Raising the marginal tax rate on the richest Americans to 70 percent would put a major dent in the economy, former Federal Reserve Chairman Alan Greenspan said Monday.
During an interview with the CBS program “60 Minutes” that aired Sunday, freshman Rep. Alexandria Ocasio-Cortez proposed that such a levy be imposed to pay for what she calls a “Green New Deal” to slash carbon emissions and ultimately wean the U.S. off its reliance on fossil fuels.
The tax would apply to those earning more than $10 million a year, a group that currently pays the top marginal tax rate of 37 percent.
Without getting into the details, Greenspan said the move would have dire consequences.
“If you’re willing to take a significant drop in economic activity, I would suggest that,” Greenspan, who was central bank chief from 1987 to 2006, told CNBC’s “Squawk on the Street.”
“Maybe I better make myself clear,” he then added. “I think it would be a terrible mistake.”
Ocasio-Cortez, 29, represents New York’s 14th District, covering parts of the Bronx and Queens, and is the youngest woman ever to serve in Congress. Though she won as a Democrat, she identifies as a democratic socialist. Ocasio-Cortez did not respond to a request for comment.
When it comes to taxes, Greenspan said the measure passed in 2017 “was an excellent tax cut” though Congress failed to come up with a way to pay for it. He noted that the U.S. budget deficit for fiscal 2018 is likely to hit $1 trillion due in large part to entitlement burdens that lawmakers have not addressed.
“Nobody cares about deficits until it grips the economy in an inflationary way,” he said.
As for the general economic outlook, Greenspan remains pessimistic. He recently warned that investors should “run for cover.”
“This is an economy which is reminiscent of the 1970s, which was a period of inflation and economic slowdown,” he said. “That’s the type of system we’re dealing with unless we can confront the issue of entitlements.”