The super rich won’t be paying a 70 percent top marginal tax rate anytime soon.
But rising star Rep. Alexandria Ocasio-Cortez’s proposal to ensure they do fired the starting gun for a populist-tinged economic debate that will define Democratic politics for the next two years, at least.
The New York freshman floated the idea in a “60 Minutes” interview that aired Sunday. She said those earning more than $10 million a year should face a top rate of 60 to 70 percent on that income to help pay for a “Green New Deal” that would eliminate fossil fuels in 12 years. She is seeking a seat on the House Financial Services Committee, which oversees the banking and housing industry.
Watch her here:
Blowback from the right was fierce. House Minority Whip Steve Scalise (R-La.) misconstrued the proposal as a broad-based tax hike on all income:
Republicans: Let Americans keep more of their own hard-earned money— Steve Scalise (@SteveScalise) January 5, 2019
Democrats: Take away 70% of your income and give it to leftist fantasy programs https://t.co/NxJPSCqvrt
As did anti-tax lobbyist Grover Norquist, likening it to slavery:
Slavery is when your owner takes 100% of your production.— Grover Norquist (@GroverNorquist) January 5, 2019
Democrat congresswoman Ocasio-Cortez wants 70% (according to CNN)
What is the word for 70% expropriation?
But left-leaning economists note the proposal is hardly radical, given rates that high — and higher — were on the books for for the top income bracket amid the prosperous middle decades of the last century. And some recent research (including from Nobel-winning economist Peter Diamond) argues a top rate slightly north of 70 percent is optimal for the ultra-rich. (The idea also drew praise from at least one figure on the right, with Ann Coulter tweeting she agrees.) Julián Castro, the former Obama administration housing chief moving toward a presidential bid, pointed to history in endorsing Ocasio-Cortez’s idea during a Sunday appearance on ABC’s “This Week.”
As my colleague Dave Weigel noted, Castro’s breezy co-signing signals just how quickly the tax policy discussion within the party can leap to the left:
Not getting a ton of attention today, but IMO Julian Castro's answer to a question about @AOC's tax talk was striking.— Dave Weigel (@daveweigel) January 6, 2019
"George, there was a time in this country where the top marginal tax rate was over 90 percent."
and *woosh* goes the Overton Window. pic.twitter.com/OsTd1T3RAq
Expect other Democratic 2020 hopefuls to go there soon, too. Sen. Elizabeth Warren (D-Mass.), for example, has said she wants to roll back Republican tax cuts passed in 2017. Though she has eschewed naming a number she would favor for a top marginal rate, she has pointed out it was “well above 50 percent” in the post-World War II era. And in her kickoff tour through Iowa this weekend, she said Washington needs to embrace “big structural change” to restore economic fairness.
The goal for aspiring Democratic leaders won’t simply be extracting a pound of flesh from point-one-percenters. Ocasio-Cortez invoked the idea as a revenue source for a moonshot proposal — and her party’s presidential pool will shortly be teeming with others looking to for ways to pay for similarly ambitious projects. (One estimate puts a $2.8 trillion price tag on Sen. Kamala D. Harris’s proposal to offer tax credits or direct payments to lower and middle-income families.)
The Washington Post’s Jeff Stein crunched the numbers with tax experts and found a new bracket for those earning more than $10 million a year would hit 16,000 households. Roughly doubling the rate they pay on income over that threshold, as a 70 percent rate would, could generate $720 billion over a decade. That could pay for a number of liberal dream programs. From Jeff: “It could come close to funding the entirety of Sanders’s free college tuition plan ($800 billion), fund President Barack Obama’s plan to get close to universal prekindergarten ($75 billion over a decade), forgive more than half the student debt in America ($1.4 trillion), cover Democratic leaders' plan for boosting teacher pay and school funding ($100 billion), or come close to funding a $1 trillion infrastructure plan.”
The soak-the-rich idea’s early traction points to party in which the center of gravity has already moved measurably to the left. Barely two years ago, Hillary Clinton’s platform called for imposing a surcharge on the incomes of those earning more than $5 million, effectively saddling them with a 44 percent top marginal rate. And four years before that, after winning a resounding reelection victory in part on a pledge to raise taxes on the rich, Obama signed a package that raised the top rate from 35 percent to 39.6 percent for couples earning more than $450,000 a year. Obama negotiated that deal with a Republican Congress.
But the fact remains that the Democrats’ last two standard bearers proposed tax policy changes at the margins. The party’s next one is likely to call for a much sharper departure.
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— Second thoughts on 2019 market forecasts. The Wall Street Journal's Michael Wursthorn and Akane Otani: "The market’s roller-coaster ride has prompted some Wall Street analysts to cut their 2019 forecasts, the latest sign of unease as the stock bull market approaches its 10th year. Major indexes rallied Friday after a stronger-than-expected jobs report boosted investors’ confidence in the U.S. economy, and Federal Reserve Chairman Jerome Powell suggested the central bank would be flexible with its policy plans.
"Still, a brutal December selloff and lingering worries about the health of the global economy have kept major indexes well below their records. Investors’ confidence also took a hit after Apple Inc. late Wednesday slashed its quarterly revenue forecast for the first time in more than 15 years due to slowing iPhone sales in China, raising anxieties that other companies could follow suit in a nod to the ramifications of ongoing trade tensions between the U.S. and China."
Nervous investors seek refuge in yen and gold. WSJ's Ira Iosebashvili: "Uneven economic data and volatility in stocks have accelerated a surge into assets perceived as relatively safe, highlighting the unease felt by many investors at the start of 2019. The Japanese yen is up nearly 5% against the dollar since markets began sliding at the end of last year’s third quarter. That move picked up speed after weaker-than-expected manufacturing data and a sales warning from Apple Inc. last week bolstered fears of a global slowdown.
"Other so-called haven assets are also rising. Gold prices have strengthened around 7% in that period and stand near their highest level in about half a year, and gold-focused funds have notched inflows in 12 of the past 13 weeks ... The broad shift toward havens suggests that investors are now more eager to diversify their holdings in the face of recent market swings."
America is a world leader ... in volatility. Bloomberg's Justina Lee: "As the world’s largest and deepest equity market, the U.S. tends to be the relatively steady hand among volatile peers. Not anymore. The country is at the epicenter of global market anxieties from trade to monetary tightening and an economic slowdown. The U.S. gauge of future volatility, the VIX, has exceeded the equivalents in Europe, Hong Kong and even emerging markets a few times over the past month. This is an anomaly that’s become more commonplace since the market sell-off in February 2018."
— Powell attempts a soft landing. WSJ's Greg Ip, Nick Timiraos and Eric Moriath: "Federal Reserve officials, after navigating the U.S. economy through the financial crisis and its rebound, face a fresh test in 2019: engineering an economic soft landing. The central bank’s challenge is to manage a moderation in growth that keeps inflation contained but avoids a recession. It was a main topic at an annual economic conference in Atlanta this weekend that featured top current and former Fed officials. Investors will look this week to talks by Fed Chairman Jerome Powell and Vice Chairman Richard Clarida for new clues on the officials’ thinking, as well as Wednesday’s release of minutes from the Fed’s December meeting."
Goldman sees Fed pausing. Jan Hatzius, the firm's chief economist, writes in a note this morning: "Fed officials are acutely focused on both financial conditions and the growth outlook, at a time when they have the luxury to be 'patient' because core PCE inflation is at 1.9% year-on-year and unlikely to rise significantly for at least the next several months. This implies a pause in the rate hike process until conditions have settled down, as well as a strong incentive to sound market-friendly in the near term."
— A majority of Britons want a Brexit re-do. CNBC: "More Britons want to remain a member of the European Union than leave, according to a survey published on Sunday which also showed voters want to make the final decision themselves. Britain is due leave the EU on March 29, but Prime Minister Theresa May is struggling to get her exit deal approved by parliament, opening up huge uncertainty over whether a deal is possible, or even whether the country will leave at all.
"The survey by polling firm YouGov showed that if a referendum were held immediately, 46 percent would vote to remain, 39 percent would vote to leave, and the rest either did not know, would not vote, or refused to answer the question. When the undecided and those who refused to answer were removed from the sample, the split was 54-46 in favor of remaining. That is broadly in line with other polls in recent months which show a deeply divided electorate, in which opinion has swung slightly towards remaining in the EU."
— Trade talks with China finally get underway. CNN's Donna Borak: "Trump claims his administration is 'doing very well in negotiations with China,' but the US team heading to Beijing this week is starting almost from scratch. While China has made some preemptive concessions in the weeks since Trump met with his counterpart Xi Jinping in Argentina, including lowering auto tariffs and restarting purchases of American soybeans, little concrete progress has been made toward developing a comprehensive trade agreement between Beijing and Washington.
"Instead, the meeting of deputy-level negotiators will give each side a chance to take stock and serve as a litmus test for whether a deal can be achieved before March 1, when Trump has threatened to impose another round of tariffs and to raise duties on imports to 25% from 10%. 'Next week's negotiations are important because they will establish expectations,' said Myron Brilliant, executive vice president and head of international affairs at the US Chamber of Commerce. 'However, we shouldn't expect major breakthroughs next week.'"
Positive sign? Liu He joins talks. Bloomberg: "Chinese Vice Premier Liu He unexpectedly attended the first day of talks aimed at resolving the trade dispute between the world’s two biggest economies, according to people familiar with the matter and a photo seen by Bloomberg. Liu is the top economic adviser to Chinese President Xi Jinping, who led previous negotiations in Washington that produced a deal that President Donald Trump then repudiated. China had previously said the talks would be led by a lower-ranking official from the Ministry of Commerce."
Chinese economy slows as trade talks loom. WSJ's Lingling Wei: "China’s economy is slowing faster than expected as Beijing this week heads into a crucial new round of negotiations with the U.S. over trade. For the past couple of months, senior Chinese officials have sought to play down the impact of U.S.-China trade tensions on the world’s second-largest economy, telling the public the conflict is doing little more than hurting the nation’s stock indexes, making it a good time to buy China again. ...
"[But] the Trump administration’s trade offensive, say the people and business executives, is hitting China’s export-oriented manufacturing sector especially hard, reducing new orders for business and forcing factories to cut production and delay decisions on investing and hiring."
U.S. has leverage in trade talks, Trump says. Alan Rappeport and Jim Tankersley at the New York Times: "Trump is cheerleading his way past the economic warning signs that have rattled financial markets and unnerved economists, insisting that the United States has an advantage in a crucial first round of trade negotiations beginning on Monday in Beijing. It helps his case that the Labor Department published a jobs report for December that soared past expectations.
"'China’s not doing very well now,' Mr. Trump said in a news conference at the White House, hours after the report came out on Friday. 'It puts us in a very strong position. We are doing very well.' Mr. Trump is correct about China’s economy, which by several measures appears to be hobbled by American tariffs on $250 billion worth of Chinese imports. But the president’s confidence about the domestic economy largely ignores what others see as looming threats."
Meet in the middle? Given the stakes, Horizon Investment's Greg Valliere predicts progress. "Both sides have compelling reasons to act – China quite clearly is suffering from an economic slowdown, and Donald Trump obviously fears that a nervous stock market could imperil his re-election," he writes in his morning note. "Thus we believe there will be a constructive statement tomorrow, with hints that high-level officials will meet later this month to hammer out an agreement in principle."
— Tariffs, not jobs for the industrial U.S. Peter S. Goodman at the NYT: "Plants in every direction shut down and moved their operations to Mexico, succumbing to the relentless pressure to cut costs in an age of globalization. Not EBW Electronics. As the decades passed, the family-owned business stayed put, on the eastern edge of Lake Michigan, churning out lights for the auto industry. But now, the company’s management is reluctantly mulling the possibility of moving its production to Mexico to escape the tariffs that President Trump has put on imported components, his primary weapons in a trade war waged in the name of bringing jobs home to America.
"'It’s killing us,' said the chairman of the company, Pat LeBlanc, 63, a Republican who voted for Mr. Trump. He now expects the president’s tariffs will chop his 2019 profits in half. 'I just feel so betrayed. If we fail because the company is being harmed by the government, that just makes me sick.' Across the industrial United States, including in the crucial political battleground state of Michigan, such complaints are intensifying as the trade war disrupts factory operations that depend on imported parts."
- "AP FACT CHECK: Trump’s super-talkative, fact-busting week." AP's Calvin Woodward and Hope Yen.
- "How the border wall is boxing Trump in." NYT's Julie Hirschfeld Davis and Peter Baker.
- "Pelosi tamps down talk of impeachment." The Post's Brian Fung.
— On the front lines of the app wars. The Post's Brian Fung: "A growing number of software companies are looking to bypass the dominant app store gatekeepers at Apple and Google — selling their services directly to consumers and undercutting the tech giants that for years have controlled how most of iPhone and Android users discover, download and pay for their apps.
"The revolt is being led by companies such as Netflix, which became the latest firm to cut off a lucrative relationship for Apple when it confirmed that new customers will no longer be able to pay their monthly subscription fees through iTunes. Instead, subscribers are being redirected to make payments on Netflix’s own website. ... Netflix’s announcement could save it hundreds of millions of dollars, and is potentially devastating for Apple."
— When box stores use a tax loophole, small towns bear the brunt. NYT's Patricia Cohen: "With astonishing range and rapidity, big-box retailers and corporate giants are using an aggressive legal tactic to shrink their property tax bills, a strategy that is costing local governments and school districts around the country hundreds of millions of dollars in lost revenue. These businesses — many of them brick-and-mortar stores like Walmart, Home Depot, Target, Kohl’s, Menards and Walgreens that have faced fierce online competition — maintain that no matter how valuable a thriving store is to its current owner, these warehouse-type structures are not worth much to anyone else.
"So the best way to appraise their property, they contend in their tax appeals, is to look at the sale prices on the open market of vacant or formerly vacant shells in other places. As shuttered stores spread across the landscape, their argument has resonated. To municipalities, these appeals amount to a far-fetched tax dodge that allows corporations to wriggle out of paying their fair share."
— Possible liquidation looms over Sears. Bloomberg News's Eliza Ronalds-Hannon, Lauren Coleman-Lochner, Nabila Ahmed, Lily Katz and Tiffany Kary: "Sears Holdings Corp. is preparing a potential wind down after Chairman Eddie Lampert’s bid to buy several hundred stores out of bankruptcy fell short of bankers’ qualifications ... The iconic retailer started laying the groundwork for a liquidation after meetings Friday in which its advisers weighed the merits of a $4.4 billion bid by Lampert’s hedge fund to buy Sears as a going concern ... If the 125-year-old retailer does die in bankruptcy — like Toys “R” Us in 2018, and Borders Group Inc. in 2011 — it would mark the largest fatality yet in the retail apocalypse prompted by a shift to online shopping."
— Shutdown drags on with no end in sight. The Post's Bob Costa and co.: "Trump administration officials began taking extraordinary steps to contain the fallout from the partial federal government shutdown Sunday, as the budget impasse between the president and congressional Democrats showed no signs of nearing a breakthrough.
"As agencies sought to deal with cascading problems across the federal bureaucracy, acting White House budget director Russell T. Vought sent congressional leaders a letter detailing the administration’s latest offer to end the shutdown. It demanded $5.7 billion 'for construction of a steel barrier for the Southwest border' but also proposed 'an additional $800 million to address urgent humanitarian needs' and unaccompanied migrant children arriving at the border...
"A Democratic official familiar with the meeting said no progress was made over the weekend, in large part because the White House hasn’t been forthcoming about how the money would be used or why the request is for so much more than the administration sought only a few months ago."
- The Bipartisan Policy Center hosts a conference call on the recently-passed privacy, data and evidence legislation on Monday.
- The Brookings Institution hosts the event "Ten years later: Lessons from the 2008 financial crisis" on Thursday in Washington.
- The Carnegie Endowment for International Peace hosts an even assessing Japan’s new national defense program on Friday in Washington.
- The Brookings Institution hosts a discussion to explore how China and the U.S. are advancing artificial intelligence on Jan. 14 in Washington.
- The Bipartisan Policy Center hosts a discussion of the book "A Bright Future: How Some Countries Have Solved Climate Change and the Rest Can Follow" in Washington on Jan. 14 in Washington.
- The Heritage Foundation hosts an event on "the constitution and economic freedom" on Jan. 15 in Washington.
— From The New Yorker's Mick Stevens, circa 1998:
From California to Washington, shutdown takes toll on parks and museums
French scientists stands-by world's oldest person Jeanne Calment
Ellen DeGeneres encourages Kevin Hart to still host the Oscars