Letter from Ron Bishop

Who Funds Our Government?

Who pays federal taxes? In principle, you might think the answer should be simple but, in practice, not so much. I’d like to shed some light on this so my neighbors and I, whatever public policies we may disagree on, can at least settle on one set of facts to help us communicate.

According to the Tax Foundation’s latest summary, the wealthiest tenth of Americans pulled in half of all the income and paid three-fourths of the federal taxes in 2022. The richest half of us earned 89 percent of the income and paid 97 percent of the taxes—and we’re not yet down to my family’s income bracket. So, when politicians of a certain party proclaim, “Rich people don’t pay their share of federal taxes,” we know what to think, right? Well, there’s more to the story.

Four-fifths of our national debt—over $36 trillion—is available for the public to own and, of that $29 trillion, over two-thirds, stays in the U.S., from Peterson Foundation data. Although there are caps on how much of this debt you can invest in each year, there is no overall limit on how much you can own. This would be a sweeter deal if the interest wasn’t taxable, but it’s only exempt from state and local taxes. Still, any citizen can hold enough national debt to pay back in interest what they spend on federal taxes (or even more). This works best for people who don’t have to spend every nickel on basic needs, but it appears to be popular with those who can do it. It’s a way for them to offset their tax payments, but those payments are real.

I hope this helps us get past some misperceptions toward a better common grasp of how our government is funded. We’ll need it to get our heads together about what to do from here.

Ron Bishop
Cooperstown