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Marginal Tax Rates and Paying for Entitlement Spending

Regular readers of Growls know that we like to use the work of Veronique de Rugy, senior fellow at George Mason University's Mercatus Center. Most recently we growled about her "comprehensive look at U.S. debt."

This week she took a look at how marginal tax rates need to "surge" in order to pay for entitlement spending, which is the primary budget driver, and therefore the primary driver of the nation's ballooning debt. For example, this Heritage Foundation 'infographic' shows that major entitlements account for 45% of federal spending.

In the following chart, she shows the "share of federal income taxes paid by the top 10% and bottom 90% of income percentiles:

And in this second chart, she shows how "marginal tax rates must nearly double to fund entitlement spending."

Her conclusion can't be clearer: "The data makes it clear that marginal rates will have to be raised to unprecedented levels to close the gap. Taxes will have to more than double for even the lowest tax brackets in order to pay for current Medicare, Medicaid and Social Security spending." Kudos to Ms. de Rugy and the Mercatus Center.

Of course, an alternative to "surging" tax rates would be reduced entitlement spending. But isn't that what the Greek government tried?

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