Name: Missy Rodey
Question: Paul – I understand that about 50 percent of U.S. revenues are generated through financial services. Can these revenues be used to pay down the national debt, or is such payment dependent upon industrial production?
Paul Solman: Fifty percent is way too high a figure, Missy. The true percentage for “finance and insurance” is probably below 10 percent. But yes, the profits from all companies, including financial services, are taxed and thus become government revenues, just as profits from industrial firms do.
As long as we’re running annual budget deficits, though — spending more money than we’re taking in every year — we won’t have anything left from taxes to pay down the national debt. In other words, all the taxes we currently charge ourselves, either directly or indirectly through corporate taxes, are not enough to cover our expenditures and so, every year, we add that year’s deficit to the cumulative national debt.
In short, there’s no money left over to pay down the national debt. And as long as we spend more than we tax, the debt is going UP, not down.
But wait a minute. I think I’ve misunderstood you. Are you suggesting a new or extra tax on financial institutions?
If so, it would need to raise well over a trillion dollars this year alone to cover the deficit and have something left over to pay down our debt. I have a funny feeling that, given the current attitude toward taxes in this country, a new tax on finance isn’t forthcoming.