(CNN) Both Massachusetts Sen. Elizabeth Warren and freshman New York Rep. Alexandra Ocasio-Cortez want to tax the rich -- but the two progressive Democratic icons are proposing going about it in very different ways.
Most proposals to tax the rich have focused on raising rates on income and capital gains, as well as increasing estate taxes. That's what Ocasio-Cortez raised on CBS' "60 Minutes" earlier this month, when she proposed setting rates as high as 70% on earnings above $10 million to help fund a climate change plan she describes as a "Green New Deal."
Warren, on the other hand, wants to tap into different pool of money -- the assets of the wealthy. A plan developed by her nascent presidential campaign would impose a 2% tax on Americans whose net worth exceeds $50 million, with an additional 1% levy on billionaires, according to documents provided by Warren's presidential campaign.
While hiking taxes on the rich is typically a go-to move for Democrats, a recent Fox News poll found that voters in both parties generally support raising rates on multimillionaires. Democrats are more enthusiastic, with 85% favoring raising taxes on those making more than $10 million. Some 54% of Republicans agree with this.
Ocasio-Cortez is the latest to lead the charge on boosting rates for high earners.
"There's an element where, yeah, people are going to have to start paying their fair share in taxes," she said. "Once you get to the tippie-tops, on your $10 millionth dollar, sometimes you see tax rates as high as 60% or 70%. That doesn't mean all $10 million dollars are taxed at an extremely high rate. But it means that as you climb up this ladder, you should be contributing more."
The nation's top income tax rate was 70% in the 1970s, though the tax system was much different back then. It dropped significantly during the Reagan and George H.W. Bush administrations, then rose a bit under Democratic presidents and fell somewhat under Republican ones. Most recently, the 2017 tax bill trimmed the top rate to 37%, down from 39.6%.
While it may sound good to some to raise the top rate, many experts say this is not the most effective way to hike taxes on the rich since it would only hit taxable income above $10 million.
"Just raising income tax rates on the highest-income households doesn't do as much for progressivity as some wish," Howard Gleckman, a senior fellow at the non-partisan Tax Policy Center, wrote in a blog post the day after Ocasio-Cortez' comments aired.
Since Ocasio-Cortez has not yet offered a detailed formal proposal, the center has not calculated how much additional revenue raising the top rate to 70% could bring in. But it's likely that high earners would try to shift their income into capital gains -- by being paid in stock, deferring compensation or other methods -- in order to minimize the tax hit, Gleckman said.
Warren, meanwhile, is suggesting taxing accumulated wealth, not annual income.
University of California Berkeley economics professors Emmanuel Saez and Gabriel Zucman, who analyzed the proposal for the Warren team, estimate that 75,000 households -- less than the wealthiest 0.1% -- would be subject to this tax. The plan would raise around $2.75 trillion over 10 years.
Experts are divided over how well a wealth tax would work and whether it is permitted by the US Constitution, which limits Congress' power to levy so-called "direct taxes." Several scholars, including multiple former heads of the Justice Department's Office of Legal Counsel, have written to the Warren campaign defending the plan's legality.
Supporters of Warren's proposal say it would enable the government to tax the vast assets of the wealthy, including closely-held businesses, mansions, artwork and financial holdings. Currently, these are typically only taxed when they are sold -- and even then, they are subject to a lower capital gains rate.
"Simply raising a tax rate on an existing base is not going to do very much," said David Kamin, a law professor at New York University and former special assistant for economic poilcy in the Obama administration. Warren's proposal is "more effectively taxing people who are not captured to a significant degree in our current income tax, who have built up large fortunes and simply aren't paying very much tax relative to those fortunes."
But wealth taxes can be difficult to administer since the rich have assets that are hard to value.
"Imagine a large privately-held company—its value could change almost daily. How would the tax handle these fluctuations?" wrote right-leaning Tax Foundation analysts Nicole Kaeding and Kyle Pomerleau in a post. They noted that several countries in the Organisation for Economic Co-Operation and Development have dropped their wealth taxes because of the challenges posed by collection.
The wealth tax gives the IRS a chance to tighten its existing rules for valuing assets to close loopholes and to develop new valuation rules, Warren's campaign says in a summary of her proposed tax. To limit people's ability to evade the tax, she would provide a significant increase in the agency's enforcement budget and set a minimum audit rate for taxpayers in this asset category, among other measures.
Both Warren and Ocasio-Cortez have made clear they're open to each others' ideas. Spokespeople for both lawmakers said they support both types of tax hikes on the wealthy since both would minimize income inequality.
"If you really want to go after concentrated wealth, you have to tax wealth itself," according to a Warren campaign aide. "This is not to say you can't change income taxes, and I think [Warren] would be supportive of that. But this is really the way to get at the dramatic inequality and concentration of wealth that we have in America."
"This is not an either/or question," said Corbin Trent, communications director for Ocasio-Cortez. "This is a question about how we reform our entire tax policy in this country to address two of the biggest challenges that we faced as a nation over the past thirty years, which are income and wealth inequality."