Interest Payments on Debt Consumed More Than Half of US Income Tax Revenue in July

In July, the federal deficit reached $244 billion, marking a 10 percent increase from the previous year. The total budget shortfall for the year so far stands at $1.517 trillion.

The budget deficit for the month was driven by higher interest payments on the national debt and an upsurge in government spending.

According to the Treasury, federal spending amounted to $574 billion, a 15 percent rise year over year. Tax receipts stood at $330.377 billion, reflecting a 20 percent increase from the same period last year.

In July, the largest monthly budget items included Social Security ($123 billion), Medicare ($92 billion), net interest ($81 billion), health ($73 billion), and national defense ($71 billion).

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About one-third of last month’s budget shortfall was attributed to interest payments, consuming approximately 52 percent of individual income tax collections.

The Treasury Department projects that interest payments will surpass $1.1 trillion for the current fiscal year, nearly half of income tax revenues.

Year-to-date, interest charges have become the second-largest budgetary item at $763 billion, surpassing Medicare ($721 billion), national defense ($715 billion), and income security ($566 billion). Social Security remains the top expense, exceeding $1.2 trillion.

Annual budget deficits are forecasted to exceed $2 trillion, totaling around $22 trillion by 2034, according to the CBO.

The CBO also expects that annual interest payments will continue to exceed $1 trillion and account for a significant portion of the federal budget in the next decade.

The fiscal year for the federal government runs from October to September.

Alarm Bells

Following the most recent fiscal data, there have been renewed calls for officials to address the country’s growing fiscal challenges.

Maya MacGuineas, President of the Committee for a Responsible Federal Budget, expressed concerns about the nation’s fiscal situation, stating that the United States is “sleep-borrowing $5 billion a day” and policymakers “have slept through so many alarm bells.”

As the national debt is on track to exceed a record share of the economy, MacGuineas worries that the next president may avoid tackling this issue.

Les Rubin, an economist, emphasized the need for immediate action to address the nation’s escalating financial obligations to future generations, particularly in light of reaching the $35 trillion national debt milestone last month.

“We must prioritize policies that uphold fiscal discipline while safeguarding essential services from compromise,” Rubin, CEO of Main Street Economics, remarked in a statement shared with The Epoch Times. “Through sound financial management and a commitment to economic responsibility, we can secure prosperity for future generations.”

The issue of national debt has received minimal attention during this election cycle, with presidential candidates focusing on proposals to eliminate certain taxes and maintain the integrity of Social Security and Medicare.

Former President Donald Trump has suggested eliminating taxes on retirement benefits for seniors, as currently 40 percent of recipients pay federal income tax, and some states tax Social Security.

He has also called for the cessation of taxes on tips, a proposal echoed by Vice President Kamala Harris in a speech on Aug. 10.

“When I become president, we will continue to fight for the working families of America, including raising the minimum wage and eliminating taxes on tips for service and hospitality workers,” Harris declared.

White House press secretary Karine Jean-Pierre confirmed during an Aug. 12 press briefing that President Joe Biden would “absolutely” endorse such legislation.

“The president supports this initiative,” Jean-Pierre stated. “He backs the idea of eliminating taxes on tips for service and hospitality workers while also increasing the minimum wage and preventing the wealthy from exploiting the system.”