Debt, Its Impact and Your Responsibility

Much has been written about the US government’s total debt outstanding, which equals the cumulative sum of all the deficits in annual budgets to date, less the years when we had surpluses. Of course, the last years of surplus in the budget were 1998-2001 (all but eight months of that under President Bill Clinton, under whose administration income tax revenues were 19.5% of GDP). The total debt now stands at about $36 trillion, or 36 followed by 12 zero’s. So how did we get here?

Some of it has to do with spending, the side that seems to be getting the most attention in the media and in political discourse today. But the revenue side deserves its own share of the responsibility. While the benefits of overspending are spread broadly among the many, the benefits of tax cuts are not so broadly distributed, mostly focused on the wealthiest income groups.

That’s probably understandable, given that we can’t squeeze much national tax revenue from the poorest of the poor, and so they don’t lobby as aggressively in Congress as the wealthy do. But that doesn’t mean we end up with the fairest distribution of the burden of paying taxes.

One problem is that while the federal government raises its biggest chunk of revenue (49%) from income taxes [25% comes from payroll taxes, such as Social security; 11% comes from corporate taxes], most states generate revenue from sales and property taxes, and these fall more broadly on lower- and middleincome groups. The income tax is a progressive tax, meaning we pay more as our incomes rise, whereas sales and property taxes are not progressive, so those tax rates fall equally on all income groups, as a percent of sales or of property value.

Effectively, the result is that while lower-income households contribute a much smaller percent of all federal government income, they contribute higher shares than other income groups to the revenues of state and local governments. But who SHOULD pay more? How do we determine who should pay more or less to governments to support national defense, police and fire protection, infrastructure such as highways and water resources, health and welfare services, recreational benefits such as parks, and Social Security?

One of the most extreme consequences of tax policy is changes in income distribution. In the 1950s the percent of total income of the top 20% of households in the US was 50%; the lowest 20% of households received 3%, and those percentages were largely unchanged in 2023. For the very TOP 1% of households, their income rose from about 10% of all income in 1950 to 22% in 2020. [Source: Tax Foundation] During that same time frame, the WEALTH level of the top 1% of households rose from 22% to 34%. [Source: Congressional Budget Office] These are HUGE changes for the very wealthiest Americans, much of it attributable to the lowering of tax rates for the richest of households under Presidents Reagan and George W. Bush. President Trump’s temporary tax cuts from his first administration (which brought tax revenues down now to only 16.3% of GDP) may have had some impact on skewing income and wealth toward the rich, but their temporary status would be made permanent, and still more benefits accrue to the rich if the current “Big, Beautiful Bill” becomes law.

The federal budget approved by the House of Representatives and being considered now by the U.S. Senate will have a major impact on the debt going forward, perhaps as much as a 10% increase in the debt over the next decade. One critical thing to remember is that while spending levels surely matter, it’s NOT only the spending that is generating the deficits. It’s also the revenue stream that’s being cut due to tax policies that could make our wealth distribution in the USA still more skewed toward the richest of the rich.

With democracy comes responsibility, and when the stakes are high, your voice is as important as your vote! Is our government to be “OF, BY, and FOR the BILLIONAIRES” or “OF, BY, and FOR the PEOPLE”? Senators Cruz and Cornyn can’t read your minds, dear readers, so now’s the time to let them know your own preferences for our future. Speak up and speak out!