Democrats and taxes on rich people

Short version: after decades of being cowed we are finally having prominent Democrats unafraid to say America’s wealthiest need to pay more in taxes.  Given our ongoing deficits, there’s a very good argument that middle-class Americans need to pay more in taxes, too, certainly if we want to fund better health care and a more robust safety net, but, for now, not even many Democrats are willing to go there.  That said, I’ll take it as a good start the Democrats are finally pushing back forcefully on the tax debate and I think, therefore, gradually changing the political dynamics on taxes.

No, I don’t think we’ll get AOC’s 70% top marginal rate (nor do I believe that is necessarily the optimal top rate, though there’s definitely a good case for raising top marginal rates), nor do I think we’ll get Elizabeth Warren’s wealth tax (as much sense as it makes).  Oh, and yeah, we should almost surely raise the capital gains tax rate.   But, here’s the thing, Democrats are talking about raising tax revenue in largely sensible ways, regardless of what Howard Schulz and other rich billionaires (and their massively disproportionate political influence think).

I really liked this take on AOC from Shadi Hamid in the Atlantic, “Ocasio-Cortez Understands Politics Better Than Her Critics: A 70 percent marginal tax rate might not be realistic—but that doesn’t matter.”

Most Americans—myself included—probably don’t have a well-thought-out position on whether a 70 percent marginal tax rate is a good idea. But it probably doesn’t matter whether it is, or whether it would “work.” To argue that “workability” is secondary might sound odd to many Democrats, particularly party leaders and experts who have long prided themselves on being a party of pragmatic problem-solvers. This, though, could be the most important contribution so far of Representative Alexandria Ocasio-Cortez and the new crop of progressive politicians—the realization that the technical merits of a particular policy aren’t the most relevant consideration. For these new Democrats, the purpose of politics (and elections) is quite different…

As I recently argued in American Affairs, even the better educated don’t primarily vote based on policy. In fact, higher levels of education can increase polarization. [emphases mine] (In other contexts, such as the Middle East, the advent of universal education and higher college attendance fueled ideological divides.) As the political scientist Lilliana Mason notes, “Political knowledge tends to increase the effects of identity as more knowledgeable people have more informational ammunition to counter argue any stories they don’t like.”

People’s politics tend to determine their policy preferences, and not the other way around. In one example from the 1960s, as Christopher Achens and Larry Bartels write in Democracy for Realists, even southerners who supported racial integration left the Democratic Party. Once they became Republican, they then adjusted their views on race and affirmative action to fit more comfortably with their new partisan identity. Put another way, if a person with no prior partisan attachments decides to become a Republican, he is likely to become pro-life. If that same person, with the same genetics and life experience, decides to become a Democrat, he is likely to become pro-choice.

Ocasio-Cortez and other progressives appear to understand instinctually what this growing body of research on voter preferences suggests. And its implications are potentially far-reaching. Once you accept that voters are rationally irrational, you can’t help but change how you understand political competition..

This focus on shifting the contours of the national debate is sometimes referred to as expanding the “Overton window.” It is altogether possible that Ocasio-Cortez doesn’t think that a 70 percent marginal tax rate is realistic in our lifetime—she might not even think it’s the best option from a narrow, technocratic perspective of economic performance—but it doesn’t need to be. As the Open Markets Institute’s Matt Stoller notes, “One thing that [Ocasio-Cortez] has shown is that political leadership matters. Just proposing a 70 percent marginal tax rate has restructured a debate over taxes. Obama’s presidency was defined by self-imposed limits.”..

Today, in a way that hasn’t been true for decades, more Americans are at least aware of something that might otherwise have been ignored as either overly wonky or, well, crazy. The 70 percent figure proposed by Ocasio-Cortez was a subject of debate—and derision—at Davos. But by joking about it, billionaires and aspiring billionaires, in effect, helped legitimate it. After all, if the richest people in the world are worried about it, it might just be a good idea…

I don’t feel strongly about a 70 percent marginal tax rate, but I don’t need to. I might even conclude that it simply “feels” too high. But that just means that if and when a Democratic candidate for president proposes a 50 percent tax rate on income that’s more than $10 million, I’ll be impressed with how “moderate,” reasonable, and sensible it sounds.

As you know, I’m a bit of a policy wonk and think it is really important that we get the details right.  And I think we would want to be very thoughtful about exactly how we would go about raising top marginal rates or implementing a wealth tax, etc.  But, without people like AOC pushing on this, regardless of the details, we’ll never even get a chance to worry about the details.  So, yeah, sure, 70% may well be too high.  But, overall, I love what AOC is doing.

Concentrated interests > science

This Adam Davidson piece on “Money, Power, and Deer Urine” (really!) is so good.  I’ve been meaning to do a post on it for a long time, but since I plan on discussing it some in my Public Policy class today, I’m putting off the post no longer.  As I explain to my class, intense, concentrated interests almost always win over more diffuse interests (e.g., beef producers have a lot of profit motive at stake in avoiding better inspections whereas not too many people find hard for a small percentage reduction in likelihood of food-borne illness spread across all meat eaters).  And, the power of those concentrated interests certainly has the power to outweigh what the science tells us (e.g., a more robust meat inspection system would reduce human suffering and occasional death).

Anyway, it’s pretty fascinating how this all plays out with the issue of prion diseases (i.e., similar to Mad Cow), hunting, and deer urine:

Walk into Walmart or Cabela’s and go to the back, near the rifles, and you’ll find a wall display of deer urine. It comes in small squirt bottles that hunters spray on the ground to hide their scent…

Lapp, along with the deer-farming industry as a whole, is facing a crisis in the form of chronic wasting disease, a plague that attacks white-tailed deer, elk, moose, reindeer, and other members of the cervid family. C.W.D., like mad-cow disease, is caused by a misshapen protein that forces healthy proteins to fold in on themselves, becoming defective. There is no cure—a sick animal wastes away and eventually dies—and the infectious proteins, called prions, can linger in dirt or on plants for years. (There have been no known cases of humans catching C.W.D., but a recent study in Canada found that some macaque monkeys who ate infected meat became ill.) The prions are found in huge quantities in an infected deer’s brain, lymph nodes, saliva, and meat; in smaller amounts in its blood and feces; and in nearly undetectable amounts in its urine…

But Krysten Schuler, a Cornell ecologist on the task force, told me that the most controversial part of the plan has been its complete ban on deer urine.

In a report released by the task force, the case against deer urine appears to be grounded in science. When I contacted some of the authors of the scientific papers cited, however, I learned that a deer would have to imbibe gallons of urine from a dying animal to fall ill; a few ounces sprayed around a hunting site doesn’t pose a risk…

The state will still allow hunters to bring butchered meat back from infected areas, even though hunters often field-dress the animals, exposing the meat—and their clothes, trucks, and other gear—to brain matter, blood, saliva, and feces. One gram of brain matter contains the same number of prions as thirty thousand gallons of urine. Why is the lowest-risk bodily fluid banned, while meat, which may pose an equal or higher risk, is permitted?

The reason is simple. The risk-mitigation plan, like all regulation, isn’t based purely on science; it also takes into account politics and economics. [emphasis mine] The report acknowledges that the New York deer-hunting industry, which is dominated by firearm hunters, brings in more than one and a half billion dollars a year, and is supported by retailers and a passionate population of hunters. The deer-urine industry, on the other hand, is most vocally supported by bow hunters, who are comparatively few, and is predominantly represented by people like Lapp, small farmers with few resources.

The plan’s disparate treatment of urine and meat is an example of what economists call regulatory capture: the process by which regulators, who are supposed to pursue solely the public interest, instead become solicitous of the very industries they regulate.

So, there’s some science going on here, but like so much of what we get as the end-result policy, it doesn’t actually make a lot of sense just looking at good policy, but does look sense when one looks at who are the powerful interests and their economic influence.  Unfortunate, but the definite reality of public policy.

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