National Debt Takes a Big Chunk Out of Paychecks

National Debt Takes a Big Chunk Out of Paychecks

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The federal government devotes $304 billion a year to servicing the national debt – and under President Obama’s budget plan more of that burden would fall on taxpayers who earn in excess of $500,000, according to new research by the American Enterprise Institute.

No major surprise – except that the conservative think tank puts hard numbers behind a basic message of Obama’s re-election campaign: Wealthier Americans must pay more in taxes to stabilize a federal debt load.

Based on different income levels, AEI scholars Aspen Gorry and Matthew Jensen measure how much in tax dollars a year goes to managing the interest and principal of more than $11 trillion in publicly held debt.

They break down the payments under three scenarios: 1.) the existing policies get continued; 2.) existing law gets upheld and all the Bush-era tax breaks expire next year; and 3.) the Obama budget continues those tax breaks for American families earning less than $250,000.

The economists provide little commentary other than noting that Obama’s plan is more “progressive”: The more you earn, the more you pay.

A household making $50,000 to $75,000 a year – the sweet spot of the middle class – pay $1,390.49 in total taxes to service the debt under current policy, a number that would drop by about $25 if every tax cut introduced by George W. Bush in 2001 and 2003 ended as scheduled at the end of the year. Under Obama’s budget, it would fall by $81.59.

Picking up the slack would be wealthier households. Those with incomes between $500,000 and $1 million would spend $29,337.83 on the debt, a $1,665.05 increase. Americans earning more than $1 million would have a share of $166,264.81, almost $18,000 more than they do today.