What is the ‘Debt Tax’?

The United States federal government paid $332.5 billion in interest last year on the national debt.1 This payment, equal to 11% of the total federal budget, does not build roads, nor does it provide education, subsidize housing, or create any other service. It merely services the $6.6 trillion (and growing) national debt. These interest costs are equivalent to a “Debt Tax” – a tax that drains income but does not produce any corresponding service benefit for today’s taxpayers.

The Debt Tax is equivalent to $1,155 annually for each man, woman, and child in the country. That is to say, the average American household pays approximately $3,153 in taxes annually – about enough to lease a car for a year – just to service the debt. To these households, the Debt Tax is simply money spent with nothing to show for it.

The Debt Tax is bigger than the estate tax (“death tax”), capital gains tax, and “marriage tax” combined.2 What’s more, its burden falls on all Americans. In contrast, the estate tax is paid by less than 0.1 percent of U.S. households (overwhelmingly, wealthy families), and 90% of capital gains taxes are paid by people with annual incomes of over $100,000.3 The Debt Tax siphons off revenues that could have been spent on services like health, education, defense, or Social Security – services that would benefit all Americans.

Read the full report here:

The Debt Tax