by Mitch Kokai
Senior Political Analyst, John Locke Foundation
With all the trillion-dollar numbers spinning about government policy these days, it’s easy to lose perspective on the scale of recent federal spending. We decided to put the past year’s policy into perspective by calculating the future tax hike that would be necessary to pay the bills rung up since January, 2020. What the average American owes for the stimulus will shock you.
The exercise is not farfetched. Rumors spread throughout Washington last week that the Biden administration is considering tax hikes to pay for COVID-19 relief enacted this year and last. To some extent, it is amazing that the U.S. experienced a 32 percent drop in GDP in the second quarter of last year and did not dive into a depression, and some credit is surely due to those who crafted stimulus bills. On the other hand, the five bills passed to provide relief, once one subtracts out loans that will be repaid, together added $5.3 trillion to the debt that you, dear reader, will have to pay back someday. Think of COVID-19 relief as a new car payment, of course without any delivery of four wheels, an engine, or a chassis. …
… Even with the high progressivity of the current tax code, the bills are extraordinary. For those with incomes between $30,000 and $40,000, the tax hike needed today to pay for the combined stimulus packages would be about $5,000. Those with incomes between $40,000 and $50,000 would pay about $9,000, while those earning between $50,000 and $75,000 would have to fork over $16,000. That rises to $27,000 for incomes between $75,000 and $100,000, and $51,000 for incomes between $100,000 and $200,000. For higher earners, the bills climb so fast that they jump off the chart. The average for Americans with incomes between $500,000 and $1 million is $304,000. A typical American family, with $88,000 of income, faces a bill near $27,000.