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.
Daron Acemoglu, MIT
“It will increase substantial revenue. Impact on economic activity is somewhat uncertain, but probably not huge, except through tax avoidance.”
Darrell Duffie, Stanford
“More revenue: yes. But there would be at least a small decline in activity from the reduced after-tax incentives.”
Eric Maskin, Harvard
“If the assertion had read, ‘. . . without lowering economic activity MUCH,’ I would have agreed. But ZERO decline in activity seems implausible.”
Robert Shimer, University of Chicago
“Total tax rate would exceed 85 percent in many states. This is surely on the wrong side of the Laffer curve, especially in the long run.”
Response: Strongly disagree