Washington’s Latest Match Made In Hell

One possible solution to satisfy the will of the people came this week from Ocasio-Cortez. It involves jacking the marginal tax rate on top earners up to 70 percent. The spoils would then be frittered away on a massive boondoggle, a “Green New Deal,” to save the planet from the menace of climate change.

Several days later Paul Krugman, in an article titled The Economics of Soaking the Rich, validated Ocasio-Cortez’s proposal. According to Krugman:

“Tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

“Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise.  The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.”

Krugman even mentioned several of his cohort’s academic research that had pinpointed the optimal tax rate on high earners to be 73 percent or even more than 80 percent. Based on Krugman’s referenced research, Ocasio-Cortez’s proposal doesn’t go far enough to produce economic salvation for the masses.

Nonetheless, Ocasio-Cortez and Krugman are a match made in hell. Should a Green New Deal, funded by a top tax rate of 70 percent, be put into practice, we presume it would have a far different result than Krugman advises. Remember, the economy, and the people that compose it, adjusts and recalibrates to the level of central planning and government intervention imposed upon it.

Hence, the promised nirvana of everyone getting rich selling rooftop solar power back to their utility at the expense of their neighbors will turn out to be a great big dud. Maximum possible revenue will diminish.  In its place, will be an enormous pile of debts and an even greater pile of regrets.

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