Ocasio-Cortez’s Proposed 70 Percent Top Marginal Income Tax Rate Would Deter Innovation

As America’s advantage in innovation erodes and levels of entrepreneurial activity decline, it is becoming increasingly important that tax policy does not further hinder economic dynamism. Unfortunately, a recent proposal by freshman Rep. Alexandria Ocasio-Cortez (D-NY) to increase the top income tax rate to 70 percent would unmistakably do this. In addition to making dubious claims about tax history, advocates of this proposal ignore that a high top marginal income tax rate would deter innovative activity, including the work of inventors and entrepreneurs. The congresswoman’s proposal is arguably based on the work of economists Emmanuel Saez and Peter Diamond, who claim that the optimal tax rate for maximizing revenue is 73 percent. This work does not account for the incentive to enter high-earning occupations. Stay Informed on Tax Policy Research and Analysis Select StateAlabamaAlaskaArizonaArkansasCaliforniaColoradoConnecticutDelawareDistrict of…

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