Total tax revenues in the US amounted to almost 25% of the Gross Domestic Product (GDP) in 2020. That may seem like a lot but it’s way below average compared to tax revenues as a portion of GDP in other developed countries, e.g., Japan (32%), United Kingdom (33%), Canada (33.8%), Germany (38.8%), and Denmark (46.3%).
A big chunk of total US tax revenue comes from federal taxes, which don’t bring in enough revenue to meet federal expenses. So the feds have to borrow to pay the bills and the public debt keeps growing year after year. This wasn’t much of a problem until 2020, because GDP growth kept pace with the increased debt, which remained manageable thanks to low interest rates. But then came Covid, which changed everything: the debt exploded, low interest rates be damned. This chart tells the story:
With more stimulus spending on the way, the federal debt is going to grow a bit more before the long drift downward to a manageable size - a process that will take many years. In the meantime, the Bold Centrist has a major challenge: how to fund Big Ideas without adding to the public debt.
Short answer: increase tax revenue. Not to Danish levels, but how about splitting the difference between Canada (33.8% of GDP) and Germany (38.8% of GDP). In other words, let’s increase US tax revenue to 36.3% of GDP.* How much extra spending money would that yield if applied to the 2020 US GDP of $21 trillion? If 2020 tax revenues stayed at the historic norm of 24.5% of GDP (more or less), the expected take would be around $5 trillion. If US tax revenues were 36.3% of GDP, another $2.6 trillion would be available ($7..6 trillion total).
Next: How to spend $2.6 trillion wisely (a thought experiment).
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* Of course, cutting wasteful spending would also be part of the equation. But there’s no getting around the need for additional tax revenue. For ideas on how to generate more revenue the right way, see The Bold Centrist, Part V: How to Design a Tax System.