Just for fun, for the weekend, I’ve calculated a handy way for you to determine your share of the federal debt. Much has been said about “income inequality”, along with an undefined slogan about the 1% vs. the 99%. But so far, I haven’t seen much analysis on who is going to pay our federal debt and when it might be paid. Our debt has grown at an unprecedented pace to just over $15 trillion with no end in sight. That’s an abstract number that no one can particularly understand, much less determine what it means personally.
In campaign 2012, more honesty and accountability for our debt burden needs to be part of the debate. Taxes and energy costs are obvious, but our obligations to the debt are more like termites, eroding America’s economic structure and potential from within.
Admittedly, my analysis is back-of-the-envelope and makes some simple assumptions. I’ll pretend that the debt is going to stop at about where it is today, just over $15 trillion, that there will be no interest on the debt and that taxpayers who are paying federal income tax today are the same ones who will be responsible for the debt. And I pretend that we’re going to pay off the debt in 15 years. What could be more irresponsible than leaving the debt for the next generation? We may as well go ahead and be honest with today’s young people about what will be required of them as they enter their earning years.
I’ve attached a chart that combines numbers provided by the Tax Foundation with these assumptions. Let’s start with the top 1% of taxpayers who are so often vilified by the Democrats. The top 1% makes $345,000 or more of adjusted gross income in a year. One-percenters pay 37% of federal income taxes, so let’s assume they’ll pay 37% of the debt. That means that each top filer in the top 1% is responsible for four million dollars of the debt. And if we’re going to pay it off in 15 years, with no interest, then we would require $22,000 per month from those taxpayers after they have paid their current tax burden. Does anyone think we can raise taxes by $22,000 a month on this group of taxpayers and have them survive that level of confiscation? Of course not. They would be wiped out, and the goods and services that they currently buy in the private sector would quickly evaporate. But stick with me.
If you’re in the top two to five percent of federal income taxpayers, you make between $150,000-$340,000 a year, which means each tax filer owes $600,000 of the current debt. And for this group to pay their “fair share” over the next 15 years, we would require $3,300 per month of additional, after-tax payments to go toward repayment of the debt.
The chart goes into more detail, but jumping down to the top 26-50% of taxpayers, with an adjusted gross income ranging from $32,000 to $66,000, and paying 11% of federal income taxes, your portion of the debt is $48,000, and the government would require another $270 per month from you for 15 years, on top of what you already pay in all taxes.
These numbers and this type of analysis should be part of the current economic debate, just like gas prices and tax rates. If we are going to be honest and deal with our economic problems in a realistic way, we can’t pretend the debt obligation isn’t there. Paying the debt is going to cost real money, and it’s going to have to come out of real pockets.
Part of the decision that needs to be made in November’s election is whether voters want the ability to pay for obligations to come from a growing economy and a booming private sector, or ideologically-based punitive confiscation of workers’ take-home pay.
I invite readers with sharper pencils and sharper minds than mine to send in better numbers and clearer analysis. Let’s not pretend or be blind about the reality of having to pay our debts any longer.