Comedian Bill Burr this week went off on a totally not safe for work rant about Rep. Alexandria Ocasio-Cortez’s plan to impose a 70 percent tax rate on all income earned above $10 million. It’s hilarious and worth a listen, but do use earbuds for the sake of your more delicate neighbors.
Burr makes a couple of good observations on the topic. First, he points out that no one should have to pay 70 percent of any of her income to the government. This is an important step conservatives often skip as we seek to dive right into policy arguments. As Arthur Brooks has famously pointed out, first you make a value alignment with your listener, then from that common value alignment you make a policy argument. Burr does that here simply and colorfully.
This is another good lesson for conservatives: tell a story. Put a picture in people’s minds. Make it real.
The 70 percent tax rate hits a little close to home for Burr. He points out how very successful comics (like himself?) can sometimes make more than $10 million in a given year. These comics were at one point in their careers lucky to make $10,000 in a year, never mind $10 million.
Anyone watching Netflix documentaries about the early life of comics like Burr, Jerry Seinfeld, Ray Romano, and others know that a comic’s early years are lonely and skin-thickening. Jokes are tested on real crowds, who either boo rudely or give no response. Worried parents and relatives asking “When are you going to get a real job?” make every holiday and get-together a painful exercise. Burr has lived this, and much like the dorm kid who thought up dollar razors, he sees a 70 percent tax rate as a fundamentally unfair prize for pushing through and making a career out of comedy.
Throughout his very funny rant, Burr compares Ocasio-Cortez’s 70 percent tax rate socialist aspirations to his desire to tax the overseas earnings of large, multinational corporations. Here Burr’s facts could use a bit of an update from the Tax Cuts and Jobs Act.
Most people who know anything about President Trump’s signature 2017 tax cut law know that it cut the corporate income tax rate from 35 percent (the federal part of the highest tax rate on such income in the developed world) to 21 percent (right in line with the developed world average).
That alone makes the United States a better place for corporations to house income and pay taxes. Cutting the rate was the best thing we could have done to stop corporate inversions, stop outsourcing jobs and capital overseas, and get American companies moving again. When combined with immediate full deductions for business fixed investment in equipment, tax reform made America a magnet for corporate profits, and therefore corporate tax payments.
The Tax Cuts and Jobs Act for the first time taxed all this money retroactively, at a tax rate of 15.5 percent on cash and 8 percent on assets held abroad. Going forward, companies can pay tax overseas and bring the money back to the United States without further tax penalty.
But policymakers knew that this was not enough. There would always be tax havens where corporations could earn money and pay a zero percent tax rate. So the Tax Cuts and Jobs Act for the first time said that U.S. companies would have to pay a global minimum tax (with the clever acronym “GILTI”) for operating in tax havens.
This minimum tax is 13.125 percent, and is owed to the IRS if you earn money in an island paradise and pay little to nothing in local taxes. That’s a huge improvement over the prior law, which allowed multinational firms to earn money tax-free in these tax havens and escape U.S. taxation.
Burr’s rant against confiscatory tax rates is spot on: no one should have to give 70 percent of what he earns—above any level of income—to the government. But Burr should also give credit where credit is due to the Republican congressional majority and to President Trump for a tax reform law that ended corporate tax haven sheltering once and for all.