“Everybody’s poor” in oil-rich Venezuela, and US President Donald Trump’s top economic adviser claims he knows the answer: excessive taxes on the South American nation’s wealthiest citizens. With high-profile Democrats such as Rep. Alexandria Ocasio-Cortez clamoring to raise income tax rates as high as 70%, Larry Kudlow is warning that the US could see a similar “catastrophe.”
Kudlow says the “old saw” of higher taxes on the wealthy from America’s political left “never works.” The former CNBC host says he doesn’t know how such proposals will pan out, but he’s already fighting back.
“Look at Venezuela – it’s an absolute catastrophe. They taxed rich people, they taxed everybody and they have equality of sorts – everybody’s poor.”
In the 1960s, Venezuela was a relatively rich country, with per capita GDP larger than Brazil and Colombia and “not far behind” the US, according to Foreign Policy analysis. Falling oil revenues and policies implemented by Hugo Chávez and then Nicolás Maduro caused Venezuela’s fall. During their administrations, Venezuela pursued aggressive tax policies including targeting oil firms with excessive rates.
As a growing chance that Trump and the Republicans could be ousted from the White House in the upcoming election cycle looms, Kudlow is responding to tax proposals by Democrats Ocasio-Cortez and Sen. Elizabeth Warren, as well as Independent Bernie Sanders who this week proposed a 77% estate tax rate on the wealthy.
Ocasio-Cortez has proposed a 70% tax rate for America’s wealthiest, those with income above $10 million. Warren echoes this by proposing a “wealth tax.” Warren’s proposal would impact just 0.1% of Americans but deliver $2.75 trillion in tax revenue for the US economy.
“The top 1 percent of Americans pay 37 percent of all the income taxes, OK? And the top 1 percent basically pays more than the lowest 90 percent, so who’s carrying the freight here?”
After speculation earlier in January, Ocasio-Cortez was appointed to the House Financial Services Committee providing an ally to Committee Chair Maxine Waters and a foe to both Republicans and Wall Street investors.
JP Morgan Chase CEO Dimon, who has a net worth of around $1.3 billion, surprised Wall Street and many of his peers this week by saying “higher taxes” were “no problem” so long as the government uses them wisely. To compare, Kudlow reportedly earns around $3 million per year and is worth around $29 million.
Dimon believes those earning the most can afford to pay more in tax but that:
“We need to ensure that our tax dollars are going where they can be most effective — like expanding the earned income tax credit and other programs that support the people and communities who really need it.”
Larry Kudlow says higher taxes, like those proposed by leading Democrats and non-Republicans, will blunt “incentives” for hard work, investment, and innovation. After making the Venezuelan comparison, Kudlow said “I don’t want that,” adding that such plans could cause the US economy to “slump.”
Featured Image from Alex Wong / Getty Images / AFP