Washington is set to spend 7.4 trillion dollars in 2026 while borrowing 1.9 trillion of it, with total public debt now equal to the entire economy, and two scholars have put five tax proposals on the table to close the gap.
The US federal government plans to spend 7.4 trillion dollars in 2026. Of that, 1.9 trillion is money it has just borrowed — one dollar in four. Borrowing like that in a pandemic or a recession is one thing, but neither applies now.
The money the government owes the public has reached the size of the entire economy, matching the record set while fighting the Second World War, and it keeps climbing. Any politician with a sense of responsibility should be putting real plans on the table for higher taxes and lower spending.
No new taxes, just the old ones
Two scholars, Clausing and Sarin, skip headline ideas like a wealth tax. They adjust existing taxes instead, aimed mainly at people with high incomes and large fortunes. Five buckets:
First, corporate tax. Raise the rate to 27 percent for the most profitable firms — under 2 percent of the total — with an extra 2.7 points for the top half a percent, and close the loopholes that let multinationals shuffle profits between countries.
Second, fund the tax office. Between 2010 and 2021 the audit rate for high earners fell from 16.5 percent to 2 percent, and the taxes never collected are estimated at 870 billion dollars a year. Audit less, dodge more.
Gambling and carbon as sin taxes
Historically, sin taxes meant alcohol and cigarettes: raise money and discourage the habit. The authors add gambling and carbon. A 5 percent levy on sports bets, plus a tax on prediction-market winnings, brings in over 130 billion dollars across a decade. A carbon fee would start at 40 dollars a tonne, gentler than the EU's or Canada's.
The other two buckets reset income tax brackets to their 1997 levels and rework how capital gains are taxed. Together the proposals come to roughly 3.3 percent of GDP, about a trillion dollars at today's size.
Why only taxes, no spending cuts? Tax policy is what these authors study, and the US does have unusually high debt and unusually low taxes.
But Medicare, Social Security, defence and interest on past debt dominate spending. Interest cannot be skipped, the population is ageing, and Social Security and Medicare only get dearer. Finding a trillion dollars there is harder than raising it in taxes.
In one line: when a quarter of what the government spends is borrowed, tough talk without real changes will not hold.
Why it matters
Debt at 100 percent of GDP is not an abstraction: once interest rates rise, interest payments start crowding out everything else. Higher taxes and lower benefits are both painful, but painful is not impossible, and the conversation has to start with plans on the table.
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