What is my prediction for the future tax rate and why? It’s true rich people don’t pay taxes, but is getting mad going to help you in the future when you are broke, or would you like to know what they do so you can also take advantage of tax shelters? Let’s talk about it.
The national debt clock tracks the U.S. debt. It first surpassed $28 trillion in March 2021 and you can see it in person on Sixth Avenue in New York City. You don’t need to travel to New York, however, to see where it’s at, you can visit the website USDebtClock.org and I’ll be showing you what it’s at as of the date of this recording and you can also visit the website to see where it’s at right now. But first, why is the debt clock important? According to the website thebalance.com, “The U.S. national debt is the sum of all outstanding debt owed by our federal government. It’s an accumulation of each year’s budget deficits. About three-fourths of the national debt is public debt, which is held by individuals, businesses, and foreign governments that bought Treasury bills, notes, and bonds. The government owes the rest to itself, mainly to Social Security and other trust funds, and that’s known as intragovernmental holdings.
The debt clock shows how much the U.S. government owes its citizens, other countries, and itself. Most federal revenue comes from individual taxes. The government counts on you to pay the debt back one day. Corporations pass their tax costs through to you by raising prices. In other words, you, your children, and your grandchildren must pay 100% of the debt through higher taxes. The higher tax burden that the level of U.S. debt causes dampens expectations. It’s a big threat to the quality of life for future generations.
Much of the debt is financed by loans from foreign governments. It gives them a voice in what happens in the United States. When the debt approaches the debt ceiling, politicians must vote to raise that ceiling. Since 2011, when the debt ceiling crisis resulted in the passing of the Budget Control Act of 2011, the debt limit was suspended in 2013 (twice), 2014, 2015, and 2017 (twice). Even today I read an article on CNBC.com titled, “Here’s what could happen to Social Security, Medicare and other payments if Congress doesn’t fix the debt ceiling” and it said, “The federal government could reach the maximum amount of money that the U.S. Department of the Treasury is allowed to borrow as soon as Dec. 15. If Congress doesn’t act to fix that limit, known as the debt ceiling, there could be big ramifications for the timeliness of government payments that people rely on.”
Congress raised the debt ceiling by $480 billion in October, bringing the total limit to $28.9 trillion. That measure was designed to last until at least Dec. 3, after which another increase or suspension would be required to avoid the risk of defaulting on financial obligations.
Then the new infrastructure law required a $118 billion cash infusion into the Highway Trust Fund, which Treasury said would be completed by Dec. 15; that will significantly reduce U.S. fiscal headroom.
Shai Akabas, BPC director of economic policy, said in a statement Congress will be “flirting with financial disaster if it leaves for the holiday recess without addressing the debt limit.”
So what is the Debt Clock really warning us about? Back to quoting thebalance.com website. “The debt clock’s warning is even more critical. Two factors that allowed the U.S. debt to grow safely have been withdrawn. First, the Social Security Trust Fund took in more revenue through payroll taxes leveraged on baby boomers than it needed back in the 1980s. Ideally, this money should have been invested to be available when those workers retire, but the Fund was “loaned” to the government to finance increased deficit spending. This interest-free loan helped keep Treasury bond interest rates low, allowing more debt financing. Technically, it’s not really a loan, though, since it can only be repaid by increased taxes when the boomers retire.
Second, many of the foreign holders of U.S. debt are investing more in their own economies. Over time, diminished demand for U.S. Treasuries could increase interest rates, thus slowing the economy. This lessening of demand puts pressure on the dollar. As U.S. dollars and dollar-denominated Treasury securities become less desirable, their value declines. As the dollar declines, foreign holders get paid back in currency that is worth less, which further decreases demand.”
So from what I just shared, there are two very important points to take away. When the government took the loan from the Social Security Fund in 1980 that was supposed to be invested to allow it to grow but was instead just made into another debt the government needs to pay back by increasing taxes when the baby boomers retire. The second notable quote was that foreign countries that used to invest in the US are instead investing back into themselves. The rule of supply and demand in play here from what we learned in high school economics class, the dollar would in turn lose value making the US dollar even less desirable. We are now paying debts to foreign government with a dollar that is worth less than before, putting more pressure on our government to supplement the decreased demand.
Let’s take a look at the USDebtclock.org website to see where we are at. You can see in the top left the US National Debt that we have been talking about where it surpassed 29 trillion dollars which comes out to a debt on each citizen of this country of about $87,000 each but since not everyone is paying taxes the amount the average taxpayer has to eventually cover based on today’s debt is around $230,000 from each of us, meaning you and me the taxpayers. Other interesting notes on here are the discrepancies between how much the government has in Social Security on hand, then follow this down to the very bottom and middle of this website, the Social Security Liability, that $1 should have a 2 in front of it. America’s Student Loan Debts and Credit Card Debts can also be found here.
You can even look up how much debt your state is racking up here.
To make the case further for why your taxes are going up, we all know history repeats itself, so with that, let’s now take a look at the history of our countries tax rates shall we? To do that I am paying a visit to taxpolicycenter.org and here is the chart starting from 1913. I have been reading the book “Top 10 Ways to Avoid Taxes” by Mark J. Quann and have a video coming out here on my YouTube channel after the first of the year. The reasons the tax rate dropped in 1981 was in thanks to an actor who was elected President named Ronald Regan. Now I never thought I would ever have anything nice to say about this man being that I am pretty Liberal, but until he came along, we were paying 70% or more for a very long time before that. I think we all have made fun of President Reagan’s trickle down economics idea back then, but as an adult now looking back, I think he needed a lot of support and excuses to slowly dwindle down that tax rate to what we have today in around the 30% range. Mr. Quann said in his book that Regan used to only act in 2 movies a year because he calculated that each additional movie beyond that would have all ended up going to taxes and therefore wasn’t worth doing. Most sources will say that as Americans we get taxed under three main categories and they are taxes on income, taxes on property, and taxes on goods and services. The government today has gotten very creative in finding ways to tax us. Capital gains tax, Corporate tax, Dividend tax, Excess profits tax, Flat tax, Gift tax, Gross receipts tax, Inheritance tax, Negative income tax, Windfall profits tax, Alcoholic Tax, Fat tax, Financial transaction tax, Fuel excise is a tax, Internet tax, Luxury tax, Soda tax, a sin tax, Stamp Duty, Transfer tax, Vehicle excise duty, and there are many more with other proposed taxes like unrealized gains, carbon taxes. Benjamin Franklin said the only two things constant in life are death and taxes. I think we are being taxed to death. I’m here to say there is another way, a legal way, the same way the politicians and the ultra wealthy have done it for over 100 years. Want to know about them? Find my calendar link here in the comments section below or on my healthwealthandrealestate.com page on the Get in Touch link at the top right of the page.