Coming Soon - Uncle Sam Wants His Cash!

Today, November 29, 2012, I made the mistake of looking at the national debt again.  Hours later I’m still depressed.  If you haven’t taken a look at this web site (usdebtclock.org), you should.  It is sobering if you weren’t concerned already.  As the numbers spin upward at a dizzying pace before your very eyes, you begin to get a visual picture of the growing mess we are in. 

While legislators debate fifty or one-hundred billion dollar budget cuts, we listen and think, “Great – that sounds like a good reduction!”  As politicians talk about taxing the rich to “make them pay their fair share and get us out of this mess”, the numbers tell a very different story.  It is always hard to tell which politicians are deliberately deceptive and selfish, which ones are afraid of a panic and which ones are just plain stupid, but any politician that talks about taxing the rich to get us out of this predicament is feeding us a load of something best represented with a word I don’t use.

Here are some fun facts for you: 

·         The top 5% of wage earners (those making over $160,000 or so) pay 59% of all federal income taxes.

·         By percentage or by total taxes, higher income brackets pay more of their income in taxes.  The effective tax rates (net after adjustments and deductions) are:

o   Top 1% ($350,000 per year and up) – 24% or $84,000 per year and up

o   Top 2%-5% ($160,000 to $350,000) – 21% or $54,000 on average

o   Top 5%-10% ($115,000 to $160,000) – 12% or $17,000 on average

o   Top 10%-25% ($70,000 to $115,000) – 8% or $7,400 on average

o   Top 25%-50% ($35,000 to $70,000) – 6% or $3,000 on average

o   Bottom 50% (Below $35,000) – 2% or $ 160 on average

·         If we raise rates on the top five percent of income earners by increasing their tax rates by an extra five percent, there would be $160 billion or so of additional tax revenue generated.  (This is substantially more than even President Obama has discussed as he would limit the increase to wage earners over $200,000 or households over $250,000.) That’s a $160 billion decrease of a $1,108 billion annual budget deficit problem.  That still leaves us $950 billion or so of deficit to deal with – this leaves 85% of the problem remaining each year!  Just taxing the “rich” (or even the “almost rich”) will barely make a dent in the problem.

·         All this is before we ever take the first bite out of our accumulated debt of over $16.3 trillion (that’s $16,300 billion for consistency sake)! Every man woman and child in the United States currently has $51,769 of national debt on their head if they were to pay it off today.  That’s over $200,000 for a typical family.  When you factor in those who pay no taxes, it drives the estimate up to $700,000 for a taxpaying family.  It goes up every day and has climbed over 20% since President Obama took office.  This is before you consider any of your personal debts.

·         In addition to the $700,000 or so you as a tax-paying American household are responsible for, there is another $1,060,000 every taxpayer is obligated to pay to cover Social Security/Medicaid and other entitlement expenses that will come due in the next couple of decades, based on current demographics of the aging population.  Do you have another $2 or $3 (two taxpayers) million dollars laying around to cover these costs for you and your family?  Do you have a good path to get it?  You'd better be finding one!

The next post will deal with what we should do to address this runaway government spending.