To pay interest to those U.S.residents who hold government bonds,the government must tax other U.S.residents,implying that the more we redistribute income among residents to cover interest payments,the higher the average tax rate will have to be.

Question

Quizplus · Accepted Answer

This statement is true because the government budget is limited, and if the government needs to pay interest to bondholders, it must find the necessary funds through taxes, borrowing, or printing money. If the government redistributes income among residents to cover interest payments, it means that the government has to increase taxes on other residents, which will increase the average tax rate. Therefore, the more the government pays in interest, the higher the tax burden on U.S. residents.

To Pay Interest to Those U