amounts in taxes as long as all of them did so and kept the national economic structure similarly competitive. Now, overly high tax rates would need to be followed by similar levies on other countries' large enterprises or American companies could not compete on price and quality with Chinese, Japanese, German, etc. Using tariffs to even the playing field could help restore the competitive balance, but these would reduce overall global trade and thus reduce prosperity for everyone. Uncompetitive enterprises in the United States would not hurt global businesses as much as it would American workers, since the former can shift manufacturing to countries with less expensive labor. Thus, AOC must insist on global trade agreements as a prerequisite to severely higher taxation on the rich. I myself personally detest the conspicuous consumption and lavish style of many of the wealthy, especially the classless nouveau riche, but we would need to shave off the lard all over the globe to make super high taxes help ordinary people. Yet, we can immediately strive toward taxes that make the rich pay their fair share. They don't now.
 
 
+4 # C. H. Winslow 2019-01-09 11:46
I should also emphasize that I am referencing actual taxation of the wealthy in whatever form that takes: capital gains, estate, personal income, etc., without all of the discount gimmicks that are legislated to prevent formal tax rates from being effective rates, i.e., actual revenue that government could collect, hopefully, to benefit all of us.
 
 
+2 # shudderer 2019-01-11 11:09
Krugman inspired a good discussion
I think his point was that AOC knew what she was talking about, he should have mentioned she is not only exceptionally smart,learned enough french to give a speech in just 4 months, and she did study economics. He like the rest of us gets caught up in himself.
I must say AOC seems just too good to be true, let's hope not.
 

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