The Liability of Households for the U.S. National Debt

This essay is in response to Joe DioGuardi's analysis of what each taxpayer owes for the national debt [Debt is Making Us Poor The Washington Post - April 20, 1998]. His analysis assumes that each man, woman and child owes the same amount of the national debt. Yet his own 'Credit Card Statement' points to the inconsistencies in his argument. Individual payments received vary widely among individuals, largely due to their incomes. Even the 'citizen share' of the corporate income tax reflects income as it relates to the cost of goods consumed. On the purchase side, most households receive nothing from Social Security, Medicare, Health, Income Security and Welfare in any particular year. The whole point of such programs is that they are tailored to individual circumstances. National defense and agriculture benefits may be shared at the macro level, yet even these benefit certain households more than others. I can testify to this as the child of a defense worker.

Mr. DioGuardi's assumptions would be correct if government operations were financed with a head tax (each citizen pays an equal amount). However, such is not the case. Taxation of individuals at the federal level is by personal income. The nation's ability to borrow at the level at which we do is based largely upon this tax, as social insurance taxes cover social insurance payments.

The National Debt is roughly 9 times the amount of revenue raised annually by Personal Income Taxes. Therefore, to calculate what an individual or family owes, multiply their annual tax bill by 9. The attached illustrate approximately how this looks for various income levels for single filers and families of four married filing jointly.

These tables show why wealthy Americans, including the sponsors of such organizations as Truth in Government, favor spending cuts over progressive income taxes. Individuals who owe more under these calculations than the per capita amount will prefer spending cuts because spending cuts, in general, fall more evenly on the entire population. As their preferred spending cuts are on poverty programs, the cuts they want affect them less. They do not like defense cuts, because defense spending often favors them with higher salaried defense jobs. Progressive income tax increases, on the other hand, fall upon them more heavily.

Of course, to change this tax reform is necessary. The Committee’s favored approach is to replace corporation income taxes (formerly the corporate profits tax) and all personal income tax revenue taxed at the 31% rate or below with a business income tax at a single rate, which would cover all spending save net interest and old age and survivors insurance, and to retain personal income taxation on all income currently taxed at the 36% rate and above, dedicating this revenue to the payment of net interest and debt retirement. This would make the wealthy solely responsible for the national debt.