In an interview with The Verge, Microsoft co-founder Bill Gates said the tax proposals targeting high income brackets, like a plan from Alexandria Ocasio-Cortez, are missing the point.
During the podcast, Gates said that the tax proposals laid out by Ocasio-Cortez, which is 70% for everyone above $10 million, misses the big picture. According to Gates, there exists a difference between the government running efficient programs and taxing people into oblivion.
“Certainly, the idea of government being more effective in terms of how it runs education or social programs, there’s a lot of opportunity for improvement there,” Gates explained. “In terms of revenue collection, you wouldn’t want to just focus on the ordinary income rate, because people who are wealthy have a rounding error of ordinary income.”
He continued: “They have income that just is the value of their stock, which if they don’t sell it, it doesn’t show up as income at all, or if it shows up, it shows over in the capital gains side. So the ability of hedge fund people, various people — they aren’t paying that ordinary income rate.”
“The one thing that never gets much press — the IRS shows the statistics for the top 400 people of the highest income and the rate they pay. Anyway, you should look at that. It’s about a 20 percent rate, so it has nothing to do with the 39.6 marginal ordinary income rate. So it’s a misfocus. If you focus on that, you’re missing the picture.”
Gates, one of the richest people in the world, said that tax plans proposed by the likes of Ocasio-Cortez would have a negative effect by creating tax dodging schemes, causing “income to show up in other countries and things.”Though Gates supports a “more progressive”tax rate for the rich, he thinks it should not stifle income generation.
“We can be more progressive without really threatening income generation — what you have left to decide how to spread around,” Gates said.