The Federal Deficit
- 1996 - $5.225 trillion
- 2016 - $19.573 trillion
- 2020 - $26.945 trillion
- 2024 - $35.464 trillion
This debt is not caused by Social Security or Medicare benefits but actually is caused by an unfair tax system. The Trump tax cuts started in 2018.
Social Security is a pension/annuity system funded by US workers.
The figures below are from the Social Security Trustees Report for 2023.
In 2023 workers paid $1.112 trillion dollars via payroll deductions into the system.
This is 12.4% of the wages up to $160,200 of every worker in the country in 2023. This does not include Medicare taxes that American workers pay and this is also separate from the federal income taxes that workers paid in 2023.
During 2023, Social Security paid out $1,232 trillion in benefits to retirees and disabled Americans and paid $7 billion for its own admin expenses.
The Social Security Trust Fund started 2023 at $2.830 trillion and ended the year at $2.788 trillion. That is a loss of $41 billion.
The system earned $67 billion in interest (2.3%, $67/$2,829) from the US treasury bonds that it is forced to buy with any surplus assets.
This requirement is counter to any prudent investment strategy for a pension fund. A diversified strategy could easily create a $75 billion return on interest and dividends, and $140 billion in increased asset value ($2.852 trillion times 5%). That is $215 billion each year rather than $67 billion. Just think of all the wasted years in the past. Of course, the federal government would be paying higher a interest rate on its debt.
The Social Security system would be greatly strengthened by applying the 12.4% tax to incomes above $500,000 and raising the federal minimum wage for all workers.
In plain English, the Social Security system has been subsidizing the expenses of the federal government. If the Social Security Trust Fund had been allowed to follow a diversified stock/bond policy, the system would self-sustaining into the foreseeable future.
In addition, the Social Security system is not part of the current federal debt. In fact, it owns $2.8 trillion of the $36 trillion federal debt.
Social Security Trust Fund Recap for 2023
- $2.830 trillion Open Bal - 2023
- $1.233 trillion Wage Taxes
- $0.067 trillion Interest Earned
- -$1.379 trillion Benefits Paid
- -$0.007 trillion Admin Expenses
- $2.788 trillion Close Bal - 2023
Medicare Benefits for Retirees and Disabled Americans
The figures below are from the 2023 annual report from the trustees of the Medicare Trust Fund.
In 2023, American workers paid $367.2 billion in Medicare taxes (2.9%) on all wages. This is separate from federal income taxes and Social Security taxes.
The trust fund increased in value during 2023. Benefits paid out, however, were $37.4 billion more than payroll taxes collected. Miscellaneous revenue items created the $12.2 billion increase in the fund.
In the future, Medicare may become a major cost item in the federal budget but as of now it is not a cost item.
If the economy is growing, it helps with Medicare costs and if the economy is not doing well, it is negative for Medicare costs.
Like Social Security, Medicare is not now a cause of the federal debt.
Medicare Trust Fund Recap for 2023
- $196.6 billion Open Bal 2023
- $367.2 billion Wage Taxes
- $35.0 billion Taxes on OASDI benefits (Part B premiums)
- $5.7 bllion Interest Earned
- -$397.5 billion Benefits Paid
- -$5.6 billion Admin Expenses
- $208.8 billion Close Bal - 2023
Federal Income Taxes for 2022
The figures shown below come from the tax tables on the IRS web site. Calendar year 2022 is the most recent year reported by the IRS and 1996 is the oldest year.
You will see from the first table below that in 2022 the total US national Adjusted Gross Income (AGI) was $14.834 trillion. In 1996, the figure was $4.536 trillion. The 2022 amount is over triple the amount from 1996.
- In 1996,
- tax filers with AGI under $25,000
- represent 53% of all filers but
- their total AGI was 16% of the total AGI of all filers.
- their total AGI was $671 billion
- their average tax rate was 7.0%
- paid $34.414 billion in income taxes
- tax filers with AGI over $200,000
- represent 1.3% of all filers but
- their total AGI was only 17.8% of the total AGI of all filers
- their total AGI was $807 billion
- their average tax rate was 28.1%
- paid $226.112 billion in income taxes
- tax filers with AGI under $25,000
- In 2022,
- tax filers with AGI under $50,000
- represent 52% of all filers but
- their total AGI dropped to only 12.9% of the total AGI for all filers.
- their total AGI was $1.744 trillion.
- their average tax rate was 5.4%
- paid $63.924 billion in income taxes
- tax filers with AGI over $500,000
- represent 1.5% of all filers but
- their total AGI significantly increased to 25.9% of the total AGI of all filers
- their total AGI was $3.849 trillion (450% over 1996)
- their average tax rate was 24.6%
- paid $945.991 billion in income taxes
- tax filers with AGI under $50,000
If the average tax rate for the top 1.5% was 50%, the total US income tax would have increased by $976 billion in 2022. The total national income tax for 2022 would have jumped from $2.099 trillion to $3.075 trillion.
AGI Range | Number of tax returns for range | % of total range | Total AGI for the range | % of total AGI | Taxes Paid | % of taxes to AGI |
All | 161M | (100.0%) | $14.834T | 100% | $2.099T | 15.27% |
Under $50K | 84M | (52.0%) | $1.744T | 12.9% | $63.924B | 5.39% |
$50k to $100K | 39M | (24.2%) | $2.782T | 18.8% | $213.183B | 8.25% |
$100K to $200K | 26M | (16.0%) | $3.567T | 24.0% | $397.758B | 11.28% |
$200k to $500k | 10M | (6.2%) | $2.891T | 19.5% | $478.105B | 16.58% |
$500k and up | 2.5M | (1.5%) | $3.849T | 25.9% | $945.991B | 24.60% |
AGI Range | Number of tax returns for range | % of total range | Total AGI for the range | % of total AGI | Taxes Paid | % of taxes to AGI | Fairer Tax Rate | Fairer Tax Amount |
$500 to $1M | 1.7M | (1.0%) | $1.124T | 7.4% | $254.285B | 22.65% | 25% | $257.206B |
$1M to $1.5M | 360K | (0.2%) | $0.435T | 2.9% | $110.820B | 25.50% | 35% | $139.477B |
$1.5M to $2M | 148K | (0.1%) | $0.254T | 1.7% | $67.287B | 26.47% | 45% | $104.551B |
$2M to $5M | 208K | (0.1%) | $0.621T | 4.2% | $166.027B | 26.76% | 61% | $345.158B |
$5M to $10M | 52K | (0.003%) | $0.362T | 2.4% | $96.476B | 26.62% | 75% | $250.306B |
$10M and up | 35K | (0.002%) | $1.052T | 7.1% | $251.097B | 23.90% | 86% | $806.157B |
$945.991B | 24.80% | 49.49% | $1,902.866B |