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By Sergei Klebnikov
January 8, 2019
Photo illustration by Sarina Finkelstein for Money; Getty Images (4); Shutterstock (2)

Rep. Alexandria Ocasio-Cortez just proposed a 70% top marginal tax rate for the rich. While critics have been quick to dismiss the prospect, prominent economists – including Nobel-Prize winners – have supported similar ideas in recent years.

Ocasio-Cortez, who at age 29 just became the youngest Congresswoman in history, floated the notion in a 60 Minutes interview with Anderson Cooper that was released Friday. She framed it as one possible way to fund her so-called Green New Deal, an ambitious plan to reduce inequality and eliminate fossil-fuels by 2030. A 70% rate on income over $10 million would only affect less than 1% of households, and could bring in up to $72 billion in taxes per year, according to experts consulted by the Washington Post.

Many quickly denounced Ocasio-Cortez’s plan: Anderson Cooper called it a “radical agenda” and former Federal Reserve chairman Alan Greenspan said it was “a terrible idea” that would crimp economic growth. In fact, a 70% marginal tax rate would hardly be unprecedented. In the Eisenhower years, the top U.S. tax rate eclipsed 90% and rates didn’t fall below 50% until the Reagan administration.

So can a 70% top tax rate work? Here are five top economists who think so:

Paul Krugman

In a New York Times op-ed published on Saturday, Krugman fleshed out Ocasio-Cortez’s tax proposal, calling it “fully in line with serious economic research.” He went on to add that: “What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.” The Nobel-Prize winner pointed out that high tax rates for the wealthy were routinely applied in “the United States, for 35 years after World War II – including the most successful period of economic growth in our history.”

Courtesy of Tax Policy Center, BEA

Mark Mazur

A former Treasury Department official who is now a director at the Tax Policy Center, Mazur spoke to the Washington Post about Ocasio-Cortez’s tax plan on Saturday. While stopping short of a full endorsement, he said the plan was certainly feasible. “The difficulties of monitoring and compliance are huge,” Mazur admitted, “but it could be done and raise a lot of money.”

Peter Diamond

A Nobel laureate, professor at the Massachusetts Institute of Technology, and one of the world’s leading experts on public finance, Diamond has long advocated for a bigger tax rate on high incomes. In a 2012 paper co-authored with Emmanuel Saez from the University of California, Berkeley, Diamond argued for an optimal top tax rate of 73% in the U.S.

Christina Romer

The former head of President Obama’s Council of Economic Advisers has called for the ideal top marginal tax rate to be even higher than what Ocasio-Cortez suggests. Drawing upon historical data, the macroeconomist estimated in a 2011 paper that it should be at more than 80 percent.

Thomas Piketty

The prominent French economist argued in 2013 that higher tax rates on the wealthy would go a long way towards reducing pre-tax inequality. Using data from both the U.S. and U.K., he mapped out how the Reagan/Thatcher revolution drastically cut top income tax rates – and how they have remained at low levels since. “The job of economists should be to make a top rate tax level of 80% at least ‘thinkable’ again,” he wrote.

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The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

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Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

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