Consider two couples — the kids, who are 30, and the grandkids, who will be 30 in 2040. The kids earn $70,000 a year per spouse, own a $400,000 house with a $1,718 monthly mortgage payment, will spend $30,000 on each of their two children’s four years of college, and earn 6 percent (3 percent after inflation) on their assets.
The grandkids are just like the kids except all their numbers are 3.68 times larger because of inflation and productivity growth…
Under the current tax system, the kids’ living standard is 83, meaning they face a 17 percent lifetime tax rate. Add in the new Medicare taxes, and the increase in top tax rates over the next decade, and their living standard drops to 80 — a 20 percent tax rate.
The grandkids face a bigger hit. Their living standard is 74 — a 26 percent tax. So, compared with the current tax system, the grandkids have to pay 9 cents more per dollar earned to Uncle Sam.
If things continue as we adults have planned, our nation’s debt, measured as a share of gross domestic product, will reach Greek levels just when the grandkids start heading to work.