Davos Billionaires Fear Alexandria Ocasio-Cortez's Popular Tax Proposal

Responses from Davos attendees to a proposal by newly elected Representative Alexandria Ocasio-Cortez to tax income above $10 million at a 70 percent marginal tax rate suggest even moderate and popular taxes on the rich are beyond the bounds of consideration for the world's financial elite.

Hundreds of politicians, think tank and NGO directors, academics and journalists joined more than 1,700 CEOs and executives in Davos, Switzerland, to address the global consequences of what the host, the World Economic Forum (WEF), describes as a "fourth Industrial Revolution"—this time around "cyber-physical systems," or the increased integration of human identity and technology, instead of previous eras built on steam mechanics, electrical mass production and digital automation.

Forum attendees are expected to address climate change, a slowing economy and the sharp increase in wealth inequality, dramatically reasserted before the forum by Oxfam International, which released a report describing a global doubling of billionaires and staggering capital accumulation at the top, with just 26 of the world's richest individuals holding wealth equal to that of the 3.8 billion poorest people on the planet combined.

"It's scary," Scott Minerd, global chief investment officer for Guggenheim Partners said on CNBC. "I think the likelihood that a 70 percent tax rate, or something like that, becomes policy is actually very real."

A billionaire at Davos, granted anonymity by CNBC to opine on how far 2020 Democratic Party candidates will go, disagreed with Minerd's assessment. "It's not going to happen, trust me," the source said. But while financial executives gathered to discuss solutions to the world's problems were divided on whether higher taxes on multimillionaire incomes were likely, the billionaires speaking with CNBC were unanimous in their opposition, even among Democratic party donors, like private equity firm founder Glenn Hutchins.

"The important thing in my view is not to try to score political points with having a 70 percent, very high tax rate," Hutchins told CNBC, dismissing proposals to address wealth inequality via taxation as political posturing standing in the way of a "fair" tax system.

Ocasio-Cortez has framed her higher marginal tax rate proposal, first made on an episode of 60 Minutes as "safeguarding democracy against oligarchy," by disincentivizing extremely high incomes with taxes on the super rich. The strategy has narrowed inequality in the past, with a 91 percent marginal tax rate raking back high incomes —especially those more than 100 times the national average—from 1951 to 1963.

“The root justification [for marginal tax rates] is not about collecting revenue. It is about regulating inequality and the market economy.

It is also about safeguarding democracy against oligarchy.”

- Emmanuel Saez & Gabriel Zucman https://t.co/TeC2Sf2lTk

— Alexandria Ocasio-Cortez (@AOC) January 22, 2019

Already popular with the growing democratic-socialist left, with which Ocasio-Cortez self-identifies, higher tax rates on the rich are likely to be a litmus test for Democratic candidates pursuing progressive votes. But Ocasio-Cortez has also awakened a more fundamental moral question, independent of any specific marginal tax rate proposal, calling into question the social value of having billionaires at all.

"A system that allows billionaires to exist when there are parts of Alabama where people are still getting ringworm because they don't have access to public health is wrong," she said at a Martin Luther King Jr. Day celebration at Riverside Church in Harlem on Monday, further stating the drive to become "a billionaire and own more than millions of families combined is not an aspirational or good thing."

It’s wild that some people are more scared of a marginal tax rate than the fact that 40% of Americans struggle to pay for at least one basic need, like food or rent.

Imagine if we focused positively, away from fear of the former toward solving the latter.https://t.co/91SoKmhGxx

— Alexandria Ocasio-Cortez (@AOC) January 22, 2019

Despite Minerd's characterization of Ocasio-Cortez's tax proposal as emerging from "extreme left" efforts to hold the Democratic Party "hostage," polling reveals it to be a measure with wide popular support, not only with Democrats, but across the political spectrum. In January, The Hill/HarrisX pollsters found that 59 percent favor a 70 percent marginal tax rate on incomes above $10 million a year. The policy was popular in every region of the country, with even 45 percent of self-identified Republicans approving. Contrast that with the most recent Gallup polling for the 2017 Republican tax cut, which found only 39 percent approval.

The opinions of billionaires in Davos to address what the WEF agenda describes as "legitimate frustration over the failure of globalization to consistently raise living standards" differs sharply from how the majority of American voters would like to handle the widening chasm between the rich and the poor. The WEF, at Davos through January 25, will reveal if they can come up with something better.