# How much tax income do we need? (USA) **URL:** \ **Category:** Great Debates\ **Created:** [August 21, 2012, 1:29am UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120 "2012-08-21T01:29:34Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![DagNation](https://avatars.discourse-cdn.com/v4/letter/d/ee7513/32.png) [@DagNation](https://boards.straightdope.com/u/DagNation)\ **Post date:** [August 21, 2012, 1:29am UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/1 "2012-08-21T01:29:34Z")
I read a lot about how the government is underfunded because of the Bush tax cuts, etc… but I have not heard any specific numbers about what we need to run the Country. What should be spent to get us out of this recession? On what? (broad strokes like “roads” or “schools”) Pretending we are at a stable point in our economy, with 4-5% unemployment, 2-4% inflation, 3-6% average mortgage interest, real GDP increasing 1-3% per year, and the states and local governments stable, what should the overall tax rate be to run the federal government? With the following assumptions: -Military is at current spending, without the cost of the Afghan war. -Social Security is fully funded and stable. -Medicare for everyone, fully funded. -Arts, sciences, and all the other little stuff on the budget are well funded, in line with historical norms. Yeah, I know that is a very vague statement. -Interest payments on the debt (ignore the principle, just interest costs). (have I missed any of the big items?) Please focus on spending needs, not taxing issues in this thread. Thanks! ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 21, 2012, 2:08am UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/2 "2012-08-21T02:08:10Z")
If you leave Medicare as is, eventually it simply becomes unsustainable. But assuming medicare remains at current spending levels in a normal economy you can balance the budget with a bit of a surplus at ~20% of GDP. ---
**Author:** ![DagNation](https://avatars.discourse-cdn.com/v4/letter/d/ee7513/32.png) [@DagNation](https://boards.straightdope.com/u/DagNation)\ **Post date:** [August 21, 2012, 5:59am UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/3 "2012-08-21T05:59:32Z")
Why does Medicare have to blow up? I know health care spending has grown fast for a while now, but it has to level off eventually, right? How much more would Medicare for ALL cost? It would require collecting taxes in place of the premiums that are paid now, and I understand that health care costs 16% of GDP. I think that universal health care could bring some efficiencies, and a large part of it is already paid for by the federal government, so that whole 16% would not be added, but a lot of it would. I’m looking at more of a wish list for liberals budget - if we could have medicare for all and a decent safety net (I’m thinking Carter era social services + health) What would that cost? ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [August 21, 2012, 6:21am UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/4 "2012-08-21T06:21:54Z")
Here’s an answer: It takes as much as it takes. It’s mathematically impossible that the government will have to collect 100% of GDP to achieve the, “4-5% unemployment, 2-4% inflation, 3-6% average mortgage interest, real GDP increasing 1-3% per year, and the states and local governments stable,” you’re talking about. So we find what we need to spend to maintain that, and we raise that much revenue. We never actually tax everything away, despite right-wing rhetoric to the contrary. From the European experience, I suppose we’ll probably stabilize somewhere around 50%-60% of GDP collected in taxes (federal, state and local). Could be less, could be more, maybe 70%, depending on a variety of factors. For example, there’s such profound wealth inequality in the USA, that restoring the old “broad middle-class” paradigm would necessarily entail redistribution. That could mean taxing a rather high proportion of the economy, but only due to steeply progressive marginal taxes that 95% of Americans would never pay. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [August 21, 2012, 6:27am UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/5 "2012-08-21T06:27:15Z")
I should add that expecting real GDP to increase every year is one of the things that gets us in trouble. That drives policymakers to push growth-driving policies, even where they may cause other problems (social, environmental, sustainability, etc.). So maybe we should drop that expectation and use a less ambitious model. ---
**Author:** ![adaher](https://avatars.discourse-cdn.com/v4/letter/a/dec6dc/32.png) [@adaher](https://boards.straightdope.com/u/adaher)\ **Post date:** [August 21, 2012, 8:20am UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/6 "2012-08-21T08:20:34Z")
> [@DagNation](#): > > Why does Medicare have to blow up? I know health care spending has grown fast for a while now, but it has to level off eventually, right? Bubbles only pop when people stop being willing to put money into fueling them. IF the government just keeps on borrowing to fund increasing health care costs, they’ll keep on increasing until we can’t borrow anymore. At some point, the US government has to make a decision to stop. And most serious policymakers have ideas for making the US stop. You know about the voucher plan probably, there’s also IPAB, which is supposed to prevent Medicare from growing beyond a certain level each year. ---
**Author:** ![Chief\_Pedant](https://avatars.discourse-cdn.com/v4/letter/c/a6a055/32.png) [@Chief\_Pedant](https://boards.straightdope.com/u/Chief_Pedant)\ **Post date:** [August 21, 2012, 10:44am UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/7 "2012-08-21T10:44:29Z")
Need for what? The amount of money we need to avoid borrowing any more? The amount of money we need to meet the budget plus repay our past borrowing? The amount of money we need to meet the budget plus pay just the interest on past borrowing? The amount of money we would need if I were in charge of the programs you list? As an aside, the idea of spending your way out of a recession is a whole other topic…if it were that simple, we could just borrow another few trillion… ---
**Author:** ![Farmer\_Jane](https://avatars.discourse-cdn.com/v4/letter/f/bbe5ce/32.png) [@Farmer\_Jane](https://boards.straightdope.com/u/Farmer_Jane)\ **Post date:** [August 21, 2012, 12:28pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/8 "2012-08-21T12:28:16Z")
Medicare doesn’t have to blow up. A chunk of that is for end-of-life costs. Dying people are REALLY expensive. It doesn’t have to be that way. I read this years ago in a public policy class and a quick Google shows my professor wasn’t kidding. [Link](http://www.cbsnews.com/2100-18560_162-6747002.html). > [@](#): > > Last year, Medicare paid $55 billion just for doctor and hospital bills during the last two months of patients’ lives. That’s more than the budget for the Department of Homeland Security, or the Department of Education. And it has been estimated that 20 to 30 percent of these medical expenses may have had no meaningful impact. Most of the bills are paid for by the federal government with few or no questions asked. There are things we could do with Medicare/aid that would help, but no one seems interested. > [@](#): > > “I can’t tell you all the tests they took. But I do know that she saw over 13 specialists,” Snedeker told Kroft. > > Asked what kind of specialists, Snedeker said, “Neurological, gastroenterologists. She even saw a psychiatrist because they said she was depressed. And she told the psychiatrist, ‘Of course, I’m depressed. I’m dying.’” > > When we reviewed the medical records, we discovered that there weren’t 13 specialists who attended to her mother: there were 25, each of whom billed Medicare separately. > > The hospital told 60 Minutes that all the tests were appropriate, and an independent physician said this case was fairly typical. > > Among the tests conducted was a pap smear, which is generally only recommended for much younger women, not an octogenarian who was already dying of liver and heart disease. > > “In medicine we have turned the laws of supply and demand upside down,” Elliot Fisher said. “Supply drives its own demand. If you’re running a hospital, you have to keep that hospital full of paying patients. In order to, you know, to meet your payroll. In order to pay off your bonds.” > > “So, the more M.R.I. machines you have, the more people are gonna get M.R.I. tests?” Kroft asked. > > “Absolutely,” Fisher said. Unfortunately, the President doesn’t take my calls. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [August 21, 2012, 12:32pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/9 "2012-08-21T12:32:21Z")
> [@Farmer\_Jane](#): > > Medicare doesn’t have to blow up. A chunk of that is for end-of-life costs. Dying people are REALLY expensive. It doesn’t have to be that way. I read this years ago in a public policy class and a quick Google shows my professor wasn’t kidding. [Link](http://www.cbsnews.com/2100-18560_162-6747002.html). > > There are things we could do with Medicare/aid that would help, but no one seems interested. > > Unfortunately, the President doesn’t take my calls. You’re gonna suggest Death Panels? Let me know how that works out for ya. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [August 21, 2012, 12:32pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/10 "2012-08-21T12:32:51Z")
> [@Farmer\_Jane](#): > > Medicare doesn’t have to blow up. A chunk of that is for end-of-life costs. Dying people are REALLY expensive. It doesn’t have to be that way. I read this years ago in a public policy class and a quick Google shows my professor wasn’t kidding. So who decides which medical procedures are necessary, and which are just inflating the cost? ---
**Author:** ![Nametag](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/nametag/32/406_2.png) [@Nametag](https://boards.straightdope.com/u/Nametag)\ **Post date:** [August 21, 2012, 1:17pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/11 "2012-08-21T13:17:20Z")
> [@Ludovic](#): > > You’re gonna suggest Death Panels? Let me know how that works out for ya. We already have death panels. They’re currently run by insurance companies. ---
**Author:** ![Algorithm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/algorithm/32/12204_2.png) [@Algorithm](https://boards.straightdope.com/u/Algorithm)\ **Post date:** [August 21, 2012, 1:50pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/12 "2012-08-21T13:50:56Z")
> [@Farmer\_Jane](#): > > There are things we could do with Medicare/aid that would help, but no one seems interested. Exactly how many _nanoseconds_ do you think would pass between Obama suggesting end-of-life care changes to Medicare and the Republicans flying off the handle about how he’s going to show up at the hospital to personally pull the plug on your grandma’s life support? ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [August 21, 2012, 2:08pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/13 "2012-08-21T14:08:57Z")
> [@Nametag](#): > > We already have death panels. They’re currently run by insurance companies. Of course, but political discourse on the topic has been poisoned by Sarah Palin. Obama was being roasted in the blogosphere for a couple of weeks just because Obamacare mandates end-of-life _counseling_, for fuck’s sake. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [August 21, 2012, 2:25pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/14 "2012-08-21T14:25:08Z")
Well, historically federal spending has been around 20% of GDP. So I’d throw that out as a pretty good idea of how much we need to collect in taxes if we want a balanced budget. Some nice historical tables (excel format) here: [http://www.whitehouse.gov/omb/budget/Historicals](http://www.whitehouse.gov/omb/budget/Historicals) As a point of reference, 2011 spending was 24.1% of GDP. Since the Bush era receipts have been at or below 18% (it was 20% when he took office) and for 2011 are at 15.4% of GDP. ---
**Author:** ![brickbacon](https://avatars.discourse-cdn.com/v4/letter/b/898d66/32.png) [@brickbacon](https://boards.straightdope.com/u/brickbacon)\ **Post date:** [August 21, 2012, 2:42pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/15 "2012-08-21T14:42:08Z")
> [@foolsguinea](#): > > I should add that expecting real GDP to increase every year is one of the things that gets us in trouble. That drives policymakers to push growth-driving policies, even where they may cause other problems (social, environmental, sustainability, etc.). So maybe we should drop that expectation and use a less ambitious model. One of the main reasons you need GDP to increase is because of population increases and demographic changes. > [@Fear\_Itself](#): > > So who decides which medical procedures are necessary, and which are just inflating the cost? There is also the tricky situation of not knowing when the “last 2 month of life” are for most people. The low hanging fruit are situations like a fast moving cancer that’s readily apparent in an otherwise healthy old person, and doesn’t require or necessitate expensive intervention, treatment, or palliative care. But many of these cases are people who eventually succumb to chronic illnesses they have been living with for a while. It’s not easy to tell a guy who is living with something that will eventually kill them, that they need to forgo any treatment because it is futile in the long term. I’m not saying there is not room for improvement, but it’s a lot harder to tell when the clock starts on the last two months of life, than most people appreciate. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [August 21, 2012, 5:45pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/16 "2012-08-21T17:45:05Z")
> [@DagNation](#): > > Why does Medicare have to blow up? I know health care spending has grown fast for a while now, but it has to level off eventually, right? No it doesn’t HAVE to level off. This is more than the result of an aging population taking lipitor, its the result of some Baumol’s disease effect and ever increasing end of life costs. > [@](#): > > How much more would Medicare for ALL cost? It would require collecting taxes in place of the premiums that are paid now, and I understand that health care costs 16% of GDP. I think that universal health care could bring some efficiencies, and a large part of it is already paid for by the federal government, so that whole 16% would not be added, but a lot of it would. Medicare eligible patients account for the lion’s share of all medical consumption in the country. Medicare for all might even make medicare more solvent without those efficiencies you talk about if we can charge young folks the same sort of premiums for medicare that insurance companies charge for health insurance. Then there are those synergies. Insurance companies want to keep you out of the hospital until youa re about 65. If they had to pay your medical costs from cradle to grave, they would pay for a lot more stuff earlier in your life but they can just dump you into the medicare system once you are eligible. But in the end, even places like France, and the UK are facing an unsustainable growth in health care costs, their precipice is just a few decades further out than ours because their health care is so much cheaper. > [@foolsguinea](#): > > Here’s an answer: It takes as much as it takes. It’s mathematically impossible that the government will have to collect 100% of GDP to achieve the, “4-5% unemployment, 2-4% inflation, 3-6% average mortgage interest, real GDP increasing 1-3% per year, and the states and local governments stable,” you’re talking about. So we find what we need to spend to maintain that, and we raise that much revenue. We never actually tax everything away, despite right-wing rhetoric to the contrary. You don’t have to achieve a 100% tax rate to totally fuck up our economy. Anything above 50% and you are looking at an entirely different economy. > [@adaher](#): > > Bubbles only pop when people stop being willing to put money into fueling them. IF the government just keeps on borrowing to fund increasing health care costs, they’ll keep on increasing until we can’t borrow anymore. At some point, the US government has to make a decision to stop. And most serious policymakers have ideas for making the US stop. You know about the voucher plan probably, there’s also IPAB, which is supposed to prevent Medicare from growing beyond a certain level each year. Health care is a bubble? [quote=“Farmer\_Jane, post:8, topic:632120”] Medicare doesn’t have to blow up. A chunk of that is for end-of-life costs. Dying people are REALLY expensive. It doesn’t have to be that way. I read this years ago in a public policy class and a quick Google shows my professor wasn’t kidding. [Link](http://www.cbsnews.com/2100-18560_162-6747002.html). But that changes medicare. You are not leaving medicare “as is” which was the qualifier that I used. > [@Jas09](#): > > Well, historically federal spending has been around 20% of GDP. So I’d throw that out as a pretty good idea of how much we need to collect in taxes if we want a balanced budget. > > Some nice historical tables (excel format) here: [http://www.whitehouse.gov/omb/budget/Historicals](http://www.whitehouse.gov/omb/budget/Historicals) > > As a point of reference, 2011 spending was 24.1% of GDP. Since the Bush era receipts have been at or below 18% (it was 20% when he took office) and for 2011 are at 15.4% of GDP. Almost all of the extra spending these days are the direct result of the recession and will go away when ther ecession goes away. Less than half of the low receipts are the result of recession so the problem on the revenue side will not go away when the recession goes away. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [August 21, 2012, 7:28pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/17 "2012-08-21T19:28:20Z")
> [@brickbacon](#): > > One of the main reasons you need GDP to increase is because of population increases and demographic changes. And we are told we need to to increase population to keep GDP up. It’s circular. We will experience negative global population growth at some point in the next century; shouldn’t we choose how we manage that, instead of living in denial until people start blowing up cities over water access? > [@Damuri\_Ajashi](#): > > Then there are those synergies. Insurance companies want to keep you out of the hospital until youa re about 65. If they had to pay your medical costs from cradle to grave, they would pay for a lot more stuff earlier in your life but they can just dump you into the medicare system once you are eligible. I agree with this; the US system is mixed. I disagree that our precipice is the federal budget; it’s basic resource sustainability. > [@](#): > > You don’t have to achieve a 100% tax rate to totally fuck up our economy. Anything above 50% and you are looking at an entirely different economy. Middle-class families already pay \>40% of their income in taxes (counting state and local, and taxes like property taxes that aren’t based on income). Not that big a shift, and may be better than the alternative. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [August 21, 2012, 8:10pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/18 "2012-08-21T20:10:18Z")
> [@foolsguinea](#): > > Middle-class families already pay \>40% of their income in taxes (counting state and local, and taxes like property taxes that aren’t based on income). Not that big a shift, and may be better than the alternative. I’ve seen that quoted, but I’m not sure how it’s possible unless you use a pretty high-income definition of “middle class”. Could you cite that for me? I’d be interested to see how they define their terms. From [here](http://economix.blogs.nytimes.com/2009/04/08/how-much-americans-actually-pay-in-taxes/) (2009) we see that the middle quintile has an effective _federal_ tax rate of around 15%. This includes payroll taxes, excise taxes, etc.- it’s all federal taxes. I believe even the highest state income tax is just over 10% (and that’s just the top marginal rate, not the effective rate). Sales taxes are, at most, 8% or so of income and that’s if you spend every dollar. Property taxes could add a few thousand to the tax bill, I guess. Adding it up I just don’t see how the \>40% claim is possible. Maybe 40% in really high property and income tax states, if you also pay sales tax on every dollar you earn. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [August 21, 2012, 9:27pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/19 "2012-08-21T21:27:57Z")
> [@Jas09](#): > > I’ve seen that quoted, but I’m not sure how it’s possible unless you use a pretty high-income definition of “middle class”. Could you cite that for me? I pay a bit over 30% and I make slightly under an upper middle class income. Plus I live in Florida which is probably in the top 5 in low tax states. If I didn’t save nearly half my income, but spent it generating sales tax, and also moved to LA or NYC, then I could make even more and not hit an upper middle class lifestyle, and get hit with a much higher income tax for the privilege. But in general, yes, I find it hard to believe there are many _families_ that hit 40%, due to all the benefits of being a family unit. ---
**Author:** ![brickbacon](https://avatars.discourse-cdn.com/v4/letter/b/898d66/32.png) [@brickbacon](https://boards.straightdope.com/u/brickbacon)\ **Post date:** [August 21, 2012, 9:37pm UTC](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120/20 "2012-08-21T21:37:41Z")
> [@foolsguinea](#): > > And we are told we need to to increase population to keep GDP up. It’s circular. Um, few people have kids because someone TOLD them to in order to keep GDP up. That’s nonsensical. In fact, in most developed countries with high GDPs, there is negative native population growth, so if someone is supposed to be telling us to procreate for economic reasons, it’s not working. It’s certainly not a circular argument. [Next page](https://boards.straightdope.com/t/how-much-tax-income-do-we-need-usa/632120.md?page=2)