Government borrows. Who should pay for it?
The big debate now is over how much the Government should borrow, but it instead needs to be over who should pay for it.
Should future generations, who have no say in this matter, be the ones that will be paying for it? They will receive both many of the benefits and most of the costs from today’s Governmental borrowing. However, if we, today, are authentically concerned about their welfare, then we will be discussing only the benefits and the costs that they will receive from it, and not whether those future generations will be net losing or net benefitting from it — because that “net” will be a result from BOTH those benefits and those costs, and this is NOT what is currently being debated.
If the debate over whether or not future generations should be paying this debt is bogus (which therefore is the case), then what about the debate over whether people living today should borrow it? That’s the debate over whether or not to borrow this money at all. However, that debate, too, is being falsely framed, because it presumes that everyone shares equally both in the benefits and in the costs (the taxes) from this borrowing — and that, too, is obviously a FALSE assumption.
Consequently: BOTH of the public debates — over whether future generations should pay it, and over whether the money should be borrowed — hide the deeper issues, which are: Who benefits, and who loses, and how much, from this borrowing?
But that question is actually a taxation-question, because it can be answered ONLY by means of the tax-code and of its enforcement. It is not only about government-expenditures, but actually twofold, about: (1) Who should pay for it (in taxes); and (2) Who should receive the benefits from it (in governmental expenditures). It is a distributional question, on both the benefits side and on the costs side. It is not really about how much the government should borrow.
Taxation includes all of the revenue that the Government in the U.S. receives. According to https://www.usgovernmentrevenue.com/total, here it is:
Total Government Revenue in the United States
Fiscal Year 2021
Federal Direct Revenue $3.9 trillion
State Direct Revenue $1.9 trillion
Local Direct Revenue $1.4 trillion
Total Revenue $7.1 trillion
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The combined state and local U.S. taxes per year are $3.3 trillion. Right now, the hottest issue in the U.S. Senate is whether lots of the $3.3 trillion per year that’s going to state and local governments will instead be going to the federal government. It’s called “repealing the SALT cap,” and it means eliminating (or “repealing”) the Donald-Trump-instituted $10,000 limit on state and local tax deductions, or the SALT deduction (a tax-reduction for only the richest). High-tax states rely heavily upon that federal deduction for all households that are paying more than $10,000 in their state and local income, sales, and property, taxes. Those are the progressive states; they are almost all Democratic; and here are the 10 states with the nation’s highest tax-burdens, the state-governments which were hit the hardest when Donald Trump transferred into the federal government’s coffers all of that rich people’s deduction money which had previously been going from the federal government to fund the state and local governments’ deduction-for-only-the-rich called the “SALT” deduction. Trump was, by means of eliminating the SALT deduction (the money from the federal government to reimburse rich people’s taxes that weren’t being paid to those states), able to claim that he was increasing taxes on the rich, but what he was actually doing was to punish progressive states, and here are the ten most progressive, starting with the most progressive one, and their total tax-burden percentages, and all of these are the 10 states that Trump had especially targeted to punish (drive rich meople to relocate away from them): 1 New York 12.79%; 2 Hawaii 12.19%; 3 Vermont 10.75%; 4 Maine 10.50%; 5 Connecticut 10.44%; 6 Minnesota 9.99%; 7 New Jersey 9.98%; 8 Rhode Island 9.69%; 9 Illinois 9.52%; 10 California 9.48%. By eliminating this federal tax-deduction, he was reducing state and local taxes on the rich — eliminating the incomes to those state and local governments which the federal government was cancelling by means of its having instituted the SALT deduction for only America’s richest.
On April 1st, U.S. President Joe Biden announced that he doesn’t want to restore the SALT deduction but that Democrats in Congress will need to transfer what had been that state and local tax burden onto the federal government so that Trump’s give-away to the rich will be removed by means of establishing new increases in federal income taxes. Up until April 1st, all that was known from Biden about this was that he wanted to restore the federal tax-subsidy to the states; but, now, we know that he wants that federal tax-subsidy (benefitting the rich) to be funded by adding new federal taxes on the rich.
Unlike Trump, who pretended to have some progressive tendencies, Biden — apparently — actually does.
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.