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Is A 70% Tax Rate 'Confiscatory'?

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Is A 70% Tax Rate 'Confiscatory'?
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Multiple high-profile Democrats, including rookie Congresswoman Alexandria Ocasio-Cortez and presidential candidate and Massachusetts Sen. Elizabeth Warren, are calling for higher taxes. In a Monday debate on CNBC's "Squawk Box" segment, the show's co-host Andrew Ross Sorkin asked a simple question: "is a 70-percent tax rate confiscatory?"

Jason Furman: 70% Is 'Too High'

A 70-percent tax bracket imposed on the uber wealthy is too high a number, former Council of Economic Advisers Chairman Jason Furman told Sorkin. While the U.S. government needs to raise additional revenue, it needs to do so without "punishing success," he said.

Former President Ronald Reagan set a 50-percent tax rate in 1981 and the economy "seemed to do perfectly in the years after," Furman said. 

"[We need] a higher rate, but not all the way to 70." 

Michael Strain: Focus On Generous Loopholes

A 70-percent tax rate creates a debate around punishing success and a vision for a future society that doesn't include "all these rich people," said Michael Strain, a resident scholar and director of economic policy at the American Enterprise Institute. 

The idea presents a philosophical problem of whether the American government is imposing a higher tax on the rich because it can, he said. 

Arthur Laffer Vs. Facebook Co-Founder 

"What's wrong when a person has accrued so much wealth they can't possibly use it all?" Squawk Box co-host Joe Kernen asked in a "Squawk Box" segment.  

Arthur Laffer, President Donald Trump's campaign economic advisor and chairman of Laffer Associates, said he is 78 and continues to enjoy working full-time. But redistributing income from Laffer's labor will always result in lower income, he said, as the incentive to work diminishes if not completely vanishes with higher taxes.

Instead of penalizing wealthy people who want to continue working in their later years, policies should instead be more focused on lifting poorer people up, Laffer said. 

Chris Hughes, Facebook co-founder and now co-chair of the Economic Security Project, said there are some facts that need to be brought into the conversation. The top 0.1 percent pay around 3.2 percent of their wealth in taxes, while the bottom 99.9 percent pays 7.2 percent of their wealth in taxes, he said.

Warren's wealth tax represents a "step toward evening the scales," Hughes said, adding that he debate is less about redistributing income from the wealthy to the poor and more about "fairness" in taxes.

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Posted-In: Arthur Laffer Chris Hughes CNBC Donald Trump Jason Furman Michael StrainEconomics Media Best of Benzinga

 

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