Ever since America gained its independence from Great Britain after the Revolutionary War, the country’s economy has been struggling with having to cope with the debt it has collected. With events such as the Civil War, World War I, World War II, and the wars still happening now in Iraq and Afghanistan; or governmental mandatory spending such as social security, medicare/medicaid, or net interest, the national government’s debts accumulate. Unfortunately, this ongoing trend is not slowing down in the foreseeable future.
In fiscal year 2018, the deficit was 793 billion dollars, but the Congressional Budget Office (CBO) estimates that in nearby 2020, the deficit would soar above a trillion dollars and continue stacking up (Kaplan). Although the general public doesn’t have any immediate effects of this ongoing trend, the question still remains: How long is it until it’s too much for the economy and government to handle? Rather than waiting to find out what can result of this perilous future, one should act now to prevent such a calamity from happening.
Some changes that could help solve this problem would be to raise the taxes on several everyday things little by little, so that over time the revenue would accumulate and make an impact on the national debt. Therefore, raising the income tax of the top one percent of earners, creating a tax on greenhouse gases, and increasing the tax on gasoline, would be a good start to reduce yearly deficit amounts.
The American government gains the most revenue through individual income taxes.
In total, the government earned approximately 1.6 trillion on individual taxes alone in fiscal year 2017, but rather than increasing everyone’s taxes (as people with lower income may have financial issues), the government could raise the taxes of just the top one percent of earners. These earners pay at about a rate of a third of their income to the government, but if the government were to raise that rate to 40 percent of their income, it would give rise to 157 billion dollars in revenue in just the first year, and if all goes well, estimates show that the government would earn about 644 billion in revenue over the next decade (Cohen). Although many of the rich that would be targeted by this plan may be exasperated by the sudden increase in their income tax, “the average household in this group would still take home at least $1 million a year.” This tax would be a favorable idea and should be considered, as the rise in the tax rate for these high earners most likely would not affect their financial status, but also it would have no effect on those that earn less.
Another way of increasing revenue and offsetting deficit is by creating a tax on greenhouse gases. The CBO proposes an idea that would put a 25 dollar tax per metric ton of greenhouse gases, especially carbon dioxide, that would rise at a rate of 2 percent per year (‘Impose a Tax on Emissions of Greenhouse Gases”). The tax would be placed on large manufacturing facilities and actions such as electricity generation, manufacturing, and transportation. The CBO estimates that if the tax was started in fiscal year 2017, the cumulative federal revenue through 2026 would be approximately 977.2 billion dollars. Another added benefit of this tax is that, “emissions from sources subject to the tax would fall by roughly 9 percent.” The result of less greenhouse gas emissions would be a great help to everyone as it would help prevent global temperatures and sea levels from rising, thus save those living in coastal areas. Imposing this tax to sources of large amounts of carbon dioxide emissions would be a good idea because unless those sources cut down the emissions by finding a more eco friendly energy source and improve the overall environment, the tax would gain tons of revenue in the future to help decrease annual deficit.
Not only can a tax on greenhouse gas emissions increase federal revenue and help the environment, but an increase on gasoline taxes can also. “For 25 years the United States federal fuel user fee (aka the “gas tax”) has remained stagnant” at a rate of about 18 cents per gallon of gasoline and 24 cents per gallon of diesel (Orvis, Robbie, and Silvio Marcacci). The U.S. Chamber of Commerce proposed an idea of increasing this gas tax by 25 cents. Under Chamber’s proposal, the tax would start slowly at five cents more per gallon and increase every year by five more cents until it reaches 25 cents more per gallon of gasoline. Statistics show that if this tax were to be in place, it would raise as much as 303 billion dollars in total revenue through the first ten years it is put in place. Like the tax on greenhouse gas emissions, this tax would help the environment by discouraging some drivers from using gasoline, and purchasing more eco friendly options such as an electric car in the future. Estimates also show that this tax increase could result in as much as 1.2 million more electric vehicles on the roads and cut about 1.3 billion barrels of fuel use by 2050. This increase on gasoline and the creation of a tax on greenhouse gas emissions are much hand-in-hand, as these taxes would help improve the environment and also raise revenue to offset annual deficit.
In general, increasing the rate of the top tax bracket’s incomes, forming a tax on the amount of carbon dioxide released into the atmosphere, and raising the tax on gasoline and diesel are all possible methods of balancing the national debt. In a decade, the CBO projects that the annual deficit would rise from 793 billion dollars per year in fiscal year 2018 to about double in fiscal year 2027 with about 1.5 trillion dollars (Kaplan). Through the next decade from 2017 to 2027 (assuming all the taxes were put into effect in that year), the total revenue earned from all three taxes would be approximately 2.6 trillion dollars in total revenue. Though this is not nearly enough to completely balance the entirety of the U.S.’s national debt, it is a good starting point. To make a strong, noticeable impact on balancing the debt, the government needs to decrease spending along with creating opportunities for more revenue.