Debt crisis ignored by Congress could cost average US household $18,000 a year

The paper, written by Jessica Riedl, a Brookings budget and tax researcher, is 132 pages long and mostly contains very revealing charts and tables. It contains a wealth of information that shows, for example, how much Our budget deficit and long-term borrowing are getting worsecompared to the Congressional Budget Office (CBO) figures required to comply only with current law if the tax cuts in the One Big Beautiful Bill (OBBB) do not count and extended. This scenario is so likely that it makes for a better and more depressing baseline. Other covers highlight that we have the largest budget deficit in the OECD and that debt per household is around $235,000 « you owe on another mortgage you don’t know about ».

I focused on the numbers that show the revenue above CBO’s 10-year projections released in February needed to stabilize the federal debt-to-GDP ratio at 100 percent by 2036, right where that ratio is projected to end in fiscal year 2026. Remember, the burden is still scary. That’s double the postwar average and the highest number since a brief summit in 1946. Limiting borrowing to that amount continues to saddle the nation with huge interest bills that even match Medicare spending.

The central Riedl table on the theme of « stabilization » shows the predicted contribution of 16 individual revenue collectors to achieving the goal. All but three fall far short. For example, imposing a 77 percent estate tax and an 8 percent wealth tax, two measures proposed by Sen. Bernie Sanders (I-Vt.), would together cover only an 18 percent gap. A 50 percent income tax rate on income over $200,000 for individuals and $400,000 for married couples puts the US about a third of the way to victory. Simply put: swashbuckling billionaires, the rich in general—or even just the high-income and older—doesn’t work.

But the triumvirate of governments fits famous bank robber Willie Sutton’s explanation for why he chose banks: That’s where the money is. They are all taxes that target huge revenue bases. They would score using a formula that raises rates evenly across all income groups, crucially including the middle class.

The first solution: an overwhelming jump in income tax brackets. Raising the extra $2.6 trillion in the 2036 budget needed to keep the debt-to-GDP ratio at 100 — using today’s largest source of revenue alone — would require an increase of 12 percentage points. In other words, if your current average interest rate is 20%, you would pay 32%. Another fix: adding 11.5 points to payroll taxes, currently 15.3% for most workers — and also removing the Social Security contribution cap of about $180,000. The last big one is value added tax, or VAT, which is the fiscal cornerstone of virtually all other OECD countries, although some use closely related national sales taxes instead. The United States is exceptional because it never has either. About 30% VAT would ring a bell. In setting this figure, Riedl assumes that America will follow most of Europe in liberalizing the most important « social goods »: home building, health care and education. « They are a bigger part of the US economy than they are in Europe, » he notes. « So we needed an even higher VAT rate than in Europe to get the same percentage of GDP as revenue. »

Of course, the solution could be a mix of tax increases from several categories. Or lower brackets due to restrictions on programs like Medicaid, Medicare, and Social Security—though virtually none of today’s political leaders dare mention that course. Again, what all scored remedies have in common is that they cover wider waters compared to narrow channels. It is mainstream Americans—our nurses and teachers, our construction workers and our accountants—who this government, because of its waste, must call upon to foot the bill.

How much would the extra household then have to pay by 2036? By then, the U.S. is expected to have about 144 million households earning an average of about $119,000 (assuming 3% annual growth from 2026). Since our examples predict that each tax – income, payroll or VAT – solves 100% of the problem, the number is the same for everyone: $18,000 a year or an extra 15% is taken from the family’s income, leaving less for food, holidays and the mortgage.

« The solution is that everyone pays, just like in Europe, » says Riedl.

The tax clock is not just about taxing the rich. As the Brookings/Riedl report shows, it is taxing on all Americans.