Congresswoman Alexandria Ocasio-Cortez (D-NY) has reignited the debate over tax rates with her proposal a 70 percent top federal income tax rate. While few Democratic leaders are supporting such a proposal, most continue to criticize the wealthy for not “paying their fair share.” However, data from the Congressional Budget Office shows that the top 20 percent of earners in the country pay roughly 90 percent of the income taxes. When all taxes are considered, the top 20 percent pays roughly 70 percent. What is clear is that both sides are shading data in this debate.
According to the Congressional Budget Office, the top one percent alone pays 39.4 percent of income taxes. An estimate 44 percent of citizens pay no federal income taxes at all.
On the other hand, Democrats like Ocasio-Cortez-Cortez are correct that we once had such high rates. From 1944 to 1951, the highest marginal tax rate for individuals was 91%. That went up to 92% for 1952 and 1953 and then back down to 91% for tax years 1954 through 1963. It was then lowered to 77% and 70% through 1981. Reagan cut the rate further and it was dropped to 50% in 1982. However, Reagan added taxes on gas and payrolls. Moreover, there are sales and state taxes that have to be considered in tax burden.
What seems clear is that taxes will again be at the center of our political campaign leading into the next election. However, the debate is already becoming largely rhetorical and superficial.
We have had higher taxes and, while I am generally not enthused about tax hikes from an economic perspective, there are reasonable arguments to be made about our rate structure. However, it is also wrong to portray the top brackets of not paying their fair share. One can argue that additional revenue is needed without ignoring that twenty percent of the country is already paying 88 percent of the federal income taxes.