Would a 70 Percent Tax Rate Slow the Economy?

In a television interview this month, US Rep. Alexandria Ocasio-Cortez floated the idea of raising the top marginal income tax rate as high as 70 percent, almost double the US’s current top tax rate of 37 percent. As described by Ocasio-Cortez, such a rate would only apply to money earned above $10 million. From the 1930s through the 1970s, the top marginal rate in the US was consistently 70 percent or higher, reaching as high as 92 percent.

Recent polling has found that a majority of registered voters supports raising the maximum rate to 70 percent—but what do economists think of it? Chicago Booth’s Initiative on Global Markets asked its economic experts panel whether raising the top marginal rate to 70 percent (without changing how the top tax bracket, which currently starts at $500,000 for unmarried filers, is defined) would “raise substantially more revenue . . . without lowering economic activity.” About half the panel disagreed, and roughly a quarter of the panel was either unsure or had no opinion. Many noted that such a tax hike would likely increase government revenue, but that revenue would probably come at the cost of at least some decline in economic activity.