In an interview on CBS' 60 Minutes programme, Ms Ocasio-Cortez suggested the new tax rate should apply to Americans earning more than $10m a year, noting that similar rates existed in America a few decades ago.
The top tax rate was above 90 per cent during the 1950s, and while it has slowly descended, it remained as high as 50 per cent for much of President Ronald Reagan's tenure in the 1980s.
American households that earn more than $600,000 annually currently pay a 37 per cent tax rate, down from the 39.6 per cent rate they paid before the Republican tax law passed in 2017.
Conservatives have pushed for lower taxes on the rich as a spur to economic growth, while liberals see potentially untapped revenue that could fund their key social spending priorities, such as Medicare for all and free college tuition.
"There's an element where, yeah, people are going to have to start paying their fair share in taxes," Ms Ocasio-Cortez told CBS.
How much revenue could new taxes on the rich really raise?
We looked at the numbers, enlisting the help of a number of tax experts, including Mark Mazur, a former Treasury Department official now at the Tax Policy Centre, a centrist think tank; Joel Slemrod, a tax expert at the University of Michigan; and Ernie Tedeschi, an economist who served in Barack Obama's Treasury Department.
$720 bn/decade: Ms Ocasio-Cortez's suggestion for nearly doubling taxes on people earning more than $10m.
In 2016, the latest year for which government data is available, approximately 16,000 Americans earned more than $10m each. These are not in fact "the 1 per cent" many on the left like to talk about – they are a much smaller slice, fewer than 0.05 per cent of all US households.
It's difficult to estimate precisely how much more in taxes the government could wring from this ultra-elite. Collectively, their total taxable income amounted to $405bn in 2016, and they paid about $121bn in federal income taxes. They also face state and local taxes, which raise their overall tax burdens.
As she noted to "60 Minutes", Ms Ocasio-Cortez's idea for a 70 per cent tax rate on those earning more than $10m would only kick in beyond the first $10m in income. So, this new tax rate would do nothing to add to the amount of federal revenue on the first $160bn (16,000 people multiplied by $10m) in taxes this group paid.
But that leaves about $244bn in taxable income for those earning more than $10m a year. If this entire pool was taxed at 70 per cent instead of the 39.6 per cent they paid in 2016, the federal government would bring in an additional $72bn annually - or close to $720bn over 10 years, according to Mr Mazur. The real number is probably smaller than that, because wealthy Americans would probably find ways around paying this much-higher tax.
"You'd certainly see some people under that system change their behaviour to avoid the higher rate, which could significantly impact how much revenue it generates," Mr Mazur said, adding that the effect would be hard to estimate. (The exercise also assumes capital gains would be taxed at this much higher rate.)
This $720bn in a decade is not nearly enough to fund Medicare for all, which has been estimated to increase government outlays by about $30tn over a decade (while also zeroing out premiums and deductibles paid by Americans).
Still, it could fund a number of other measures. It could come close to funding the entirety of Bernie Sanders' free college tuition plan ($800bn), fund President Barack Obama's plan to get close to universal pre-kindergarten ($75bn), forgive more than half the student debt in America ($1.4tn), cover Democratic leaders' plan for boosting teacher pay and school funding ($100bn), or come close to funding a $1tn infrastructure plan.
And of course, higher income tax rates on the top 16,000 households is not the only way to raise taxes on rich Americans.
$3 tn/decade: A wealth tax on the top 1 per cent similar to those in Europe.
The American government currently raises tax revenue primarily through payroll taxes and income taxes, and gets a smaller chunk from estate taxes and corporate taxes. It has not adopted a kind of tax that exists in some European countries: a wealth tax, wherein the federal government takes a chunk based on household wealth rather than income.
Norway, for instance, in 2016 taxed at a rate up to 0.70 per cent for all wealth over 1.4m kroner ($162,568). France's wealth tax in 2017 hit assets above €1.3m ($1.4m).
Mr Slemrod, of the University of Michigan, said in an email that the wealthiest 1 per cent of Americans own roughly one third of the $107tn in wealth in America. This group collectively holds about $20tn in wealth above $10m per household.
From there the calculation of wealth tax is simple: a 1 per cent wealth tax on the wealthiest 1 per cent of households above $10m could raise about $200bn a year, or $2tn over 10 years. Mr Tedeschi, the former Obama official, found a 0.5 per cent wealth tax on the top 1 per cent could raise at most $3tn over 10 years.
But this, too, would probably change Americans' behaviour and perhaps lead them to try shifting their wealth overseas, and the economists say the actual amount of revenue is likely lower than their estimates suggest. And this is assuming there are no exemptions to what is considered wealth, such as housing assets.
Plus, this approach would require Americans to give the Internal Revenue Service a full accounting of all the assets they own under law – something that could be required under law but may prove difficult to evaluate. In 1990, the federal government did try something similar by placing excise taxes on sales of yachts, expensive automobiles, jewellery and other things consumed by rich people. But that effort came right before a minor recession, leading to the repeal of the taxes.
"The difficulties of monitoring and compliance are huge," Mr Mazur said of the wealth tax. "But it could be done and raise a lot of money."
$3tn/decade: Doubling income taxes on the top 1 per cent.
In 2012, the economists Peter Diamond of the Massachusetts Institute of Technology and Emmanuel Saez of the University of California at Berkeley published a paper arguing the optimal top tax rate is 73 per cent. In 2018, that would raise the tax rate on income above $600,000 from 37 per cent to 73 per cent, but back then it meant increasing the top rate from 39.6 per cent to 73 per cent.
The IRS says that Americans earning more than $600,000 annually compose the richest 0.9 per cent of families, so we'll use that for shorthand for the 1 per cent.
In 2016, this richest 0.9 per cent earned about $1.7tn in taxable income and paid about $530bn in taxes. These Americans would have to pay an additional $320bn every year in taxes if the top tax rate went up to 70 per cent, according to calculations based on IRS data. Mr Mazur, the former Treasury official, noted this estimate was probably high because the wealthy would probably find ways to try to shelter themselves from higher taxation, such as by buying tax-exempt bonds.
Other economists found similar results. Mr Tedeschi, the former Obama economist, put the number at about $300bn annually. Meanwhile, raising tax rates for the top 1 per cent to 57 per cent would raise about $1.7tn over a decade, while raising it to 83 per cent would raise $3.8tn over that period, Mr Tedeschi found.
"You can get a hell of a lot of a money from taxing the 1 per cent," said Edward Wolff, a tax expert at New York University.
The Congressional Budget Office also recently estimated that raising taxes on the two highest income brackets by 1 percentage point would net $123bn over 10 years. That would be for everybody who earns more than $200,000 annually.
The CBO also found that a 0.1 per cent financial transactions tax on Wall Street would raise an additional $780bn over 10 years, while returning the corporate tax rate to 35 per cent would raise an additional $1tn over a decade. (The Republican tax law of 2017 lowered that rate from 35 per cent to 21 per cent.)
But Americans outside the top 1 per cent would probably pay at least part of both these taxes, Mr Tedeshi said. Overall, just including a new wealth tax and significantly higher income taxes, the federal government could probably raise an additional $2 trillion to $3 trillion a decade by taxing the 1 per cent alone, according to Mr Tedeschi.
The Washington Post
Register for free to continue reading
Registration is a free and easy way to support our truly independent journalism
By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists
Already have an account? sign in
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies