Are We Paying Too Little In Taxes?
Now that the election cycle is in full swing, both candidates are talking about taxes. But what never gets mentioned is what should we be paying based on the current finances of this country? Our national debt stands at about $35 trillion dollars. So the question should be asked but are both political parties just kicking the can down the road on the question of what should American be paying in taxes. Are we paying too little in taxes?
There are a lot of moving parts to our national debt. Some of the largest parts are the budget deficits that are happening every year. The interest that is having to be paid in order attract investors to buy our debt is another huge part of the debt. And the elephant in the room is the out of control spending. Let’s look at each one of these pieces.
The first item is the federal budget deficits that happen every year. When it comes time to sit down and draw up a new federal budget, both political parties, take to the media and attempt to make their case to the American public of why their position of either adding to a certain line item or cut another line item is the correct path. Left out of the discussion is the question of, is this budget a real picture of the situation or is it just a smoke screen because almost always the federal government spends more than what was budgeted. Is it all a political game? Over the past year, the federal deficit has also been significant, with a cumulative deficit of $1.5 trillion for the fiscal year.
The second item that needs to be looked at is the amount of interest his country is paying for the debt it has already accumulated. As of August 2024, our government is on track to spend approximately $892 billion dollars in interest payments for the coming fiscal year. The cost of those interest payments is expected to rise to around one trillion dollars by 2025 and up to around $1.7 trillion dollars by 2034. For fiscal year 2024, the total U.S. federal budget is approximately $6.9 trillion. This budget includes spending on major categories such as Social Security, Medicare, Medicaid, defense, and interest on the national debt. The budget also accounts for various discretionary programs, which cover areas like education, transportation, and environmental protection. The budget is designed to address both mandatory spending (which includes entitlement programs) and discretionary spending, with a projected federal deficit of about $1.6 trillion
Spending is the wild card in all these numbers. So we have to look at how much money does the federal government receive currently. For fiscal year 2024, the U.S. federal government is projected to collect around $4.8 trillion in total revenue from taxes. This revenue comes primarily from individual income taxes, payroll taxes, corporate income taxes, and other sources. However, this amount is less than the total federal spending, leading to a significant budget deficit. The shortfall between federal spending and revenue for fiscal year 2024 is approximately 30.4%. This means that the federal government is spending about 30.4% more than it is collecting in revenue.
So asking the question are we paying too little in taxes is a very valid question. Currently the federal government has to issue $1 trillion dollars of new debt every 90 days just to fill the shortfall between revenue and spending. When will this cycle be broken?
The other sad fact about government spending is that the American public doesn’t really care. When the new media announces that the government is spending 30.4% more than they take in, there is no public uproar. When the news media reports that the federal government has to spend $892 billion dollars this year on just the interest, the public just shrugs their shoulders. When politicians announce they passed a new law that will authorize some government department to spend billions of dollars that we will have to borrow, nothing is said by the public.
But as we all know just by our own household finances, we can’t keep spending money we don’t have and not expect terrible things to happen to us down the road. But that is exactly what the federal government is currently doing. Every American would owe approximately $105,740.00 if the national debt were to be divided equally among the population. That’s every man, woman and child. That should scare each and every one of us. But unfortunately, the average American is not interested in how their financial future is being jeopardized by politician’s spending money we don’t have. So should we begin to ask that question, are we paying too little in taxes? Would we be better off raising the amount of taxes so that we at least begin to pay down the balances we currently are carrying.