Former Treasury Secretary Lawrence Summers and Natasha Sarin, an assistant professor of law and finance at the University of Pennsylvania, have waded into the debate over how best to tax the rich.
In an essay printed in the opinion pages of the Boston Globe on Thursday, Summers and Sarin argue for several revenue-raising proposals as alternatives to plans pitched by US Sen. Elizabeth Warren and Congresswoman Alexandria Ocasio-Cortez to tax vast stores of wealth or hike the top marginal tax rate to 70 percent.
Friday’s Globe will feature more from the duo about the “challenges” in Warren’s and Ocasio-Cortez’s ideas, but on Thursday the two finance experts made the case for a multi-pronged approach that they claim could raise even more money than either of the other two proposals. They said their approach would also make the nation’s financial system fairer and promote a healthier economy.
Given the current makeup of Congress, the arguments over which tax hike to support are still merely academic for the moment. Whether any of the ideas have a shot at becoming law will largely depend on who controls both branches of Congress and the White House after the 2020 election.
Warren, a presidential candidate, and Ocasio-Cortez, the highest-profile new member of Congress, are both Democrats. Summers served as treasury secretary for President Clinton and as a top advisor to President Obama. Debates premised on the idea that people should pay more in federal taxes are largely confined within the Democratic circles.
Some of Summers and Sarin’s ideas involve undoing tax cuts that the Republican Congress made last session. They advocate for ratcheting the corporate tax rate back up to 25 percent, and ending the pass-through deduction, which they describe as the “most notorious of the Trump tax changes.”
On the whole, the pair favor addition by subtraction. They want to do away with tax shelters and other means by which the wealthy keep their money out of national coffers. They also want to beef up Internal Revenue Service enforcement and give it a new focus on the rich. Today, recipients of the earned income tax credit are twice as likely to be audited than those making more than $500,000 annually, according to Summers and Sarin.
There is a lot of money at issue. Over a decade, the Summers and Sarin menu of proposals would raise a total of $2.83 trillion; Warren’s wealth tax on those worth more than $50 million would raise $2.75 trillion; and Ocasio-Cortez’s idea of increasing the top marginal tax rate to 70 percent would raise $720 billion. To put that in perspective, the Congressional Budget Office in January predicted that federal revenues would total $3.5 trillion in 2019.
Warren and Summers represent different factions within the Democratic party. Summers is more aligned with Wall Street, which is a frequent target of Warren’s. Summers was president of Harvard University when Warren taught at its law school, and the two have tangled before when Summers was angling to become chairman of the Federal Reserve.
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