Folks:
I’m planning a party to celebrate an immigrant’s recent acquisition of U.S. citizenship. Unlike the red carpet that our government rolled out for the Tsarnaev family, this Boston-area immigrant had to pay for an MBA from an Ivy League university and hand over roughly 50 percent of her income in federal, state, and local taxes over the 11 years since graduation before getting the citizenship that came so easily to Dzhokhar Tsarnaev (a failing student in debt to the taxpayer-subsidized University of Massachusetts, who had previously cost Cambridge taxpayers approximately $26,000 per year as a K-12 student (given that the older Tsarnaev brother was collecting various welfare benefits in Massachusetts and was also a Cambridge Public School student, my immigrant friend was also paying for our hospitality to the Tsarnaevs)).
By accepting U.S. citizenship, my immigrant friend says goodbye to the possibility of returning to her native Russia and paying income tax at a 13 percent rate. She also says goodbye to the possibility of living tax-free in a country such as Monaco and to the possibility of living for a smallish annual fee in a country such as Switzerland. She is therefore adopting a share of our debt. I’ve got a baseball, hot dogs, and apple pie theme already planned for the core of the party but am stumped as to what to get to indicate her shouldering of our debt burden.
I thought briefly about getting a huge quantity of jelly beans, one for every dollar that she will have to pay back. But then I got stuck on the question of how many jelly beans to buy. http://www.usdebtclock.org/ says that debt per American (citizen or resident?) is $53,281. The JellyBelly FAQ says that there are 400 jelly beans in a pound, so that would be 133 lbs. of jelly beans. But not every resident pays taxes to service the debt. Some are too young, some are too old, some are unemployed, some are disabled, etc. The debt clock tries to adjust for that by showing “debt per taxpayer” (maybe misleading because people who don’t pay income tax still pay a lot of other taxes, e.g., property tax, sales tax, gas tax) of $148,136. What about the fact that my friend has an Ivy League MBA? Her income is higher than average and likely to remain that way. Furthermore, the Obama Administration and Congress are constantly coming up with new ways to “tax the rich”. My immigrant friend is likely to bump up against the $250,000 “you are now a rich person” threshold in a lot of future years. Should her share then be considered closer to $1 million?
We also have to consider her age, 37. She’s in her prime earning years yet by the time she turns 65 it seems unlikely that Medicare and Social Security will exist in their current forms (maybe they will be “means-tested” so that people who had higher incomes during their working lives won’t get any benefits). Does the fact that she is unlikely ever to receive these valuable government handouts mean that her share of the debt is higher? Since none of her tax payments will ever turn into checks and health care payments in her old age, unlike a lot of American taxpayers
Finally…. since the debt is growing, not shrinking, perhaps her share of the debt is actually $0. If it is never going to be paid back then nobody needs to shoulder the burden of repayment.
So… comments from readers would be appreciated. Question 1: What is the proper way to calculate the share of our national debt being taken on by a new citizen, age 37 and with a high income? Question 2: What is a fun but not crazy expensive or bulky way to symbolize this quantity at a party?
1) this is complicated; if the US were to continue being able to have low interest payments, perhaps 10% of the total tax would be used to pay interest on the debt and SHTF would not happen during her working lifetime (kick the can). Assuming $220K in income, you would pay about $50k in taxes each year, or $5k (in present dollars)*30 years =$150,000. That is a best case scenario.
2) I would give three 1 kilo Chinese Tungsten ‘novelty gold bars’.
btw, there is a foreign earned income exclusion of $95,100 so someone could return to Russia and pay 13% income tax, as long as it was less than that amount.
Realistically the debt is never going to be repaid, so why bother complaining? C’mon and join the FIRE (finance real estate insurance) economy! The debt is either going defaulted on (not likely) or inflated into oblivion (very likely). Rather than writing snarky blog posts you should leverage your assets to borrow 10-40x, “invest” it into Wall Street, then sit back and enjoy while Uncle Ben and the Fed print enough dollars to inflate yourself into a gazillionaire! Just make sure to trade your dollars into gold or bitcoins before the big crash.
tldr; buy her a bitcoin.
“By accepting U.S. citizenship, my immigrant friend says goodbye to the possibility of returning to her native Russia and paying income tax at a 13 percent rate”
I’ve also recently become a US citizen after waiting for a mere 13 years and after paying for Tsarnaevs’, for Obama’s aunt Zeituni’s and for countless others’ welfare. And I’ve also said goodbye to the possibility of returning to my native Romania and to paying *no* income tax, because I’m a software engineer and therefore my income would be exempt from the flat 16% tax. No regrets about this, though.
My suggestion for your party – get some confetti!
I think the National Debt is too amorphous to visualize. As you say, it may have no value if never paid back. Instead it would be more visceral to have a cake chart. Take a custom round or square cake, have the baker color 55-60% [1] of the frosting red representing the percentage of time your friend will spend in a given year working for government, ie. percent of income effectively paying taxes. Only government employees can eat from the red part of the cake. Everyone else must share the smaller portion of cake. Any uneaten part of the red cake should be thrown out.
Party Favors in Brookline is great at specialized cakes, something a certain soon to be four year old will appreciate http://www.partyfavorsbrookline.com/cake-catalog
[1] http://www.nowandfutures.com/taxes.html
MBA in financial sector probably contributes to national debt increase beyond his/her tax share. Bad example.
Great answer, anon! You nailed it.
Would you rather have 1 billion dollars and be living 1000 years ago, or be penniless and living today? If you choose the former, think harder and try again.
Nobody avoids coming to the US because of the debt, because they understand implicitly that our national debt is a made up problem. And appropriate when in recession. And that the debt is owed mostly to ourselves anyway. And that the debt we owe to other countries is even better – for us, not them. Because the debt is in our own currency! And that actually the US is very, very rich. Not in money (though we are that too) but in our natural resources and people.
And they know that the hyper-inflation predicted to come “any day now” for the last four years never came, and will not come.
Now we do have a real debt problem, but it is not monetary debt. It is the lost productivity due to large numbers of people not working. That WILL hurt us in the future, alas.
Anon, Mike: You guys did nail it… except for the fact that the MBA in question does not work in finance (remember that this is Boston, not New York City). She works for a company that makes a physical product and sells it (as you might expect given our mixed centrally planned/free market system, about fifty percent of the domestic demand for this product comes from the government and about fifty percent from private individuals and organizations).
Mike: I’m not quite sure of your point regarding rich people in ancient times. Are you saying that a homeless person in America today (“penniless”) has a more enjoyable life than a super wealthy person, e.g., Roman Emperor, in ancient times?
Separately, the fact that someone can come from another country and have a good life here in the U.S. does not necessarily mean that the U.S. economy is healthy. It may mean that Americans, on average, are lacking in skill and motivation. So a foreigner can easily out-compete the natives for the natural resources and other wealth that had been previously accumulated here. For example, I gave some helicopter training to a New York City police officer who was from the Philippines. He was 39 years old. The NYPD was sending him, all expenses paid, to Harvard Business School. He was planning to retire at age 42, with a pension of nearly 100 percent of his salary, and return to his native Philippines where the taxpayers of New York City would be sending him checks that would make him one of the higher income folks in that country. As long as New Yorkers keep sending the checks (inflation-adjusted too!), the overall health of the U.S. economy was not a factor in whether or not his career strategy was sensible.
Phil, have you though of some representation based on coloured liquids (orange juice and water for instance). If you take a gallong of orange juice to represent the debt, and the corresponding amount of water to represent your friend’s taxes over time, you can then drop the water in the juice and see how watered down the juice gets… just a though.