Why More Tax Collection Won’t Reduce The National Debt

The Congressional Budget Office has released its fund reappraisal for fiscal 2025. The study shows that full national gross for nan fiscal twelvemonth that conscionable ended exceeded $5 trillion, reaching $5.2 trillion. By comparison, full national gross was $500 cardinal successful 1980, nan twelvemonth earlier nan Reagan taxation cuts were enacted.

For those excessively young to remember, nan Reagan taxation cuts reduced individual income taxation rates crossed nan committee for each taxpayers, reducing nan apical marginal taxation complaint from 70% to 50%.  Critics said nan immense taxation cuts would “hollow out” nan authorities by slashing taxation gross and starving authorities spending programs. The taxation cuts, they said, would summation deficits, raise liking rates, trim growth, and make nan taxation codification little progressive.

Nobody talks astir retired a hollowed retired authorities anymore. Since nan Reagan taxation cuts were enacted, full national taxes person accrued ten-fold. The taxation cuts unleashed an economical maturation roar which provided a surge of national revenue. From $500 cardinal successful 1980, taxation gross doubled to $1 trillion successful 1990, and doubled again to $2 trillion by 2000. Total taxes reached $3 trillion by 2014, and $4 trillion by 2021.  Now, only 4 years later, full taxes are much than $5 trillion.

Deficits person increased, but not because taxes are excessively low. The surge successful national taxes has fueled a monolithic spending binge, giving Washington much and much money to walk each year. They person spent each dime and more. While taxation gross has accrued ten-fold, spending has accrued moreover more, from $590 cardinal successful 1980 to an unthinkable $7 trillion successful 2025, a twelve-fold increase.

The ever-increasing taxation gross allows spending to support increasing and enables nan authorities to easy continue  to get very year. Despite nan changeless warnings from taxation trim critics that deficits will push up liking rates, liking rates person dropped from nan double-digit rates of 1980, pinch nan 10-year Treasury dropping from 11% successful 1980 to astir 4%  today.

The claims that nan taxation cuts would make nan taxation strategy little progressive besides were unfounded. The taxation cuts reduced nan apical complaint from 70% to 50%, and it is now 37%. But nan taxation strategy has go overmuch much progressive, pinch precocious earners coming paying a overmuch greater stock of full income taxes. In 1980, earlier nan taxation cuts, nan apical 1% paid 19% of full income taxes. Today nan apical 1% pays much than 40% of each income taxes, much than double nan stock they paid earlier nan Reagan taxation cuts.

The numbers show that nan shortage problem is not nan consequence of excessively small taxation revenue. The problem is nan opposite. Too overmuch gross leads to much spending and much borrowing, and little economical growth. The shortage hawks support calling for much taxation increases. But a stronger lawsuit tin beryllium made that much taxation cuts, not taxation increases, are needed to trim nan taxation gross spigot, slow spending growth, and summation conomic growth.