I’ve written before about whether athletes take state taxes into account when they weigh competing offers. Here’s another example: Grant Williams left the Boston Celtics for the Dallas Mavericks, at least partly because of Massachusetts’ Millionaire’s Tax:

Testing the market worked out for Williams, who will now make more money while living in Texas, which does not have state income tax. Williams reportedly turned down a four-year, $48 million over offer from the Celtics last season.

Williams mentioned Massachusetts’ Millionaire’s Tax as one of the factors he was mindful of when considering the Celtics’ offers. The Millionaire’s Tax is a four percent tax on top of Massachusetts’ five percent income tax, which raises the tax rate to nine percent for millionaires.

“I was thankful just because I feel like the way my agent and everybody talked about it was that this was our floor,” Williams said. “In Boston, it’s really like $48 million with the millionaire’s tax, so $54 million in Dallas is really like $58 million in Boston and $63 million in L.A.”

Here’s what I wrote in 2019 when Bryce Harper chose Philadelphia over San Francisco:

Has California lost another centi‐​millionaire because of its high tax rates? Washington Nationals superstar Bryce Harper just signed a 13‐​year, $330 million contract with the Philadelphia Phillies, the largest contract in the history of major North American sports. (Though not the largest when adjusted for inflation.) Some reports say that the San Francisco Giants came very close in the competition but lost out because of California’s taxes. Alex Pavlovic of NBC tweeted:

“I’m told Giants made a 12‐​year, $310 million offer to Bryce Harper. They were willing to go higher but would have had to go well over $330 million to get it done because of California taxes.”

If taxes did keep Harper on the East Coast, he wouldn’t be the first sports star to make such a decision. Trevor Ariza, a member of the Los Angeles Lakers’ 2009 NBA championship team and by 2014 “a key part of the Wizards’ playoff run,” decided to leave Washington and join the Houston Rockets. Why?

“Washington was disappointed but hardly shaken when Ariza chose to accept the same four‐​year, $32 million contract offer in Houston, where the 29‐​year‐​old could pocket more money because the state doesn’t tax income.”

As I wrote then, yes, a $32 million salary – or indeed a $32,000 salary – goes further in Texas than in the District of Columbia. What economists call the “tax wedge” is the gap between what an employer pays for an employee’s services and what the employee receives after taxes. It causes some jobs to disappear entirely, as employees and employers may not be able to agree on a wage once taxes are taken out of the paycheck. It causes some employees to flee to lower‐​tax countries, states, or cities. The Beatles, the Rolling Stones, Bono, and Gerard Depardieu are some of the better‐​known “tax exiles.”


It isn’t just entertainers and athletes, of course. A 2018 study found that 138 millionaires left California after a 2012 tax increase. Millionaires have also been seen leaving Connecticut, New York, and New Jersey. Last fall Chris Edwards wrote about the impact of taxes on interstate moves.


As taxes rise in many states, no‐​income‐​tax states like Texas, Florida, Washington, Tennessee, and Nevada may become increasingly attractive to athletes, entertainers, and other high‐​income producers.

The U.S. government budget is characterized by vast sums that are too abstract for most people to easily comprehend. This fact sheet translates the billions and trillions in government budget figures into terms that non-experts can more directly relate to. The goal is to empower more Americans to speak out about the irresponsibility of government spending and borrowing and make their voices heard.

While federal government finances have some unique features that make the federal budget unlike any American household budget, putting government spending and borrowing in terms of their cost per household will illustrate just how out of balance the federal budget is and why a course correction is both necessary and urgent.

U.S. government debt is too high and growing too fast.

• Government debt is larger than all the goods and services produced by individuals and businesses in the United States in one year. If Congress decided to collect the money to pay off the debt next year, no American would have any income left to pay their rent, buy food, or for anything else, for a whole year.
• If we split government debt among all American households, each would owe $194,000 this year. If we waited 30 years and then split government debt among all households, each would owe $696,000.
• Economic researchers have found that countries that borrow as much as the U.S. government do experience negative effects, such as lower economic growth, reduced incomes for their population, and higher interest rates that affect everything from mortgages to auto loans. If government debt grows too far out of control, countries can face a so-called fiscal crisis, which could affect people worse than the 2008 financial crisis or Great Recession. Banks could collapse, people would lose their jobs, and everyday goods and services would become unaffordable. 

The government budget is irresponsibly out of balance.

• If any typical American family spent and borrowed like the federal government does, this family would spend $100,000 a year, despite only earning $78,000. This family would borrow the additional $22,000 in one year, on top of having already borrowed more than $400,000 in total.
• That’s one way to think about the federal government spending $6.3 trillion in 2022, after collecting only $4.9 trillion in taxes, and putting the additional $1.4 trillion on top of the $22.3 trillion U.S. public debt.
• Of every $10 the government spends, more than $7 is spent on autopilot, without members of Congress having to vote before spending that money. Congress only votes on how to spend $3 of every $10.

Download a printable PDF version of this fact sheet here.

Federal government debt is rising to dangerous and unprecedented levels. Without reforms, federal debt held by the public will grow from 98 percent of gross domestic product this year to 115 percent a decade from now. Compared to the size of the economy, federal debt and interest costs are headed toward levels never seen in our nation’s history.

The recent bipartisan debt-ceiling deal modestly slowed the flow of red ink, but larger reforms are needed. A growing number of fiscal experts are recommending that Congress limit federal debt to 100 percent of GDP (e.g. here, here, and here). That is, Congress should restrain the budget so that debt grows no larger than the economy.

Let’s look at four reasons to cut debt and then examine a plan to hit the 100 percent target with entitlement and federalism reforms.

Four Reasons to Cut Federal Debt

1. Funding spending with debt pushes costs onto young people in the future. But young people will have their own costs, crises, recessions, and wars to deal with, so burdening them with our costs in addition is unjust.
2. High and rising debt increases macroeconomic instability, and it will likely prompt a major financial crash and recession, which will cause hardship for many and undermine living standards.
3. Many statistical studies have found that government debt above about 90 percent of GDP slows economic growth.
4. Most federal spending goes toward subsidy and aid programs, which help recipients but distort the economy. As such, reducing debt with spending cuts would boost growth as resources were reallocated to higher productivity uses.

Excessive spending is causing the surge in debt. As shown in the chart, CBO expects federal revenues to remain at about 18 percent of GDP in coming years, a bit above the 50-year average of 17.4 percent. The problem is that spending is projected to rise to 24.8 percent of GDP by 2033, substantially above the 50-year average of 21.0 percent. Reducing spending to the long-term average would restrain debt to about 100 percent of GDP.

Entitlement and Federalism Reform Plan

Policymakers should balance the budget and cut debt in the long term, but a good near-term goal would be to stabilize the debt at 100 percent of GDP. The plan proposed here would achieve that in 2033 by reducing spending to 21.1 percent that year.

The table shows proposed spending reforms. The entitlement reforms would be enacted in the near-term and the savings would increase over time, while the federalism reforms would be phased in over 10 years. The reforms would cut program spending by $1.31 trillion in 2033 and cut overall spending including interest by $1.45 trillion, or about 15 percent of baseline spending that year.

The entitlement reforms include limiting Medicare’s growth rate to the growth rate of GDP beginning in 2026. A good way to achieve that would be to restructure the program around individual vouchers, which would improve choice, encourage competition, and restrain costs. For Medicaid, the plan would convert today’s open-ended matching grants to fixed block grants in 2024, which would control federal costs while freeing the states to innovate with their health care systems.

For Social Security, the table includes two straightforward reforms, as estimated by CBO. The first modestly reduces the annual cost of living (COLA) adjustment for benefits, and the second would modestly raise the program’s full retirement age. (For both reforms, I estimated 2033 savings based on the CBO figures for 2032).

The federalism reforms would cut federal aid-to-states for programs administered by state and local governments. The federal government spends $1 trillion a year on more than 1,300 aid-to-state programs. The aid system ties the states into regulatory knots, undermines democratic control, destroys accountability, and generates waste, fraud, and abuse. State and local governments should fund their own programs for welfare, housing, transit, education, and many other things.

For programs in the table, the plan would phase in the federalism reforms over 10 years. The states could respond by funding their own programs if they chose, either by raising taxes or creating budget room by cutting other spending. Without all the top-down rules imposed by Washington, stand-alone state programs would likely be leaner and more efficient.

Final Thoughts

Policymakers may think such spending reforms are radical, but larger reforms have succeeded abroad. Facing a debt crisis in the 1990s, Canada cut its federal spending from 23 percent of GDP in 1993 to just 15 percent by 2006. The government cut entitlements, business subsidies, defense, aid to the provinces, and many other things. It privatized assets such as airports and the air traffic control system. As the government was cut, the Canadian economy boomed for 15 years.

America needs similarly large spending cuts. In addition to the above reforms, we should cut business subsidies, farm subsidies, foreign aid, and energy subsidies. We should also privatize federal assets.

I discuss further reforms here and Romina Boccia proposes reforms here and here.

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Data Notes: the federalism reforms generally involve zeroing out aid to the states for the specified activities. The K‑12 subsidies do not include special education subsidies. The excess highway aid is projected highway outlays that are greater than highway trust fund revenues. The values in the table were sourced from CBO projections and OMB projections.

The current federal budget deficit and the accumulated debt result from Congress spending more than they are willing to raise in taxes. Ultimately, the question of which is more to blame—steady taxes or ballooning spending—will depend on our priors: should the government consume an ever-increasing share of private resources, or should its growth be constrained?

However, the recently updated CBO long-term budget outlook makes clear that the causes of the future budget deficit is not a question of normative judgment. Tax increases cannot fix the underlying growth of health and retirement spending. Even if tax revenues permanently increased to the levels collected when the United States had a budget surplus in 2000, projected deficits would still rise above 9 percent of GDP by 2053. Tax cuts are not to blame for the demographic and benefit-formula-fueled growth in mandatory spending.

This short piece will begin with context on U.S. fiscal trends and then discuss the two distinct issues in budgetary sustainability—the growth rate of future spending and the desired level of government spending. Fixing the unsustainable growth rate of federal spending is necessary regardless of the desired level of government spending and preferred tax rates. However, without spending restraint, any tax relief will necessarily be short-lived.

Spending Consistently Outstrips Revenue

Federal spending has been systematically higher than tax revenue for the last half-century. Revenues have fluctuated around an average of 17.4 percent of GDP, while spending has followed much larger swings around an average of 20.9 percent. For a brief time between 1998 and 2001, Congress ran a surplus when revenue was high during the strong economy, and outlays dipped due to a temporary political consensus against deficits that limited defense spending, discretionary appropriations, and entitlement growth. Since then, spending has steadily ratcheted up, punctuated by the Great Recession and COVID-19.

Figure 1 shows historical and projected revenue and outlays from 1970–2053. In 2022, federal revenue as a percent of GDP was at a two-decade high, and this year’s revenue as a share of the economy is projected to be 18.4 percent of GDP, a whole percentage point above the historical average. Over the next three decades, revenues will remain above the historical average, climbing to 19.1 percent by 2053. After recovering from the pandemic spike, outlays are projected to climb past their current highs, rising from more than 24 percent of GDP in 2023 to 29.1 percent of GDP in 2053.

The CBO projections are subject to some well-known flaws. First, it is based on current law, which assumes unrealistic things, such as Congress allowing all the temporary 2017 tax cuts to expire and discretionary spending growing slower than the economy. Second, it cannot account for new spending Congress will authorize in the future, whether due to an emergency—war, recession, pandemic—or politically expedient spending on student loan forgiveness or additional energy subsidies. Third, the projections are based on speculative assumptions about economic growth, inflation, interest rates, and healthcare costs. None of these flaws change the critical takeaway from the CBO projections: even with assumed significant tax increases and conservative spending projections, the federal budget is unsustainable.

Congress has been much better at constraining projected revenue growth than they have been at constraining spending. Spending grows as benefits increase faster than inflation and more people become benefit-eligible. Baseline tax revenue grows as temporary tax cuts expire, and inflation and wage growth slowly push people into higher tax brackets. The largest source of additional tax revenue over the next 30 years is inflation and wage growth caused real bracket creep, accounting for almost twice as much additional revenue as the expiration of the 2017 tax cuts in 2053.

Periodic tax cuts have kept revenue as a share of the economy flat rather than increasing while spending growth remains on a consistent upward path.

Taxes and Fiscal Sustainability

Some commentators have claimed that “without the Bush and Trump tax cuts, debt as a percentage of the economy would be declining permanently.” However, CBO budget projections from before the 2001 Bush tax cuts tell a different story. In 2000, when the U.S. was running budget surpluses, the first line of CBO’s long-term budget outlook begins by noting that “projected growth in spending on the federal government’s big health and retirement programs—Medicare, Medicaid, and Social Security—dominates the long-run budget outlook.” Even in its most optimistic scenario—in which the federal government saves the temporary surpluses—CBO still notes that “the growing expenditures projected for health and retirement programs would quickly push the budget back into deficit,” and debt would again begin to grow exponentially.

There are some more recent years, such as 2012, when CBO projected declining deficits and debt, but these years are flukes of the current law scoring process in which the CBO assumed both significant automatic tax increases and large automatic spending cuts that Congress never intended to allow. The 2012 alternative baseline, which more realistically assumed Congress would extend the 2001 tax cuts and halt automatic payment cuts to Medicare providers, among other spending increases, showed a more realistic scenario with deficits growing to 17.2 percent of GDP by 2037.

Focus on Unsustainable Spending First

Ultimately, focusing on revenue distracts from fixing the existential fiscal problems faced by the U.S. The growth rate of health and retirement spending is not a problem that can be fixed with higher taxes. As Jeff Miron wrote in 2013, “If higher taxes have even a modest negative impact on growth, tax increases have no capacity for restoring fiscal balance. That finding leaves expenditure cuts—especially to Medicare, Medicaid, and ACA subsidies—as the only viable avenues for significant reductions in fiscal imbalance.”

CBO has similarly warned every year for the past several decades that spending on health and retirement programs cannot continue to grow faster than the economy forever; eventually, something has to give. These major entitlement programs are responsible for almost all of the non-interest spending growth over the next three decades and, as a share of the economy, are projected to increase by 36 percent over the same time. Such rapid health and retirement spending growth is neither caused by nor fixable with the tax code.

If Treasury collected as much revenue as it did in 2000 when it had a record 2.3 percent budget surplus, the U.S. would still have a 2022 budget deficit of about 5.1 percent of GDP (compared to the actual 5.5 percent deficit). Figure 2 shows an illustrative estimate of federal deficits if tax revenue increased permanently to 20 percent of GDP, the high revenue mark from the early 2000s. The only slightly larger deficits under CBO’s current law projections show that even significant tax increases cannot compensate for fundamentally unsustainable spending growth.

Debate the Level

After policymakers address the unsustainable growth rate of mandatory spending, they can debate the appropriate size and scope of government. Reasonable people can disagree over the appropriate level of government spending and, thus, the level of revenue.

As I’ve written before, big government is expensive, and advocates of larger government should be clear that by blaming deficits on tax cuts, they are calling for significantly higher taxes on middle-class Americans. Additional taxes only on the rich are not a sustainable or mathematically feasible way to fund a European-style social welfare state. Paying for the current level of government spending—let alone what some Democrats have proposed—will require an unprecedented tax increase.

Broad-based tax increases are also no guarantee of lower deficits and debt. Historically, new or increased taxes to remedy fiscal imbalances deepen and prolong economic recessions, do not reduce debt‐​to‐​GDP ratios, and are associated with new spending in excess of the revenue raised.

As Congress prepares for the 2025 fiscal cliff when the 2017 tax cuts expire and taxes automatically increase on basically every American, legislators should be clear that by keeping taxes low, they are also committing to constraining the level and growth of federal spending. Without spending restraint, any tax relief will necessarily be short-lived.

California and Florida now have approved budgets for the fiscal year beginning July 1, 2023, giving us the opportunity to compare spending across two large states with different governing philosophies.

Both overall and per capita, Florida spends far less than California. Further, it is not clear that the California state government provides much incremental value to its residents for all its extra spending.

Figure 1 compares total anticipated spending by Florida and California for the current fiscal year broken down into three broad categories: general funds, other state funds, and federal funds. The last category represents money coming from the federal government largely to support each state’s Medicaid program, but for many other purposes as well. The other two categories of spending are supported by taxes, fees, and service changes collected by the state government. The ink is still not dry on California’s budget so the categories aside from General Fund are estimates subject to change.

To improve comparability, Figure 2 divides total state spending by recent population estimates to arrive at per capita figures. California’s Department of Finance estimates the Golden State’s population was 38.94 million on January 1, 2023, while Florida’s Demographic Estimating Conference estimates a Sunshine State population of 22.61 million as of April 1, 2023. For the rest of 2023, it looks like California’s population will remain nearly flat while Florida will continue to grow, albeit at a slower pace than it did during the pandemic.

We see that on a per capita basis, California state government spends about double the amount Florida does. Since states must balance their budget, the main reason California can spend far more than Florida is that the Golden State has a personal income tax. Florida, by contrast, is mostly reliant on sales and excise taxes for its non-federal revenue.

It is important to factor in this institutional difference when comparing the governors of these two states. Florida has been a low tax, low spending state for decades, and California has been at the opposite pole for a long time. While Florida has never had a personal income tax, California’s has been in place since 1936.

That said, those of us who prefer smaller government could still applaud Florida’s current and recent administrations for resisting the temptation to impose a personal income tax and thereby grow state spending.

Supporters of bigger government might criticize Florida for skimping on needed spending, but to make that criticism effectively, they would have to show that California’s spending is benefiting its residents. Obviously, some California residents benefit from the state’s copious spending by receiving the funds, but what about the general public?

For example, the state’s High Speed Rail Authority has already spent over $11 billion. Contractors and their employees have benefited from these expenditures, but the riding public is almost certain to see no benefit until at least 2031, when, maybe, the first lightly travelled segment of the state’s high-speed rail system will open. Meanwhile, Floridians will be able to travel between Miami and Orlando by rail starting in September, thanks to private investment and without the expenditure of taxpayer funds.

Because different states organize their budgets differently, it is challenging to determine which spending categories are driving the gap between California and Florida. But education appears to be one key area. While California Gov. Gavin Newsom’s final budget called for $103.3 billion in K‑12 and higher educational spending, Florida’s approved budget only included $30.3 billion for these purposes.

But it is not clear that California is getting much additional bang for the extra bucks it is spending. Standardized test scores reported by the National Assessment of Educational Progress (NAEP) show Florida equaling or exceeding California. In one extreme example, Florida ranked fourth among states in Mathematics at the fourth-grade level while California ranked 38^th.

Further evidence of relative policy effectiveness can be gleaned from interstate migration. In recent years, California has been shedding people while Florida has been gaining them. Many Americans have been voting with their feet for the governing style of Florida (as well as Texas), and against that of California (as well as New York).

Much of the public debate between California and Florida policy revolves around social issues on which many libertarians (including this author) prefer the Golden State’s approach. But, for less politically engaged citizens, their view of state government revolves more around the quality of services provided and the economic costs imposed, directly or indirectly. Viewed from this perspective, California does not appear to be coming out ahead.

Federal government spending is soaring and debt will soon reach record highs compared to the size of the economy. Rising spending and debt are undermining growth and may push the nation into a financial crisis.

As the federal government’s size has expanded, the scope of its activities has also grown. The government subsidizes farming, health care, school lunches, broadband, rural utilities, energy, rental housing, aviation, passenger rail, public broadcasting, chip manufacturing, job training, foreign aid, education, urban transit, space exploration, and hundreds of other activities.

For decades, the government has published an official list of all its grant or subsidy programs for the states, businesses, nonprofits, and individuals. The list used to be called the Catalog of Federal Domestic Assistance but is now called Assistance Listings. The list is a rough indicator of the steadily expanding scope of federal interventions.

The chart shows that there are 2,418 federal grant or subsidy programs in 2023, more than double the number in 1990. Each new subsidy program requires higher taxes or more federal borrowing. Each subsidy generates a bureaucracy, spawns lobby groups, and encourages more special interests to demand handouts.

The rise in size and scope of federal subsidies means that Americans are losing their independence. State and local governments, businesses, nonprofits, and individuals that become hooked on subsidies become tools of the federal government. They have less incentive to work and innovate, and they shy away from criticizing government policies.

Let’s all celebrate July 4, but remember that the path to freedom and prosperity is to cut the size and scope of the federal government.

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Data Notes: Counts for 2020 and 2023 are from July listings under grantsgov here. Previous years were counts based on hardcopy and electronic versions of the Catalog of Federal Domestic Assistance. The new Assistance Listings keeps the same CFDA numbers. The counts should be considered only a rough measure of federal subsidies since what constitutes one program and one grant is rather loose.

An example of a new grant program is CFDA 20.939 for safe streets enacted in 2021. You can get a sense of the bureaucracy in this one new subsidy program reading the materials here and here. There is no reason for this new federal intervention, as the states themselves are in favor of safe streets and have their own revenue sources.

In 2009, as the federal government was rolling out the $700 billion Troubled Asset Relief Program and preparing to spend another $787 billion in President Obama’s “stimulus” package — both with little serious examination by Congress — I wrote a blog post titled “How to Spend a Trillion Dollars without Waste and Fraud.”

The first line of my post was “You can’t.” And I noted that the federal government knew that, because both Neil Barofsky, the special inspector general for TARP, and Gene Dodaro, the acting comptroller general, had told a House subcommittee — after the passage of both bills — that the government’s experiences in the reconstruction of Iraq, hurricane‐​relief programs, and the 1990s savings‐​and‐​loan bailout, along with the lack of written policies in the new programs, did not bode well.

As Dodaro noted, it wasn’t the first such example. Nor would it be the last. Reports are now rolling in about massive waste and fraud in the government’s Covid-relief spending, begun in 2020 under President Trump and increased under President Biden.

“An Associated Press analysis found that fraudsters potentially stole more than $280 billion in COVID-19 relief funding; another $123 billion was wasted or misspent. Combined, the loss represents 10% of the $4.2 trillion the U.S. government has so far disbursed in COVID relief aid.” Now the Small Business Administration’s inspector general reports that more than $200 billion may have been stolen from the Paycheck Protection and COVID-19 Economic Injury Disaster Loan programs. 

Linda Bilmes, coauthor with Nobel laureate Joseph Stiglitz of The Three Trillion Dollar War: The True Cost of the Iraq Conflict, analyzed the massive problems in three somewhat smaller government projects — the Iraqi reconstruction effort, Hurricane Katrina reconstruction, and the Big Dig artery construction in Boston — and found that “in any organization that starts to increase spending very rapidly there are risks of waste, fraud and inefficiency.”


President Obama assured us in 2009 that Vice President Biden would be in charge of monitoring the spending in the stimulus bill and that “nobody messes with Joe.” But that is not in fact a solution to the inevitability of waste and fraud when an unaccountable bureaucracy is spending trillions of other people’s dollars. As the pickpocket says in the opening scene of Casablanca, “This place is full of vultures, vultures everywhere.” Vultures ye have with ye everywhere. And when you’re trying to shovel out trillions of dollars — money created by writing a number on a piece of paper and then writing checks on that sheet of paper — you can’t ask too many questions. The goal was to get money into people’s hands to ward off depression. And all the money did get into people’s hands. Just not necessarily into the intended hands. Some of it, for instance, went to SBA employee LaKeith Faulkner, who was sentenced to 62 months and ordered to pay $10,600,000 in restitution for his role in a scheme to obtain fraudulent PPP loans. And some of it to six Essex County, New Jersey, residents who were arrested for scheming to fraudulently obtain — you guessed it — Paycheck Protection Program (PPP) loans.

David Fahrenthold of the New York Times wrote,

In the midst of the pandemic, the government gave unemployment benefits to the incarcerated, the imaginary and the dead. It sent money to “farms” that turned out to be front yards. It paid people who were on the government’s “Do Not Pay List.” It gave loans to 342 people who said their name was “N/A.”

He calls it “one of the largest frauds in American history, with billions of dollars stolen by thousands of people, including at least one amateur who boasted of his criminal activity on YouTube.”

There are no doubt many more stories for other reporters to pursue. And continuing questions about the net costs and benefits of massive government spending programs, funded by debt and rife with, yes, waste, fraud, and abuse.