Recap:

The US federal deficit represents the amount of money the government borrows each year to cover the difference between what it spends and what it collects in taxes and other receipts.  As of today, August 15, the federal government has so far spent $1.63 trillion (T) more this fiscal year than it has collected (U.S. Treasury).

The national debt represents the total amount of outstanding borrowing accumulated over the nation’s history.  As the federal government experiences reoccurring deficits, the national debt grows.  Currently, the national debt is just about $37 trillion (U.S. Treasury).   The national debt is expected to surpass the all-time record of 106% of Gross Domestic Product (GDP) by 2029. To put that in perspective, the average over the last 50 years was about 49% of GDP.  

My goal throughout this series has been to cut $8.1 trillion (T) from the Federal Budget to stabilize the debt at 100% of GDP by 2035. So far I’ve saved $6.55T by choosing various budget and policy options that either cut federal spending or raise revenue. My primary source of ideas came from The Committee for a Responsible Federal Budget (CRFC). See Part II, Part III and Part V for details.

That leaves $1.55T still to go. To close the deficit gap, I’ve considered raising taxes on the income or wealth of the super-rich. But it turns out the wealthiest Americans already pay almost 60% of their income on federal, state, local and foreign taxes. That’s enough. As for wealth taxes, most developed countries that had them have abandoned them, due to a combination of high risk, difficulties of collection and low returns: about 1.5% of tax revenues for the countries that still have them, on average. That would translate to about $75 billion (B) in federal tax revenue in the U.S., nowhere near what’s needed to close the $1.55T gap. For additional information, see What Rich Americans Pay in Income Taxes and Part VI of this series.

CRFC offered a couple policy options I didn’t choose the first time around:

  • Increase Corporate Tax Rate to 25% 2035 ($590B deficit reduction)

  • Implement a 10% Universal Tariff: 2035 ($2390B deficit reduction)

But I’m choosing them now, somewhat altered: raise the corporate tax rate to 24%, shrinking the deficit by about $442B by 2035 and implement a 5% universal tariff*, saving another $1195B by 2035. $442B+1195B= 1.64T. These revenue-raising options are modest and unlikely to cause economic havoc. Plus, they allow me to close the remaining $1.55T deficit gap.

Job completed.

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* This assumes Trump’s crazy tariffs will be rescinded at some point.