Right idea, wrong approach. That’s the message from Larry Summers, former Treasury secretary under President Bill Clinton, and Natasha Sarin, a Penn law professor, on the tax-the-rich proposals from Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Elizabeth Warren (D-MA).
Writing in the Boston Globe, Summers and Sarin say they agree with Ocasio-Cortez and Warren that large increases in federal tax revenue are needed, and that raising taxes on the wealthiest Americans is the right way to go. But they argue that there are better ways to accomplish those goals — and raise far more revenue — than by lifting the top marginal tax rate to 70 percent, as Ocasio-Cortez has suggested, or introducing a wealth tax, as Warren has proposed:
“Where we differ from Warren and Ocasio-Cortez is in our belief that the best way to begin raising additional revenue from highest income tax payers is with a traditional tax reform approach of base broadening and loophole closing, improved compliance, and closing of shelters. We show that these measures, along with partial repeal of the Trump tax cut, can raise far more than recent proposals. These measures will increase economic efficiency, make our tax system more fair, and are perhaps more politically feasible than a wealth tax or large hikes of top rates. It may be that measures beyond base-broadening are appropriate and desirable given the magnitude of the revenue challenge we face. But base-broadening is the right place to begin.”
Their plan centers on:
- Stepping up IRS enforcement and audits to raise revenue;
- Closing corporate tax shelters;
- Closing individual tax shelters and eliminating the carried interest tax break for investment fund managers;
- Eliminating “stepped up basis,” the tax break that heirs get on inherited assets that have appreciated in value;
- Capping tax deductions for the rich;
- Ending the 20 percent pass-through deduction introduced by the 2017 GOP tax overhaul;
- Lowering the threshold for the estate tax;
- Raising the corporate tax rate to 25 percent, up from the 21 percent created by the GOP tax law.
To get more details, read their full piece here — and look for a follow-up on Friday with more analysis of the Warren and Ocasio-Cortex proposals.