Conservative pundits and politicians quickly attacked Rep. Alexandria Ocasio-Cortez’s (D-NY) for suggesting a marginal tax rate of 70 percent for America’s wealthiest income earners this week, spreading misinformation about what that tax would really mean — and Fox News’ Sean Hannity was not about to miss the party.
Hannity complained on his radio show Tuesday that rich people “are not going to remodel their homes” or dine out in style if such a tax were to take effect.
They want socialism, well, [Alexandria Ocasio-] Cortez said she wants a 70 percent tax bracket. 70 percent? Alright, well, let me start here. The bottom 50 percent of wage earners pay less than three percent of the income tax bills in this country. The top 20 percent pay almost 90 -- so, 20 percent of Americans pay 90 percent of the bill.
Now, if you take that money from them, and you confiscate it, vis-a-vis high tax rates or the threat of a jail cell, raising it 70 cents -- no, you know, all the -- you have a mass exodus out of New York, New Jersey, California, all these high tax states. They're leaving, all these people are leaving for better weather, lower taxes, affordable living, nicer homes, everything's better.
You know, and people got mad at me, they said, "Hannity, you were talking about, well, rich people won't buy boats" -- no, rich people won't go to restaurants, because they won't have the money. Rich people won't invest in companies, that means they're not going to hire people.
Rich people are not going to remodel their homes, they're not going to build new homes -- who benefits? The contractor, the electrician, the plumber, the -- the carpenters, they're the ones that benefit, when rich people spend money on their homes.
Politifact put out a helpful explainer on what Ocasio-Cortez's suggestion might actually look like in practice:
Here is what Ocasio-Cortez told 60 Minutes:
*"You look at our tax rates back in the '60s and when you have a progressive tax rate system, your tax rate, let's say from zero to $75,000, may be 10 percent or 15 percent, etc. But once you get to the tippy-tops — on your 10 millionth dollar — sometimes you see tax rates as high as 60 or 70 percent. That doesn't mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder, you should be contributing more."
Would taxpayers earning $10 million pay a 70 percent rate on all of their income? And how much higher is that than current tax rates?
No, and this is an important qualifier (and one that some Republican lawmakers seemed fuzzy on). Under Ocasio-Cortez’s idea, the 70 percent rate would affect only the dollars received above $10 million. Economists call this a 70 percent "marginal tax rate."
And how many Americans would be affected by this higher rate?
Citing federal data, Mark Mazur, director of the Urban Institute-Brookings Institution Tax Policy Center, said it would amount to 16,000 Americans. That’s a tiny share of the 127 million households in the United States. That 16,000 would include a lot of superstar athletes, entertainers and hedge-fund financiers.