Monday, November 8, 2010

The Cost of Interest

The image at right is from a recent post by Gene Hayward, who links to the Wall Street Journal.

As you can see, the image provides two income tax examples, and breaks down government spending for those two levels. There is much more to the list than I'm showing here. (I cut the list off after the item that "interests" me most.)

The numbers indicate that, for both income levels, the portion of your taxes that goes to pay interest on the federal debt is just over 5.3 percent.

So if a computer glitch or something totally wiped out the federal debt, your taxes could go down about 5.3 percent. For every dollar you'll have to pay this year, you'd be paying 94.7 cents, instead.

It's something. And every little bit helps. But it's not a big reduction. And again, that's the tax savings we'd see if the entire federal debt was wiped out.

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