A 70 Percent Tax to Fund a Green New Deal?

Having won back the majority in the House in last year’s Midterm elections, Democrats entered the new legislative session in Washington with renewed confidence. Some representatives – notably Congress novice and youngest female representative ever, Alexandria Ocasio-Cortez (D-NY), have been floating some big ideas. One of them is the so-called “New Green Deal”, a massive investment program for clean energy and climate-friendly infrastructure. To fund it, Ocasio-Cortez proposed an even bolder step – tax rates as high as 70 percent on incomes over US$10 million.

According to reports by Deloitte, this proposed rate does exceed individual income tax rates currently in use. Many nations known for imposing high taxes on their citizens, like Sweden, Belgium or Denmark, do not use rates as high as 70 percent. This is partly because most European nations use a system of progressive taxation: the higher the taxable income, the higher the tax rate on the total of that income. Countries with especially high maximum tax rates, like Portugal or Greece, often impose an additional rate on high incomes.

The U.S., like its neighbor Canada, works with tax brackets, meaning that any income under a certain amount is taxed at the same low rate. Income left after that is taxed at incrementally higher rates in all applicable higher tax brackets. Following Ocasio-Cortez’ proposal, the 70 percent rate would only kick in for any earnings above someone's 10 millionth dollar.

Tax rates are hard to compare across countries not only because of the different systems of taxation. Each country of course sets a different amount of tax-free income. In some countries, income tax is tied to a national health care system. Again others have steep local taxes that vary depending on where you live or currently use a temporary surcharge because of a national emergency or the like.