Alexandria Ocasio-Cortez’s tax idea pushed Scott Walker to mislead a bunch of children

This story begins with Scott Walker, Wisconsin’s conservative and recently unemployed ex-governor, misleading a group of fifth-graders about taxes. It ends with a relentless campaign to defend a tax agenda that’s widened income inequality in the United States.

Walker, among the Republicans who have found a new pastime in snarking about the newly elected Rep. Alexandria Ocasio-Cortez (D-NY) on Twitter, saw no better opportunity to jump into the fray than when Ocasio-Cortez floated a tax bracket with a marginal rate of 70 percent for income over $10 million.

Walker tweeted that he explained how tax rates worked in the 1970s and early ’80s to an elementary school class like this:

It’s a misleading explanation to give kids for many reasons, not least because children getting allowances is not remotely similar to taxable income, and if Walker wants to make the argument that the US should base the tax code on kids’ financial opinions, he’ll probably have a lot more explaining to do. But if we are going to do this, then the explanation should have been something more like:

Imagine you did chores for your grandma for $10. When you get home, your parents, who run allowances by the US tax code in 1981 — before Ronald Reagan enacted tax cuts — tell you that you get to keep all your money, because your income is below $5,809.

Now, if for some reason your grandma decided to give you $300,000 for chores (which, wow!), and your parents are still operating like the IRS in 1981, you would only pay them the 70 percent rate — which Walker is stuck on — on anything above $273,543. In this case, 70 percent of $26,457 would be $18,519. The rest of the money would be taxed at lower rates. That’s how marginal tax rates work, and Walker should (and probably does) know this.

If not, my colleague Alvin Chang explained how marginal tax rates work in a cartoon, ready-made for the fifth-graders too.

Now the kids can still say, “That’s not fair.” They wouldn’t be alone: In many ways, lawmakers came to that conclusion too. The top marginal income tax rate today is half of what it was in 1981, and it kicks in at a much higher income level.

What Ocasio-Cortez proposed was establishing a new top rate at 70 percent, but she also suggested having that tax rate start at a much higher income level than where it was in the Reagan years. Every dollar above $10 million in income should be taxed at 70 percent, she said — not all income.

Here’s what she said to Walker.

This back-and-forth didn’t end there. Walker went on to use Ocasio-Cortez’s idea as the centerpiece of a scare campaign against progressivism. It’s clear that Ocasio-Cortez — and the new class of Democrats who campaigned (and won) on ending income inequality — have struck a nerve.

Put simply, Walker believes in taxing the rich less.

Contrary to his tweet, unemployment did not rise because of the tax increases. The economy did not tank. In fact, liberal economists think the increases might have even helped it grow.

Here’s some context: In 1981, Reagan instituted some of the biggest tax cuts in US history. He cut the top marginal income tax rate from 70 percent to 50 percent. He did it again in 1986, bringing the top marginal income tax rate to 28 percent. But the cuts didn’t spur enough economic growth to outweigh the loss in revenue, and Congress backtracked after both of the tax cuts. Taxes were raised in 1982, 1983, 1984, and 1987. George H.W. Bush signed another tax increase in 1990. Bill Clinton passed another tax increase in 1993 raising the top marginal rate to 39.6 percent.

Clinton’s tax increases paralleled a period of budget surplus in the 1990s — which some Democratic lawmakers (including those like Barack Obama) have used as a rationale to advocate for increased taxes on the wealthy. Of course, liberal and conservative economists don’t agree on this point. The latter argue that a subsequent tax reduction on investments was what actually led to the economic boom. It’s an impossible question to answer: Taxes are only one lever in an economy — and their effects can’t be seen in isolation.

All of that aside, Walker’s Twitter feud with Ocasio-Cortez only highlights Republicans’ 2017 tax cuts, which have grown increasingly unpopular with the American public and given a massive windfall to America’s wealthiest.

As Alvin Chang and Dylan Scott have written for Vox, Republicans didn’t address the widening income gap in the United States last year — they exacerbated it.

And now they are balking at an alternative.