Sam Pizzigati’s Interesting Proposal On Income Tax Rates

is an author who writes extensively about wealth, taxation, and the struggles of working people. Recently he penned an interesting article for CommonDreams.com, How Progressives Can Fix the Progressive Income Tax.

In his latest article, Pizzigati discusses the growing call, sparked by Rep. Alexandria Ocasio-Cortez, for a sharp rise in the top tax rate (Pizzigati neglects to mention that Sen. Bernie Sanders had proposed this earlier, but yes, AOC has the current attention for the idea). top tax rateOcasio-Cortez’s simple proposal is to restore the historical top tax rates that were dismantled by Ronald Reagan in the 1980s. The top tax rate was set between 70 to 94% throughout the previous 50+ years. Coincidence or not, those 50+ years also saw the United States’s greatest economic growth and individual prosperity.

It is worth noting that the top tax rate only applies to income over a very high level. For example, Ocasio-Cortez’s proposal to restore Richard Nixon’s 70% top tax rate would only apply to someone’s income in excess of $10 million. So, someone making $9,999,999, which by all accounts is a lot of income, would not pay 70% income tax on a single dollar of their income.

Pizzigati’s article is most interesting for his argument for his proposal for a return to a truly fair and progressive income tax. Income tax brackets have traditionally been pegged to specific income ranges, Pizzigati observes. Currently, taxable income over $500,000 ($600,000 for married filing jointly) is in the 37% tax bracket. The problem with that formula, Pizzigati argues, is that the nation’s richest have had an intense vested interest in killing those high tax rates on their high incomes and the rest of Americans have had no strong incentive to protect them. The American political system, which allows the über rich to have an inordinate influence on legislation, enabled the über rich to persuade legislators to decrease the top tax brackets. The top tax rate is now half of what it was, on average, for decades.

Pizzigati proposes that instead of pegging tax brackets to dollar amounts, we peg them to multiples of the minimum wage. Specifically, Pizzigati proposes a 70 percent tax on all income over 100 times the annual income of a full-time minimum wage worker–minimum wage currently being a paltry $7.25 an hour, or $15,000 a year working full-time. That proposal would institute a 70% tax rate on income over $1.5 million.

What this legal change would do is provide an incentive for the über rich to care about the minimum wage for the poorest Americans. The higher the minimum wage, Pizzigati argues, the less of the wealthy’s own high incomes would be subject to a 70 percent tax.  Raise minimum wage to $15 an hour, the über rich double the amount of their income that is taxed at a lower rate.

The biggest positive of this plan is that it makes less abstract and removed the issue of the top income tax bracket. It potentially increases interest and involvement in the issue for both the richest and poorest Americans and it more closely connects their economic situations. It brings into sharper focus the reality that people at different income levels affect each other and are connected with each other economically.

Whether this proposed change would change the minds of the über rich about taxes is an open question, and Pizzigati admits some doubt. The über rich are definitely motivated to lower their top tax rate, and if that motivation can be channeled toward ways that would also benefit other Americans, that is a positive. I believe, though, that another motivation of the über rich is for social and economic separation from the poor. Maintaining separate social status from others is not uncommon for many people who do not want to mix with or be treated the same as people who are different. Wealthy people have the economic means to enforce such social separation (for example, gated communities) and the political clout (i.e., campaign donations) to get legislators to give rich and poor separate rights and privileges.

The question is, would the motivation of the über rich to keep the poor poor be stronger than the motivation to keep taxes low by raising the minimum wage. Another question is, would this proposal encourage the rest of Americans to really feel more motivated to fight for a higher top tax rate as Pizzigati believes? Only one way to find out.

 

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