You have probably heard it before that the United States government has a massive spending problem. You have also probably heard countless times that the wealthy need to “pay their fair share” in taxes– whatever that is at that particular time. The current reality is that the U.S. government is bringing in record revenues from taxes. Somehow the U.S. deficit in 2024 was $1.8 trillion.
For 2025, the outlook is expected to be even worse with more debt (and debt servicing) as outlined below. As a percentage of GDP, the 2024 deficit of 6.4% was up from the 6.2% of GDP in 2023.
While $1.16 trillion in interest expense is the first time the U.S. ever paid $1 trillion in debt servicing, the government’s number one problem is that it spends and spends above and beyond any reasonable measure. That figure was still a whopping $882 billion in net interest after backing out interest received from the government’s investments.
Forgiving debt, subsidizing millions of people who are not legally in the country, throwing incentives and stimulus at select portions, and paying more and more for the same services all comes at a high annual cost. It also requires issuing even more new debt on top of a mountain of debt that has already accumulated. When this stops is anyone’s guess but being forced to operate on a balanced budget or facing an international lending crisis where the U.S. is not deemed creditworthy are both looking more and more like realistic scenarios for the future.
Oggonomics has a mantra — if you just want the government to take care of you later in life, you probably will not like how they take care of you. Let’s be honest here: the government is not even taking care of itself.
The Oggonomics post on X, formerly Twitter, from October 4 asked, “Can a fiscal-literate explain a (WTF) how debt to the penny rises $500 Billion in about six weeks?” Here was the financial math, and it hasn’t improved:
- 10/1/2024 $35,668,947,367,182.09
- 8/16/2024 $35,167,228,191,213.46
Looking at the 10/17/2024 data from the Treasury’s Debt to the Penny site now shows that the total public debt outstanding has risen to $35,769,084,471,524.38. There is no real explanation for this. There are calendar effects which can push payments into earlier months and the U.S. income taxes received can at times be “lumpy” due to tax filing deadline dates.
According to the Treasury Department, the Biden administration’s deficit was $1.833 trillion in fiscal year 2024. While inflation has been colling, that cannot even be the excuse now because the deficit was up $138 billion (over 8%) from fiscal year 2023.
What hurts the worst in this data release is that this was the third highest deficit on record. We didn’t even have a recession during this period. Only 2020 and 2021 were worse, both years reeling from Covid policy spending. The U.S. government’s revenues (taxes) hit a record $4.9 trillion in 2024.
The government truly proved that it has a conflict of interest by raising interest rates 11 times and then for keeping the rates higher for longer. Fiscal 2024 ended with an average interest rate paid out on all government debt of 3.32% in 2024. Its average was just 2.97% in 2023. Even if the Federal Reserve lowers the short-term interest rates more rapidly than expected, the average yield paid by the Treasury on its debt will likely rise in the year ahead and until the higher interest rate notes actually mature and are replaced by lower rates.
Individual income taxes of $2.4261 trillion rose by $249.6 billion in 2023. Corporation income taxes of $529.9 billion were up by $110.3 billion from 2023 levels.
Janet Yellen’s Fiscal Budget Report did say that the Biden-Harris Administration lowered the deficit $1.3 trillion since taking office. That did not address the notion that 2020 and then 2021 were the years the economy was in panic from the Covid restrictions.
We all need to understand that the budget items for 2025 are looking even slightly worse than in 2024. The baseline income (receipts) of $4.885 trillion and spending (outlays) of $6.861 trillion are projected to result in a baseline deficit of another $1.977 trillion. Here were some of the other items from income (receipts):
- Social insurance and retirement receipts were $1.7096 trillion, up by $95.1 billion from 2023.
- Excise taxes were $101.4 billion, up by $25.6 billion from 2023.
- Estate and gift taxes were $31.6 billion, a decreased of $2.1 billion from 2023.
- Customs duties were $77.0 billion, down $3.3 billion from 2023.
- Miscellaneous receipts were $43.2 billion, up by $1.6 billion from 2023.
Janet Yellen’s budget letter does bring up the colloquial “fair share” directly on 3 occasions regarding more taxes that need to be paid by wealthy individuals and corporations. Variations of “fair” in the same theme appeared in 2 other instances.
If you want a breakdown over some relative terms to what a “fair share” actually looks like, consider what USAFacts had to offer up about the most recent data available (2021). That report shows that most of the federal income tax revenue comes from the nation’s top income earners. What it does not say is that the bottom 50 percentile of earnings pay almost none of the collective federal income taxes. In 2021, the data were as follows:
- The top 1% of earners collectively paid 45.8% of national total income taxes.
- The top 5% of earners (incomes of $252,840+) collectively paid over $1.4 trillion in income taxes, or about 66% of the national total income taxes.
- The top 10% of earners incomes of $169,800+) collectively paid $1.7 trillion, or 76% of the national total income taxes.
- The top 50% of earners collectively contributed some 97.7% of federal income tax revenues.
This leaves a contribution of just about 2.3% of all federal income tax revenues are paid collectively by the bottom 50% of earners.
