Let’s say congress passes a bipartisan bill that will enact a tax of twenty dollars, once per year, for every American. Assuming we have 330 million Americans, and also assuming they can pay (I acknowledge that many Americans aren’t currently taxed, and thus might be exempt from this tax), that would equal 6.6 billion dollars in additional taxes, minus whatever it costs to collect that tax.
Let’s say this tax is in effect until the national debt is paid off, and then it expires. Let’s also assume we’re making efforts in other regards to drop our debt, whatever those might be.
Why wouldn’t this work? Granted, 6.6 billion dollars is a drop in the bucket compared to a debt of trillions, but it’s a start. I can’t see how either side, democrat or republican, would object to a tax that explicitly works towards paying off the debt, with no other earmarks for that money. I believe every American should sacrifice to help their country, and 20 bucks a year isn’t really that much. Hell, I’m a poor kid fresh out of college, and I’d help pay more. Make it an extra 50 a year.
But I’m not really the smartest guy about economics. Could somebody tell me why this won’t work?
First, because you can’t stop the government saying, “Ooh! An extra 6.6 billion dollars of annual revenue! Now we can afford to do X!” Money is fungible, after all.
More importantly, 6.6 billion dollars per year will not start to pay off the debt, it will just slightly reduce the rate at which it grows.
The US Debt Clock
Currently the US debt is over $13 trillion, with the average per citizen of $42,806 and per taxpayer of $119,778. Even factoring $20 per person per year and 0% interest, it would take 2,140 years to pay off the existing debt.
As others have noted, the national debt is growing at a much higher rate than your plan takes into account. The debt is growing at approximately a hundred times the rate you’d be paying it off.
You’d need to earmark the funds for debt reduction and debt reduction only, I’d think. And it would need to be part of an overall strategy and not a stand-alone measure. But I think I hear what you’re saying, and I agree. Every little bit helps.
Suppose you owe $5,000 in debt and you make $50,000 a year. Let’s say you get a $5,000 year raise. Do you say, “Yeah now I will pay off that debt.” Or do you say “Yeah now I can get a new computer”
See the more coming in the more they’ll spend.
I would also think why not add to the OP idea. Instead of each PERSON how about each company as well.
From a strictly mathematical standpoint, obviously it would have some effect. Even a penny a year would have some effect. But it might cause bad effects politically that would outweigh its token financial value.
For example, people might become complacent. “That national debt? Nothing to worry about. We’re paying that off with our special tax. In fact, as long as paying it off is so easy we might as well borrow more.”
On the other hand, that twenty dollars might piss people off far out of proportion to their total tax burden. “Dammit. The government always wants more. This new deficit reduction tax is the final straw. I vote we just cancel the national debt and tell whoever it is that they’re not getting our money.”
Not all debt is bad, and not all of it is just “evaporated” money. My grandmother bought me a T bill every year for my birthday. So I’ve got all these bills approaching maturity. You’re essentially saying you’re going to tax me in order to pay…myself. Then what the hell was the point of buying the T-bills in the first place?
Consider also that not all debt is pre-payable. If I have your IOU in my hand and you want to pay it off before it runs up its “rightful” interest, you have to give me monetary incentive. In other words, you’d have to offer a lot of money for it in order to get me to sell. That may not be worth it, depending on the situation.
The not-so-simple answer is that a mere $20 tax is not worth the political capital needed to get this approved (see posts above concentrating on the math). Large groups of constituents in politically contested areas, are going to be against the tax, and it’s easier to just denounce this tax as not worth it, from a merely logistical point of view.
A more realistic, but complicated view is to simply curtail spelling. As you can see from the various news stations, this process is working quite well. [/sarcasm]
Because if you raise taxes by $6.6 billion, a politician will spend it this year and promise to cut spending next year to make up for it.
Then next year comes, and Democrats will present a bill to spend $8 billion and cut the rest from programs that go mostly to red states. Republicans will counter with a proposal to spend $7 billion and cut the rest from blue states. Eventually they will compromise on a bill that spends $8.5 billion and postpone any cuts until after the next Presidential election cycle.
Remember during the Clinton administration in the 90’s? We actually had a budget surplus, and whether the credit goes to the Republican Congress or the Democrat President, the politicians on both sides of the aisle were wetting themselves over the prospect of starting entirely NEW pork barrel projects to fund with the “extra” money. There was barely a peep about using the surplus to pay down the national debt.
This is what makes your plan fantasy. Before we reduce our debt, we must first balance the budget so that we are not increasing the debt. We are currently talking about 1 trillion plus dollars per year in deficit indefinitely. Your meager $6.6 billion wouldn’t even make a dent in the yearly deficit, let alone the total debt.
I’ll give you the benefit of the doubt and assume you’re sincere and good-spirited, but do you really believe that Larry Ellison and Warren Buffett should contribute the same $20 as the guy who’s just lost his job and is spending the last of his savings chatting with a bankruptcy lawyer about the best way to keep getting the medicine he needs?
Here’s an interesting commentary about the growing debt. When you remember that David Stockman was a 1980’s-vintage apostle of “Greed is Good”, “It’s better to tax the poor than the rich,” you can sense how much farther down current American politico-economic “thinking” has descended.
When I read OP, I visualize a school of guppies trying to help all the fish by going a little more hungry, while over-stuffed sharks are circling, cackling with each other, and saying “Watch this!” as they rip off another large chunk of living flesh.
I’m glad you’re willing to give me the benefit of the doubt. I hadn’t really considered my hypothetical that far ahead.
If I could ask a further hypothetical question, at what point would this additional tax (assuming it could pass, and that it would go towards its intended purpose) make a difference? 50 dollars per person? 100? What if we extended the tax to businesses as well? What if we had a sliding scale, so that wealthier Americans paid more?
What you’re proposing is pretty regressive taxation, a tax scheme that most politicians say they are against. So much against, in fact, that we’ve greatly swung the scales the other way: the highest 1 percent in income are already paying 40% of all income taxes. The bottom half of earners in this country don’t even pay 3% of all income taxes. And if you view the link, you’ll see it’s been getting worse each year.
Personally, I think it’s a good idea to get the lesser earners more invested in their country, and not think that they can freeload/etc on the winners in life, as it definitely creates a culture of dependency. But that’s another thread I’d guess, no need to 'jack this one.
Probably around $2000 a year per person to have any serious impact. And even that won’t necessarily eliminate the deficit but it will at least keep its growth under control.
I’ll give you the benefit of the doubt and assume you’re sincere and good-spirited, but do you really believe that Larry Ellison and Warren Buffett should contribute the same $20 as the guy who’s just lost his job and is spending the last of his savings chatting with a bankruptcy lawyer about the best way to keep getting the medicine he needs? 