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Zeroing in on the problem

Why most tax increases won't cure federal debt

Issue: "The GOP and Hispanics," May 19, 2012

When the U.S. Senate, on a procedural vote, killed the so-called "Buffett Rule" last month, even some liberal lawmakers and pundits said it was more about politics than economics. The rule would have imposed a 30 percent tax on all income for people making more than $2 million a year, and would have generated about $5 billion a year in additional tax revenue, or about 0.2 percent of total tax revenue.

The bottom line: A tax increase, even a dramatic one, will not solve the debt problem, and a tax increase brings with it the probability of sending much needed capital to other countries. The following chart looks at the federal budget and then eliminates eight zeros, bringing the problem into sharper focus.

The U.S. federal budget in numbers we can all understand:

U.S. annual tax revenue: $2,340,000,000,000

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Federal annual spending budget: $3,590,000,000,000

New annual debt from overspending this year: $1,250,000,000,000

National debt: $15,400,000,000,000

Last year's budget cut by Congress: $38,500,000,000

Now remove 8 zeros and pretend it's a household budget:

Annual family income: $23,400

Money the family spends annually: $35,900

New debt added to credit cards: $12,500

Outstanding balance on credit cards: $154,000

Total cuts to the family budget: $385

Warren Cole Smith
Warren Cole Smith

Warren, who lives in Charlotte, N.C., is vice president of WORLD News Group and the host of the radio program Listening In. Follow Warren on Twitter @WarrenColeSmith.

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