Taxes Vs Debt: Where Does US Funding Come From - Chart Of The Day

Tyler Durden's picture




 

A key sticking point in the ongoing presidential debate is what happens to US tax rates, either for just those making over an arbitrary $250,000/year, aka "the rich", or for everyone. To put this debate into perspective, here is a chart that shows how over the past 20 years the US funding needs (demonstrated previously here), have been met in terms of the only two components of US funding - tax revenue and debt issuance.

Some highlights:

  • For the 12 months ended July 2012, total US receipts (virtually all of them taxes) amounted to $2.4 trillion.
  • At the same time, for the 12 months ended July 12, total US debt issuance amounted to $1.6 trillion.
  • Total matched funding need for the LTM period was thus ~$4 trillion.
  • In the 1990s, reliance on debt funding declined progressively from 30% to 0% in 2001.
  • Since then debt issuance has soared, and at its peak, funded 50% of all US funding needs in the aftermath of the Lehman collapse.
  • It has since stabilized at just over 40%.
  • Assuming all millionaires paid 100% taxes on their income (Laffer curve aside), this would result in just about $1 trillion in tax revenues for the US government (based on 2008 IRS income data), which would plug the US funding gap for less than 4 months.
  • Looking at the chart above, and seeing the secular increase in the debt-funding component, probably a more reasonable question is why pay any taxes at all? After all, as increasingly more debt was used to plug deficit shortfalls, the rate on said debt declined progressively, hitting all time record lows just over a month ago.
  • Taking the thought experiment (as ridiculous as it may be) to its absolute extreme, wouldn't numerous quasi-socialist goalseeking "theories' such as MMT be perfectly validated if instead of collecting any tax revenue, the government funded itself exclusively with debt? After all, to both the GOP and the Democrats, it increasingly appears that "deficits don't matter." Worst case: the US pulls a Greece or Belize and just says "we won't pay."

In conclusion: is the primary presidential debate focusing on precisely the wrong thing? Maybe (and again taking the argument to its ridiculous extreme), instead of worrying who will pay taxes, which already are a far less important component of US funding needs, perhaps the US economy should consider a rebooting by allowing everyone to live tax-free in the process stimulating the biggest consumer-driven spending spree of all time: after all, we live in a world in which if something has worked so far, no matter how idiotic or ridiculous, it should work in perpetuity (not forgetting hope and prayer).

Plus it is not like anyone expects that the US will ever be good for, and repay the $22 trillion (at a minimum) in debt it will have in 4 short years. At best, it will keep rolling all that debt over (at ever shorter maturities) until the USD finally loses its reserve status.

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Mon, 08/20/2012 - 12:46 | 2720816 Cognitive Dissonance
Cognitive Dissonance's picture

We ain't seen nuttin' yet.

Just sayin'

Mon, 08/20/2012 - 12:58 | 2720856 slaughterer
slaughterer's picture

Greece leaving EURO next week. 

Mon, 08/20/2012 - 13:07 | 2720886 LawsofPhysics
LawsofPhysics's picture

Bullish for the dollar (short term),  someone hold slaughterer to this call.  Personally, I see Germany leaving before Greece.

Mon, 08/20/2012 - 13:35 | 2720993 NotApplicable
NotApplicable's picture

Anybody explain the hole (less than 100%) in 2000-01?

Mon, 08/20/2012 - 13:48 | 2721044 Nolsgrad
Nolsgrad's picture

The US ran a surplus in the budget. 

Mon, 08/20/2012 - 17:13 | 2721725 TheGardener
TheGardener's picture

Tyler is awesome. Tax freed American consumers would get
the can kicking into overdrive until another roaring twenties.

The world would willingly finance any FRN backed system,
even Free Reserve Notes as long as not having to face
reality.

Mon, 08/20/2012 - 21:30 | 2722327 knukles
knukles's picture

Yeah but if it worked that well they'd tax it.

Mon, 08/20/2012 - 18:13 | 2721894 bilejones
bilejones's picture

This is the lie that cannot die.

Here's the treasury site that shows the total debt.

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm

You'll find that the debt has increased every year since 1958.

 

The telling line here is "Includes legal tender notes, gold and silver certificates, etc." 

 

Also the other numbers you'll see kicked around don't include "Off budget items"

 

That's how you get the wife to think you are doing well: Only measure the bank loans, Don't include the iou's, pawn tickets, and weekly vig to the Soprano's. And lie about how much you are spending .

 

I'm sure you're shocked to see the State do such a thing.

 

 

 

Mon, 08/20/2012 - 15:46 | 2721446 JimBowie1958
JimBowie1958's picture

The EU has and can return to existing without Greece, but Germany was in from the start and is the irreplaceable engine pulling the EU along.

Greece will get either austerity effectively enforced or it will get kicked out, methinks.

Mon, 08/20/2012 - 13:08 | 2720888 falak pema
falak pema's picture

are they taking a late vacation? Its time they got some time off! 

Once they start printing the drachma they can go back to work with a vengeance, and never pay their debts. 

I've learnt something new : "proof of concept". Show the world debt repayment to banksta banks is not needed. Let all and sundry then follow. Once proven, rinse and repeat world over.

Ponzi Game over WS! 

 

Mon, 08/20/2012 - 13:25 | 2720948 Dad Was Right
Dad Was Right's picture

Speaking of Greece...

I had on my calendar Greece was due to make a payment to the ECB today.  3B Euro if I recall correctly. Haven't heard anything so I guess they made the payment?

Mon, 08/20/2012 - 13:40 | 2721010 Let them eat iPads
Let them eat iPads's picture

Yes, Europe gave Greece the money to make the payment to Europe.

 

Or something to that effect.

Mon, 08/20/2012 - 13:56 | 2721075 AldousHuxley
AldousHuxley's picture

Greece is going to leave EURO like Rhode Island is going to leave the Union.

 

Small countries are always owned by large superpowers as appendages to the empire....Germany owns them. ...just a play thing right now.....

Mon, 08/20/2012 - 15:33 | 2721395 mick_richfield
mick_richfield's picture

 

Greece leaving EURO next week.

California leaving USD the week after.

Mon, 08/20/2012 - 12:49 | 2720826 Let them eat iPads
Let them eat iPads's picture

Put huge tariffs on all crap imported from China.

 

Call it a crap tax.

Mon, 08/20/2012 - 12:56 | 2720850 Shizzmoney
Shizzmoney's picture

This is of course, the easy answer.

And politicans will tell the proles to the heavens how when they enter office, they will do this.  Of course, when they get there, they forget.

It's because the people who bankroll them, the corporations, are completely against this.  Ditto with the Fed, who WANTS the trade imbalance with China, who WANTS the USD to be low for corporate crap making prices (at the behest of the American worker AND the Chinese worker).

Not that any of us are shocked, however.

Mon, 08/20/2012 - 13:15 | 2720911 MachoMan
MachoMan's picture

I'm not sure that's true at the moment...  It definitely used to be true...  trade imbalances created huge windfalls for transnationals...  the increased profits of course never managed to trickle down...  but I digress.  (of course, wage arbitrage is a constant in every business, everywhere).

However, at the present time, our policy makers are painted in a corner.  If we are no longer to import cheap goods from slave labor, then how will inflation be exported?  In other words, if we actually have to pay full value for goods and services developed in the first world, under a first world regulatory regime, then how can the charade last any longer?  How long will it take for people to realize the real cost of monetary and fiscal prolifigacy?  There is no free lunch afterall...  I think the desire of transnationals is secondary, at best, to the fear of not being able to punitively exploit our reserve status...  many have died protecting it...  many have died even for threatening it.

I'll posit that the interchange will not be orderly...  and, thus, will be avoided or sought to be avoided anyway.  The truth is, that in a death by a thousand cuts, if you make peace with the cuts, then it's more comfortable than not knowing how you may alternatively meet your demise.  Morbid, but true.

Mon, 08/20/2012 - 13:03 | 2720866 falak pema
falak pema's picture

Ipads crap? If so, Nike, Walmart and Apple, all hit the wall. But so what...its time they paid taxes on slave labour earnings, big time.

If you added a flat corporate tax on all multinationals in Caymanista havens, of 20% and it was coordinated with Eurozone, you would be a long way to improving the budget deficits, without hurting the real economy. These super revenues from tax havens only make fat men/corporates fatter. We need the lean and hungry types who pay their taxes and work to keep their abdos at par.

Its time WS got corrected like a bot that had its cordon sanitaire ripped off. Let them eat HFT bots.

Mon, 08/20/2012 - 18:40 | 2721955 NidStyles
NidStyles's picture

Sounds like more Us Vs. Them without acknowledging that the Us is everyone that isn't a bankers, and Them being everyone that is. Those Cayman accounts are not the Corporations, they are the bankers that credit the corporations. 

Mon, 08/20/2012 - 13:13 | 2720910 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

Put huge tariffs on all crap imported from China.

 

Which will be paid by American consumers who are already on the edge.

Mon, 08/20/2012 - 13:42 | 2721022 A Nanny Moose
A Nanny Moose's picture

Bingo!

Mon, 08/20/2012 - 13:55 | 2721071 Let them eat iPads
Let them eat iPads's picture

I don't mind shifting production to other low cost countries, I just don't want any more garbage from China.

Mon, 08/20/2012 - 14:26 | 2721165 11b40
11b40's picture

The answer is - buy less crap.

Make it easier to build it here, then jobs come home and pople begin to have more income to buy American made crap.

I really am tired of all this spinless, mindless garbage peddled to Americans by people who should know better.

First, trickle down, supply side econ is a fantasy.  A get rich quicker scheme from the welfare kings who have been skimming and hollowing out this country's economy for a half century.  Supply is a function of demand....period, end of story.  No demand and the supply matters not one whit.  Have demand?  Suddenly, supply shows up.  You do not build a house from the top down.  You build it from the bottom up; a deliberate, painstaking, and laborious task that folllows strict guidelines for proper construction.

Second, that 'protectionism' is bad for America is Bullshit.  Like virtually anything, too much may be bad, but without the right mix, we get robbed.  The difference between 'fair trade' & 'free trade' is the difference between night and day.  Do you close your garage?  Do you lock your doors at night?  Do you close your gate?  Then you may just be a protectionist...and if not, they you just might be a fool.  Same with our borders, which includes the flow of goods, services, and people.

Third, we can't have it all.  No society ever has for any extended period, and we are about to prove it again.  Econ 101's 'Guns or Butter' lesson has not been suspended, just glossed over and lied about.  We have 2 simultaneous war theaters and we are told to "go shopping"?  Oh, and here's a tax cut, too.  How dumb can we be?  At least we were once smart enough to demand sacrifice when we went to war.

Fourth, we are building a "service economy".  Yeah, sure we are.  We are gettting serviced, alright.  Serviced right up the ass.  Where are these high-tech jobs we were promised?  Even bettrer, where are the trained workers for these invisible high tech jobs.  Every year, the percentage of drop-outs rises.  Every year, the costs of an education outpaces the inflation rate by a wide margin.  So, every year (for decades now), we have a larger pool of marginally educated workers with low wage jobs....or, now, no jobs.  All those basic factory jobs that provided for decent wages and built our communitites and tax base are gone.

Fifth, we need to give tax breaks to the "job creators".  No, we do not.  We need to give enroll job creators in a refresher course in creating AMERICAN JOBS.  As in major tax increases on personal income for top earners, and major tax breaks for investments in the tools of production and capital formation spent domestically.  It's called investing in the future and was once the foundation of Capitalism.  All the capital sitting off shore waiting for another round of "re-patriation" tax breaks before coming home should instead be given a big round of increased taxes on off shore funds, coupled with the incentives mentioned abouve if the money is brought home and INVESTED in business expansion HERE.  Otherwise, it should be very painful to close shop in America and invest in foreign lands.

And don't even get me started on companies who decide to move their charter off shore.  Any corporation with a headquarters in a 'tax haven' should be subject to special tax review ANNUALLY, and all executives of such companies subject to an annual audit as well.  Then, let's see how long Haliburton would keep it's headquarters in Dubai.

There is lot's more, but I gotta go back to work.  Let the junks begin.

Mon, 08/20/2012 - 15:21 | 2721356 CrockettAlmanac.com
CrockettAlmanac.com's picture

Or we could just return to a sound money standard and let things work themselves out naturally.

Mon, 08/20/2012 - 15:37 | 2721413 11b40
11b40's picture

Your suggestion has about as much chance of happening as mine do.  It is all about will power, a characteristic that seems to have vanished in congress.

Mon, 08/20/2012 - 18:41 | 2721958 NidStyles
NidStyles's picture

Who are you fooling? They never had any to begin with. 

Mon, 08/20/2012 - 13:25 | 2720946 diogeneslaertius
diogeneslaertius's picture

Constitutional Money backed by a basket of Commodities weighted as per our top exports (we can pull some reverse RMB fixing shit here maybe without a centralized state run econ)

Incremental tariff on Chinese goods

Roll back free trade et al. NAFTA/CAFTA/GATT etc.

 

we need to jump start small business as well but i think the above coupled with pulling out most of the crippling regulatory infrasturcture could put the US back on its feet in five years

Mon, 08/20/2012 - 14:09 | 2721130 Blankenstein
Blankenstein's picture

Ross was right.

 

Ross Perot / Al Gore Debate on NAFTA

 

http://www.youtube.com/watch?v=GhwhMXOxHTg (part 1 of 8)

 

http://www.youtube.com/user/naftafailure (rest of videos)

Mon, 08/20/2012 - 12:53 | 2720833 hedgeless_horseman
hedgeless_horseman's picture

 

 

...if instead of collecting any tax revenue, the government funded itself exclusively with debt?

Considering that one nation's debt and interest are another man's asset and income stream, I am sure that is exactly where our owners want us to be.

Mon, 08/20/2012 - 12:54 | 2720842 Tyler Durden
Tyler Durden's picture

One man's debt is not another man's income when the rate on said debt is 0% or negative.

Also, one man's debt is merely a promise that another man has given.

And as Belize just demonstrated, "you didn't sign that bond indenture; somebody else signed it for you"

Mon, 08/20/2012 - 13:10 | 2720898 malikai
malikai's picture

Inbred.

Mon, 08/20/2012 - 13:26 | 2720951 francis_sawyer
francis_sawyer's picture

Paint a bullseye on that mug... (just for fun & hijinks at organized dart tournaments at home, of course)... U never know when the Facebook police are going to misinterpret the phrase "I love paying unicorns & paying taxes to banking cabals" as something unintendedly sinister)...

Mon, 08/20/2012 - 14:07 | 2721118 hedgeless_horseman
hedgeless_horseman's picture

 

 

Tyler said, "One man's debt is not another man's income when the rate on said debt is 0% or negative."

With wine, some years are better than others, but even a bad vintage can still be profitable when blended with others.  The important thing is to own the vineyard for generations.

Mon, 08/20/2012 - 17:50 | 2721816 TheGardener
TheGardener's picture

Ever heard of "consistent quality approach" ?

You do your marketing homework on the branding disregarding
terrain,estate, year, grape or you even reconstitute the whole thing and most likely all of the above . Cocacola wines if you want to call them names.

You do not have to own any vineyards , you buy all over
the place and have some experts at hand for the blending.

Marketing gimmicks can be run of the mill eighties style
as long as you have a brand.

But horseman, your beef I`d have with some California plonk,
as long as it is grilled the way you picture it...

Mon, 08/20/2012 - 13:11 | 2720901 falak pema
falak pema's picture

chateau Lafite/Chateau Mouton Rothschild.

Château Mouton Rothschild - Wikipedia, the free encyclopedia

 

Mon, 08/20/2012 - 13:12 | 2720905 Cognitive Dissonance
Cognitive Dissonance's picture

"David has been in the business for 40 years and has worked in different branches of the family firm."

And the family business is...............Muppet puppeteer extraordinaire. They make GS blush......with envy.

Mon, 08/20/2012 - 19:52 | 2722129 i-dog
i-dog's picture

GS is an integral part of the same team that RedShield is also a part of. They share. It's an old ideology, not a family (or families).

Omnes viae Romam ducunt.

Mon, 08/20/2012 - 13:25 | 2720950 diogeneslaertius
diogeneslaertius's picture

but the TV told me the NWO does not exist and that the council of 300 is a breakfast cereal

Mon, 08/20/2012 - 13:43 | 2721024 prains
prains's picture

phonzi is in da houze!    aaaaaaaaaaaaaaaaaeeeeeeeeeee

Mon, 08/20/2012 - 13:47 | 2721027 dwdollar
dwdollar's picture

It works as long as it works. These banking families are just a bunch of wannabe dark wizards who the proles ignore or admire/fear. Every once and awhile the proles do awaken and they show who's really in charge. History has proven that all dynasties eventually end.

Mon, 08/20/2012 - 18:01 | 2721873 TheGardener
TheGardener's picture

"History has proven that all dynasties eventually end."

They end with retards and NWO embracing folks are a
promising sign, for a start.

Mon, 08/20/2012 - 20:00 | 2722140 i-dog
i-dog's picture

Dynasties and families end ... ideologies don't. New recruits keep them alive. For example, the Rothschilds were new recruits in the 1780s; the Rockefellers in the 1880s; the Clintons in the 1980s.

Tue, 08/21/2012 - 05:58 | 2722950 Ghordius
Ghordius's picture

Halleluja! +1Trillion - and I would not call them ideologies, it's rackets. Wolfes form packs, sheep form herds, fish form shoals. It's a question of function. The human being is special because it can join several forms of bond-groups. Families, clans, gens, tribes, nations, international movements, armies, corporations, gangs, mobs, political parties, friendship circles, markets, cities and rackets.

Mon, 08/20/2012 - 13:11 | 2720899 LawsofPhysics
LawsofPhysics's picture

Exactly, even better, with ZIRP,  one man's income/saving  becomes debt - FAIL.  Paper fucking promises everywhere and nobody can deliver shit.  This is going to be fun.

Mon, 08/20/2012 - 13:14 | 2720912 LMAOLORI
LMAOLORI's picture

 

 

hedgeless_horseman "if instead of collecting any tax revenue, the government funded itself exclusively with debt?"

We are pretty much doing that now anyway aren't we?

Presenting The Shocking Source Of US Treasury Demand In The Past Year

http://www.zerohedge.com/news/presenting-shocking-source-us-treasury-demand-past-year

"hedgeless_horseman Considering that one nation's debt and interest are another man's asset and income stream, I am sure that is exactly where our owners want us to be."

Yes but then again many on here want to stiff the largest holder's of the U.S. debt anyway so this would be a win win at least they would get the principal

The TRUTH About Who Really Owns All Of America's Debt

http://www.businessinsider.com/who-owns-us-debt-2011-7?op=1


Mon, 08/20/2012 - 12:51 | 2720835 bagehot99
bagehot99's picture

What do these nicompoops plan to be paid with, more Monopoly money?

Mon, 08/20/2012 - 23:39 | 2722677 whoyodaddy
whoyodaddy's picture

You spelled "nincompoop" wrong.  It is spelled pelosi.

Mon, 08/20/2012 - 12:56 | 2720837 poldark
poldark's picture

What is the interest payments % of revenue? 8.33%

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