Bill Gates, the co-founder of Microsoft and one of the world’s richest men, used a recent interview to pour cold water on the notion advanced by progressive politicians that a huge tax rate is the cure for all ills
Last month, Democratic Congresswoman Alexandria Ocasio-Cortez said that tax rates on the wealthiest Americans could hit 60 percent to 70 percent to fund her Green New Deal, a project aimed at massive wealth redistribution and the elimination of fossil fuels from the American scene.
Gates was asked about the plan in a podcast interview with The Verge. He said government operations need to be more efficient, but also said Ocasio-Cortez’s focus on income taxes is misguided.
“Certainly, the idea of government being more effective in terms of how it runs education or social programs, there’s a lot of opportunity for improvement there,” he said.
“In terms of revenue collection, you wouldn’t want to just focus on the ordinary income rate, because people who are wealthy have a rounding error of ordinary income.”
He said Ocasio-Cortez was looking in the wrong place by focusing on the ordinary income tax rate that most Americans pay.
The wealthy, he said, “have income that just is the value of their stock, which if they don’t sell it, it doesn’t show up as income at all, or if it shows up, it shows over in the capital gains side. So the ability of hedge fund people, various people — they aren’t paying that ordinary income rate.
“The one thing that never gets much press — the IRS shows the statistics for the top 400 people of the highest income and the rate they pay. Anyway, you should look at that. It’s about a 20 percent rate, so it has nothing to do with the 39.6 marginal ordinary income rate,” he said.
Gates then said a policy that only looks at the ordinary tax rate “a misfocus. If you focus on that, you’re missing the picture.”
Gates is not the only major economic figure to oppose the plan.
Former Starbucks CEO Howard Schultz, who is mulling an independent run for the White House in 2020, rejects the concept.
“I don’t think we want a 70 percent income tax in America,” Schultz told CNBC.
In his interview with The Verge, Gates said that taxes in the U.S. “can be more progressive, the estate tax and the tax on capital, the way the FICA and Social Security taxes work. We can be more progressive without really threatening income generation — what you have left to decide how to spread around.”
Gates said that the more government spends, the more it will need to take in — even if not all Democrats seem to understand that.
“Certainly, we have a government that’s spending more than it’s taking in, so the idea that at some point, if you want to avoid massive inflation, you need to probably raise more money because what you need to do in terms of your medical care promises will make expenditures even higher than they are today,” he said.
Gates dismissed as “crazy talk” the concept of ignoring the deficit to fund programs.
Ocasio-Cortez and her allies had argued last month that Congress should spend what is necessary without regard for whether there is revenue to fund it or matching spending cuts from other places in the budget, CNN reported
“Well, that’s crazy,” Gates said.
“I mean, in the short run actually because of macroeconomic conditions, it’s absolutely true that you can get (debt) even to probably 150 percent of GDP in this environment without it becoming inflationary. But it will come and bite you.
“The people you owe the money to, you will have a problem,” he said.
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