The Price of Cruelty: How the 2025 Immigration Crackdown Wastes Billions and Harms Communities

In the summer of 2025, Congress passed what supporters proudly called the “One Big Beautiful Bill,” pouring an unprecedented $170 billion into immigration enforcement over the next four years. The bill promises to build more walls, expand detention centers, and supercharge deportations of undocumented immigrants.

Supporters claim it will restore order. But at what cost?

In our previous post, “Do Undocumented Immigrants Really Drain Our Economy?” we showed that undocumented workers contribute billions to our tax base and strengthen entire industries. Now, with a fresh $170 billion on the table, the federal government is poised to spend record amounts tearing those same workers away from their communities.

Behind the slogans and big numbers is a simple truth: these policies target largely nonviolent, tax-paying workers — people who help build our communities. Spending tens of billions to arrest, detain, and deport them isn’t just inhumane — it’s staggeringly wasteful.

This post will break down the real dollars behind the new budget, the massive tax revenue we stand to lose, and the painful consequences for families and communities. In the end, it’s clear: this cruel spending spree will cost us far more than money.

The True Costs of Immigration Enforcement

The 2025 “One Big Beautiful Bill” represents one of the largest immigration enforcement spending sprees in U.S. history. Over the next four years, the bill commits more than $170 billion to expand and intensify immigration controls. Here’s how those billions break down:

• $45 billion for new or expanded detention centers, allowing federal authorities to detain more than 100,000 individuals at any one time — nearly double today’s already crowded system.

• $30–44 billion dedicated to deportation operations, covering transportation, legal proceedings, and contracts with local law enforcement to funnel more people into removal pipelines.

• $46 billion to expand and fortify border walls and barriers, despite evidence that walls alone do not meaningfully deter visa overstays, which make up nearly half of undocumented migration.

• The remaining billions will fund advanced surveillance technology, cooperation with state and local police, and an enlarged immigration court system designed to process far more deportations, far faster.

All told, this staggering investment is meant to supercharge deportations to a goal of 1 million people per year — about 3,000 removals per day. But these numbers ignore the human reality: many of those targeted are long-settled, nonviolent workers with U.S. citizen children, homes, and steady taxpaying jobs.

Instead of strengthening our economy and communities, this massive budget expansion is a commitment to mass detention and forced separation — at an extraordinary cost to taxpayers.

Unrealistic Goals, Inflated Spending

Behind the headline promises of 1 million deportations per year lies a logistical and moral nightmare. The current immigration system is already struggling under a historic case backlog, with deportations this year reaching about 239,000 as of July — far below the new target. To scale up to 3,000 removals per day, as the bill envisions, would require more than doubling the pace of arrests, transportation, detention, and legal proceedings.

Beyond legal barriers, there are massive operational constraints. Immigration courts are severely understaffed. Flights to repatriate deportees are limited by international agreements. Many people targeted for removal have deep roots in U.S. communities, meaning their cases are far more complicated than a simple “in and out” deportation.

Yet the federal government plans to funnel billions of dollars toward these unrealistic targets anyway. Detention facilities will expand, but the human and financial costs of holding tens of thousands of nonviolent individuals indefinitely will only mount. The promised “efficiency” of this operation is a political talking point — not a realistic blueprint.

In the end, these inflated deportation goals will not just waste money; they will push an already-overwhelmed system closer to collapse, all while tearing apart families and communities in the name of an impossible enforcement agenda.

The Economic Fallout: Lost Tax Revenue

Beyond the staggering spending, there is another price Americans will pay: the loss of billions in tax revenue from deported workers. Undocumented immigrants contribute significantly to the public purse. According to the Institute on Taxation and Economic Policy, undocumented workers pay roughly $8,889 per person in combined federal, state, and local taxes each year.

If the administration achieves its goal of deporting 1 million people annually, the nation would lose nearly $9 billion in annual tax revenue — money that helps pay for schools, roads, and essential services in every state. Over four years, that loss would total around $35 billion, nearly enough to fund free community college tuition nationwide.

And that’s just the beginning. Economic modeling suggests that mass deportations would reduce GDP, shrink the available labor force in critical sectors like agriculture, construction, and hospitality, and weaken local economies that depend on immigrant spending power. In the long run, the total impact of removing millions of workers could drain hundreds of billions from the nation’s economy and starve public budgets of future revenue.

By spending billions to deport tax-paying workers, this policy effectively cannibalizes the very resources that keep American communities afloat — a cruel irony that no one in Congress seems willing to acknowledge.

The Human Cost: Breaking Up Families and Communities

Numbers alone cannot fully capture the damage this policy inflicts on people. Most of those targeted under this massive enforcement push are nonviolent individuals who have built lives and families in the United States. They raise children, pay taxes, and contribute to their neighborhoods. Many have lived here for decades, with deep roots and ties to their communities.

When these individuals are detained or deported, the harm ripples outward. U.S. citizen children face the trauma of losing a parent and, in some cases, being placed in foster care. Family-owned businesses lose trusted employees and may even close down. Local schools and social services must absorb the shock of suddenly displaced families.

Beyond that, indefinite detention itself is a humanitarian crisis. Overcrowded facilities, poor medical care, and prolonged legal delays have led to deaths and severe mental health harm inside detention centers. Mass deportation plans will inevitably expand these abuses, trapping tens of thousands of people in conditions that violate basic human rights.

By investing billions to break up peaceful families and destabilize communities, this policy trades compassion and stability for fear and cruelty — all in the name of “enforcement.”

Better Uses for $170 Billion

Imagine what $170 billion could achieve if it were invested in strengthening American communities instead of tearing them apart. That money could expand affordable housing, modernize public schools, repair roads and bridges, or dramatically improve our health care system. It could jump-start clean energy projects, expand childcare support, or help reduce student debt.

For example, just a fraction of this enforcement budget — around $10–15 billion per year — could fully fund community college tuition for millions of students, or provide universal preschool nationwide. It could also help rebuild vital rural hospitals, expand mental health care, and improve emergency response systems that are often chronically underfunded.

One powerful alternative would be to invest in a path to legal status or citizenship for undocumented workers. Experts estimate that providing a path to legal status for the roughly 11 million undocumented immigrants in the United States would cost about $25–35 billion over a decade — a fraction of what mass deportation and detention will consume. And unlike deportation, this investment would pay dividends: newly legalized immigrants would contribute an estimated $100–150 billion in additional tax revenue over ten years, stabilizing families and fueling local economies.

Instead of spending $170 billion on mass detention and deportation — and losing an additional $35 billion in annual tax revenue from deported workers (a total hit of $205 billion) — we could invest far more wisely. For example, spending $25–35 billion on a path to citizenship, plus another $15–25 billion to fully fund community college or universal preschool, would cost around $50 billion total. This investment would pay itself back many times over, generating $100–150 billion in new tax revenue over a decade and delivering a net gain of $65–115 billion for the nation — not even counting the massive boost to productivity and economic growth from an educated workforce.

Instead of punishing peaceful, tax-paying workers, we could choose to strengthen families, grow the economy, and build a future rooted in fairness and opportunity — a far better return on investment than fear and cruelty.

Conclusion: A Cruel and Pointless Investment

The numbers are clear. The “One Big Beautiful Bill” plans to funnel $170 billion into a massive deportation and detention machine that will break apart families, destabilize communities, and drain billions in tax revenue from our own public budgets. By targeting nonviolent, tax-paying workers, these policies will rob the nation of both moral credibility and financial stability.

For a fraction of that spending — around $50 billion — we could build a path to citizenship and expand educational opportunities, earning back as much as $150 billion in new tax revenue while strengthening families and boosting the broader economy. That is an investment in our future, not an act of political vengeance.

It is time to see these mass deportation strategies for what they truly are: a cruel and pointless waste of taxpayer money. Instead of tearing down communities, we should build them up — with fairness, opportunity, and compassion guiding our policy choices. The American people deserve nothing less.

Do Undocumented Immigrants Really Drain Our Economy?

Let’s Follow the Money

In the latest push to tighten immigration enforcement, Congress has approved sweeping funding increases to expand detention, speed up deportations, and fortify border security. Supporters of these measures often argue that undocumented immigrants are a drain on taxpayers — that they take more than they give, burdening schools, hospitals, and social services.

But is that true?

Before we dive deeper into what this new enforcement surge could mean — which we’ll cover in a follow-up post — it’s worth pausing to look at the numbers behind a key question: what do undocumented immigrants actually contribute in taxes, and what do they receive in public benefits?

The answer might surprise you. Undocumented immigrants pay billions of dollars every year to federal, state, and local governments — often into programs they will never be able to use. In this first post, we’ll break down the real tax contributions of undocumented immigrants and explain why their economic role is far more complicated, and more positive, than the headlines suggest.

Who Are Undocumented Immigrants?

When politicians and commentators talk about “illegal immigrants,” they’re usually referring to people who live and work in the United States without current legal authorization. This includes individuals who crossed the border without inspection as well as those who overstayed a visa.

Estimates put the undocumented population at around 10 to 11 million people nationwide — roughly 3% of the total U.S. population. Many have lived here for years, working in construction, hospitality, agriculture, food service, health care, and other essential sectors. They pay rent, buy groceries, raise families, and participate in their communities just like everyone else.

It’s important to recognize that undocumented immigrants are deeply woven into the fabric of the American workforce and economy. They are not a separate, hidden world — they live among neighbors, coworkers, and classmates across the country.

Who Are Undocumented Immigrants?

When politicians and commentators talk about “illegal immigrants,” they’re usually referring to people who live and work in the United States without current legal authorization. This includes individuals who crossed the border without inspection as well as those who overstayed a visa.

Estimates put the undocumented population at around 10 to 11 million people nationwide — roughly 3% of the total U.S. population. Many have lived here for years, working in construction, hospitality, agriculture, food service, health care, and other essential sectors. They pay rent, buy groceries, raise families, and participate in their communities just like everyone else.

It’s important to recognize that undocumented immigrants are deeply woven into the fabric of the American workforce and economy. They are not a separate, hidden world — they live among neighbors, coworkers, and classmates across the country.

What Taxes Do Undocumented Immigrants Pay?

One of the biggest misconceptions is that undocumented immigrants somehow live “off the books” and avoid paying any taxes. In reality, millions pay into public systems every single day — through multiple channels:

• Federal and state income taxes: Many file taxes using an Individual Taxpayer Identification Number (ITIN), a legal tool from the IRS for people without Social Security numbers. Others have taxes withheld directly from paychecks.

• Payroll taxes: Contributions to Social Security and Medicare are deducted from undocumented workers’ wages—despite their limited eligibility to ever draw benefits from these programs.

• State and local taxes: Every time they make a purchase, sales taxes apply. Even renters effectively pay property taxes indirectly through their rent.

According to a 2024 report by the nonpartisan Institute on Taxation and Economic Policy (ITEP), undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022—approximately $59.4 billion to federal and $37.3 billion to state and local governments.

This substantial contribution—roughly $90 to $97 billion annually—directly challenges the belief that undocumented workers avoid contributing to public coffers.

What Benefits Do They Receive?

It’s a common belief that undocumented immigrants drain public benefits, but the reality is far more limited than many assume. By law, undocumented immigrants are largely excluded from federal programs like Social Security retirement benefits, Medicare, Medicaid (except for emergency care), SNAP (food stamps), and most forms of welfare assistance.

At the state and local level, some benefits do exist — for example, public K–12 education is available to all children regardless of immigration status, thanks to Supreme Court precedent. Emergency medical care must also be provided to anyone in life-threatening circumstances, regardless of status.

Still, compared to what they pay in taxes, undocumented immigrants receive relatively few public benefits. Many pay billions into programs they will never be allowed to use, especially Social Security and Medicare.

In other words, while they do rely on some essential services — like schools for their children or emergency rooms in crisis — the scale of those benefits is small relative to the tax dollars they contribute.

The Net Impact: Are They a Drain or a Benefit?

When you look at the full picture — taxes paid in versus benefits received — undocumented immigrants are far from being a drain on the system. In fact, they create a clear surplus at the federal level.

They contribute billions to Social Security and Medicare each year but cannot claim those benefits, effectively subsidizing these programs for future retirees. On top of that, their spending supports local sales and property tax bases, funding public services and infrastructure.

At the state and local level, there can be modest costs — for example, funding public education for their children or emergency health care. However, multiple studies have found that these costs are generally offset, in whole or in part, by their tax contributions and their economic activity as workers and consumers.

Overall, the evidence shows that undocumented immigrants help stabilize key federal social programs while providing a net positive or near-neutral fiscal impact locally. They are far from the “drain” that headline rhetoric often portrays — and more accurately described as an under-recognized group of taxpayers contributing to America’s shared resources.

Why the Myth Persists

If the numbers so clearly show that undocumented immigrants contribute more than they receive, why does the opposite belief remain so widespread?

Part of the answer is political. The image of “taxpayer-funded freeloaders” makes for a powerful talking point, especially during budget negotiations or election seasons. It taps into broader fears about fairness, economic competition, and the sense that someone is gaming the system.

Another factor is how people see costs at the local level — for example, crowded schools or overburdened hospitals — without connecting those services to the tax money undocumented immigrants pay into those very same systems. Because most people aren’t aware of the billions of dollars these workers contribute behind the scenes, it’s easy to assume they only take and never give.

Finally, the term illegal triggers strong emotions and can overshadow facts. Once a group is labeled “illegal,” it becomes easier to view them as undeserving of basic rights or economic participation, even when the reality is far more complex.

In other words, the myth sticks around because it is emotionally powerful — even if it doesn’t hold up to the math.

Real-World Consequences of Misunderstanding

Believing the myth that undocumented immigrants are a drain on public resources doesn’t just distort the conversation — it can actively make things worse.

When policymakers base laws on the false idea that undocumented immigrants pay no taxes or overuse benefits, they may pass harsh measures that push people deeper into the shadows. That includes restricting work permits, limiting tax-filing protections, or scaring people away from filing taxes altogether.

The result? Less revenue for essential programs like Social Security and Medicare, and more workers pushed into cash-only informal economies, where their contributions disappear from public ledgers entirely.

Criminalizing or isolating millions of workers who are already paying taxes undercuts community stability and can harm local economies that depend on their spending and labor. The more we treat them as outside the system, the less they can legally and visibly contribute — creating exactly the problem the myths claim to fear.

A misunderstanding of the facts doesn’t just breed bad policy — it risks breaking the very tax base many of us rely on.

The Bottom Line

When you look past the slogans and the fear-based rhetoric, the facts are clear: undocumented immigrants pay billions of dollars in taxes every year, supporting vital programs they often cannot use. They help keep Social Security and Medicare solvent. They pay state and local taxes that fund public schools, roads, and emergency services.

While there are modest costs at the local level — like education and limited emergency care — these are generally balanced, if not exceeded, by their tax contributions and their role in sustaining local economies.

Undocumented immigrants are not a drain on the system. In many ways, they help keep it running.

As Congress directs more resources toward immigration enforcement in the new budget, it is worth asking: are we targeting people who strengthen the economy more than they weaken it?

This is a conversation worth having, based on numbers — not myths.

Sources & Further Reading

• Institute on Taxation and Economic Policy (ITEP): Undocumented Immigrants’ State & Local Tax Contributions (2024)

• American Immigration Council: The Facts on Immigration

• Congressional Budget Office: The Impact of Unauthorized Immigrants on the Federal Budget

• Pew Research Center: Facts About Unauthorized Immigrants in the U.S.

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If you found this explainer helpful, please consider sharing it — myths about undocumented immigrants and taxes remain powerful, but facts can change minds.

Next time, we’ll dive into how the expanded immigration enforcement funded by the recent budget bill could impact communities, economies, and even the nation’s tax base itself.

A Crisis by Design: The “Starve the Beast” Strategy

For decades, many conservative policymakers have championed a deceptively simple strategy to shrink the government: “starve the beast.” Popularized during the Reagan era, this approach boils down to one core maneuver: pass enormous tax cuts, drain government revenue, and then turn around and claim that social programs must be cut because there’s no money to pay for them.

It sounds cynical — because it is. But it has proven remarkably effective over the past 50 years, reshaping the American economy and leaving social supports in a constant state of crisis.

Reagan and the Birth of the Modern Strategy

The modern “starve the beast” playbook emerged most clearly under Ronald Reagan in the 1980s. Reagan signed sweeping tax cuts, especially benefiting corporations and the wealthy, through the Economic Recovery Tax Act of 1981. The result? Federal revenue plunged, while deficits soared.

Rather than reversing the tax cuts, Reagan’s team used the growing deficit to push for spending cuts, especially on public housing, education, and health programs. David Stockman, Reagan’s budget director, described the strategy bluntly: “We’re going to cut their allowance,” referring to social programs.

In other words, they manufactured a budget shortfall on purpose — then claimed there was no choice but to shrink support for vulnerable Americans.

Bush, Cheney, and the Early 2000s

The pattern returned under George W. Bush. The Bush tax cuts of 2001 and 2003, some of the largest in U.S. history, again delivered huge breaks for top earners. Predictably, the deficit grew, worsened by wars in Iraq and Afghanistan.

Vice President Dick Cheney made the philosophy explicit: “Reagan proved deficits don’t matter,” he reportedly told Treasury officials. But deficits did matter — as a tool to justify cuts. Conservative lawmakers soon demanded spending restraints on domestic programs while shielding the tax cuts.

The Tea Party and the 2010s

During Barack Obama’s presidency, the Tea Party movement took this strategy to the next level. After the 2008 financial crisis, the Obama administration passed emergency spending to stabilize the economy and expand health care through the Affordable Care Act.

Almost immediately, Tea Party-aligned Republicans began ringing alarm bells about deficits — deficits made worse by the Bush tax cuts and years of unfunded wars. They pushed harsh budget caps and automatic spending cuts known as “sequestration” under the 2011 Budget Control Act, slashing billions from public health, research, and infrastructure.

The pattern was clear: starve the revenue stream, then attack spending on social protections under the banner of “fiscal discipline.”

Trump and the 2017 Tax Cuts

Donald Trump’s 2017 Tax Cuts and Jobs Act marked another chapter of this same playbook. Corporate tax rates were slashed from 35% to 21%, and the top brackets saw significant reductions. These cuts disproportionately favored the wealthy and drove the deficit higher.

Soon after, many of the same lawmakers who cheered the tax cuts argued for cutting “entitlements” like Medicare, Medicaid, and food assistance. The deficit, once again, became the excuse to shrink programs serving everyday Americans.

The 2025 “One Big Beautiful Bill”

Most recently, in 2025, Republicans rolled out the so-called “One Big Beautiful Bill” — a sweeping package of permanent tax cuts, environmental deregulation, and limits on federal agencies’ ability to regulate. Once again, the bill promised to boost growth and “pay for itself,” echoing claims made since the Reagan era.

Nonpartisan budget analysts warned it would add trillions to the deficit over the next decade. And, like clockwork, Republican leaders quickly pivoted after its passage to argue that the country could no longer afford Medicaid, food assistance, or affordable housing supports.

The pattern could not be clearer:

1. Cut taxes.

2. Watch the deficit explode.

3. Use the deficit as justification to slash social programs.

The “One Big Beautiful Bill” may be the most sweeping recent example of starve-the-beast politics in action — showing the strategy is alive and well, even after 50 years.

Why It Matters

The starve-the-beast strategy is not just a historical curiosity. It is a deliberate, repeated tactic that has reshaped the American economy in deeply unequal ways. Over decades, these tax-cut-driven budget crises have channeled enormous benefits to corporations and the wealthiest households, while leaving the vast majority of Americans worse off.

Every time tax cuts drain federal resources, conservative leaders argue there is “no money” left for education, affordable housing, health care, or infrastructure. As these investments shrink, working- and middle-class families bear the brunt — seeing stagnant wages, rising costs, and crumbling public services.

Meanwhile, the wealthy — who benefit most from each new round of tax cuts — grow even richer, concentrating their wealth and power further. That wealth concentration then fuels more lobbying, more political donations, and more influence to keep the same cycle going.

Far from delivering broad-based prosperity, “starve the beast” policies have widened the wealth gap dramatically, hollowed out communities, and left everyday Americans with fewer opportunities to build a secure future.

Understanding how this crisis is created — on purpose — is the first step toward stopping it. Because when a budget deficit is manufactured by design, it is never an accident. It is a conscious choice to privilege the powerful, while starving everyone else.

How the 2017 Corporate Tax Cuts Fueled Record Stock Buybacks

…and What the One Big Beautiful Bill Might Repeat

In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), lowering the corporate tax rate from 35% to 21%. Supporters promised that companies would reinvest this windfall in new equipment, expand operations, and boost worker pay.

But the reality turned out quite differently.

Record-Breaking Stock Buybacks

After the tax cuts took effect, corporate America went on a historic buyback spree. In 2018, companies in the S&P 500 repurchased over $800 billion worth of their own stock — the largest amount ever recorded. In 2019, they spent another $700 billion. Before the tax cuts, annual buybacks usually hovered closer to $500 billion.

Stock buybacks shrink the number of shares on the market, boosting earnings per share and pushing up stock prices. This helps wealthy investors and corporate executives, but does little for everyday workers.

Workers Left Behind

Despite big promises, wage growth remained sluggish. According to Bureau of Labor Statistics data, average hourly earnings grew about 3% per year between 2017 and 2019, barely keeping pace with inflation. Meanwhile, corporate profits soared — and went right back to shareholders.

Shareholders Got Richer, Inequality Widened

America’s richest 10% own roughly 89% of all corporate equities, so most of the gains from buybacks ended up with them. Instead of raising wages or funding new investment, corporations spent their tax savings rewarding their shareholders and executives.

Even Trump Didn’t Expect It

President Trump himself seemed frustrated by how corporations used their windfall. In March 2018, he said:

“We thought they would have known better but they didn’t know better … I am fine with restricting buybacks. In fact, I would demand that there be no stock buybacks. I don’t want them taking hundreds of millions of dollars and buying back their stock because that does nothing.”

— Reuters, March 2018

Even the president behind the tax cuts recognized that companies had largely used their windfall to enrich themselves.

So Why Do It Again?

Now, some lawmakers are pushing to make these corporate tax cuts permanent through what they call the “One Big Beautiful Bill.” But there is little discussion about putting limits on stock buybacks this time around.

If the goal is to strengthen our economy and help workers, why would we hand corporations another giant tax break with no strings attached? We already saw what happened last time: corporations took the money and rewarded shareholders, while workers saw almost nothing.

If there is one lesson from the 2017 tax cuts, it is that without guardrails, corporate tax giveaways mainly benefit the wealthiest Americans. Any plan to extend these cuts should include strong rules to make sure the money supports job growth, wage increases, and investment — not just stock market gains.

Take Action

If you think tax policy should help workers and communities, not just the richest shareholders, reach out to your members of Congress and tell them:

No permanent corporate tax cuts without protections against stock buybacks. Tax breaks should build the real economy — not just inflate stock prices.

How Government Money Really Works — And What Most People Get Wrong About Taxes and the Budget

The Big Misunderstanding About Money

At some point in our lives, most of us absorb a simple, commonsense idea: money is limited. You earn it, you spend it, you try to save some. If you spend more than you bring in, you go into debt — and if that debt piles up, there are consequences. That’s how households work, how businesses work, and how most state and local governments work too.

So it seems logical to assume the federal government must play by the same rules. If there’s a budget deficit, it must mean the government is spending beyond its means. If we want better schools, safer roads, or stronger healthcare, then we either need to raise taxes or cut spending somewhere else. That’s just basic math, right?

Well — not exactly.

This familiar story about government money is tidy, intuitive, and deeply wrong.

The truth is that the federal government doesn’t operate like a household or a business. It’s not just one more player in the economy — it’s the referee, the scoreboard, and the person printing the tickets at the front gate. Unlike the rest of us, the U.S. government creates the money it spends. It doesn’t need to “raise revenue” before it can afford something. It spends first, and taxes later.

That idea might sound a little out there at first. If the government can just create money, why doesn’t it solve everything? Why are there still potholes, overcrowded classrooms, understaffed hospitals, and families living paycheck to paycheck? Why is there always talk of deficits and debt ceilings if those things don’t really constrain us?

This post is here to pull back the curtain.

We’re going to explore how government money actually works in a modern economy — how it enters the system, how it flows, and most importantly, how it sometimes gets stuck. We’ll dig into the real purpose of taxation, and why the most dangerous kind of money in our economy isn’t money that’s being spent — it’s the money that isn’t going anywhere at all.

This isn’t about party politics or economic theory. It’s about understanding the machine we all live inside — and why it so often feels like it’s broken, even when there’s more wealth in circulation than ever before.

If you’ve ever wondered:

• Why we always seem to “run out of money” for public goods…

• Why billionaires can accumulate fortunes beyond imagination while others struggle to afford insulin…

• Or why inflation rises even when wages don’t…

…then this post is for you.

By the end, you’ll see money — and taxes — in a very different light.

The Government Isn’t Like a Household Budget

The idea that governments need to “live within their means” is one of the most persistent beliefs in public life. You’ll hear it from politicians on both sides of the aisle, in news segments, campaign speeches, and budget debates: We can’t spend what we don’t have. We need to tighten our belts. Just like families do.

It sounds responsible. Humble, even. And it gives the impression that government finances are just a scaled-up version of our own — a bigger checking account, a more complicated spreadsheet, but ultimately the same rules.

But here’s the thing: that’s not how a currency-issuing government works. Not even close.

The federal government of the United States is not a household. It doesn’t need to earn money in order to spend it. It doesn’t need to borrow dollars before it can invest in a new bridge, fund research, or pay a soldier. Why? Because it creates the money to begin with.

Think about that for a second. The U.S. dollar doesn’t fall from the sky, and it doesn’t originate in taxpayer wallets. It’s created by the federal government, usually through the Federal Reserve and the U.S. Treasury, when Congress authorizes spending. That money enters the economy when the government pays for goods, services, salaries, or benefits — and only after that do taxes start pulling some of it back out.

It’s a bit like the way a casino works. The house creates the chips. It doesn’t need to “earn” them first. The chips flow out onto the floor when people buy in, and the house collects them back as games are played. The casino’s ability to issue more chips is not constrained by how many it collected from players yesterday — it’s constrained only by what the system can handle before things get out of balance.

In the same way, the federal government’s real constraint is not money, but resources. The number of people available to work. The amount of steel, concrete, bandwidth, energy. The capacity of factories and farms and freight trains. If the government spends too much money into an economy that doesn’t have the capacity to absorb it — meaning, too much money chasing too few goods — then you get inflation. That’s the real limit. Not a bank balance.

This is where a lot of confusion starts to clear. Because when you realize the government doesn’t need to collect taxes before it can spend, you start to ask new questions — like why the government still cuts back during times of need, or why it borrows money it doesn’t technically require. You also start to see why taxation matters, even if it’s not “funding” spending directly. We’ll get into all of that shortly.

But for now, the key point is this: the U.S. government is the source of the dollar. It can never run out. It can never go bankrupt in its own currency. It can’t default unless it chooses to. That doesn’t mean it can or should spend without limits. But it does mean we need to stop pretending that government budgeting is just a bigger version of our own household finances.

How Banks Create Money — and Why Debt Isn’t Just Borrowing From the Future

When most of us think of money, we picture something finite — like coins in a jar or bills in a register. It’s easy to imagine there’s a set amount out there in the world, being passed from person to person. But in reality, most money isn’t printed by the government or minted by the Treasury. It’s created by banks — and it’s created out of debt.

Here’s how it works: when you take out a mortgage, a car loan, or swipe your credit card, the bank doesn’t hand you someone else’s deposited money. It simply creates the money by typing it into your account. That loan becomes new money in the economy. And when you pay it back — with interest — the bank removes that money from circulation.

This process happens millions of times a day across the economy. A business borrows to buy new equipment. A student takes out a loan for tuition. A family finances a new roof. All of these actions create money in the short term. In fact, somewhere around 90–95% of the money supply exists not as cash or coins, but as digital entries born from private bank loans.

In this way, debt isn’t just a tool for consumers and companies — it’s the engine that drives most of the money creation in a modern capitalist economy.

But there’s a catch.

Debt-based money always comes with strings attached. It has to be repaid — with interest. And if too much borrowing happens at once, it can fuel bubbles, inflate prices, and saddle people with repayments that siphon off future income. On the other hand, when borrowing slows down — during recessions or periods of uncertainty — the amount of money being created also shrinks, and the economy can stall.

This is where the Federal Reserve comes in.

The Fed doesn’t create money the way Congress does — it doesn’t spend into the economy like the Treasury does. But it plays a crucial role in managing the flow of money by setting interest rates. When the Fed raises rates, borrowing becomes more expensive, which slows down new lending and cools the economy. When it lowers rates, loans get cheaper, encouraging people and businesses to borrow, invest, and spend.

What About Quantitative Easing (QE)?

You might’ve heard that during financial crises, the Federal Reserve “pumps money into the economy” through something called quantitative easing. That’s partly true — but not in the way most people think.

In QE, the Fed creates money to buy government bonds or other assets from large banks. This adds reserves to the banking system — kind of like topping off the fuel tank. But it doesn’t directly put money in your pocket or build a new school.

QE makes borrowing cheaper and asset prices higher, which can boost economic activity — but mostly by encouraging banks and investors to keep lending. It’s an indirect tool, and its effects tend to benefit Wall Street more than Main Street.

So yes, QE creates money — but it’s not the same kind of money creation you get from direct government spending or new loans to consumers and businesses. And like interest rates, QE can change the speed of money, but not its final destination.

Quantitative Tightening (QT) is the opposite.

In QT, the Fed sells assets (usually government bonds) or lets them expire without replacing them. This slowly pulls reserves out of the banking system. It’s not the same as taxing or deleting money directly, but it does tighten credit. Banks become more cautious, loans become more expensive, and money moves more slowly.

QT is one of the tools the Fed uses to fight inflation.

It works by making borrowing more expensive and reducing the money supply available for lending and speculation.

But here’s the catch:

QT mostly affects banks and investors. It doesn’t do much to remove stagnant wealth sitting in tax shelters or luxury assets. That’s why taxation is still necessary — it targets money that’s already stuck, not just money flowing through the pipes.

In essence, the Fed acts like a thermostat, adjusting the “temperature” of the economy by nudging the speed of money creation up or down. But here’s the important part: the Fed doesn’t actually remove money from the system. It doesn’t pull dollars out of circulation — it just influences how fast those dollars are created or destroyed by the banking sector.

Only taxation does that.

Taxes are the one tool that reliably drains money out of the economy. That’s why, even in a world where banks create money and the Fed adjusts interest rates, taxation remains essential. It’s how we prevent the financial system from overheating with too much credit — or from concentrating too much wealth in places where it stops moving altogether.

So while government spending and private borrowing both create money, they do it in different ways, with different tradeoffs. And when the private sector slows down — when people are maxed out on debt or reluctant to spend — it’s often the public sector that has to step in and keep the economy from grinding to a halt.

What Taxes Really Do

If the government can create its own money, and most new money comes from loans, that raises a natural question: why do we still need taxes at all?

This is where the story starts to shift.

Most people assume that we pay taxes so the government can afford to do things — fix roads, fund the military, send out Social Security checks. And at the local and state level, that’s largely true. Those governments are currency users. They have to balance their books just like households or businesses. But the federal government — the one that issues the U.S. dollar — doesn’t need your tax dollars before it can spend. It spends first, and taxes later.

So what’s the point of taxation if it’s not to “raise revenue”?

It turns out, taxes play a completely different — and much more important — role in keeping the economy healthy.

Taxes Control Inflation

When the government spends money into the economy, that money becomes part of the pool we all use to buy things. But if too much money builds up in that pool — especially when the economy can’t produce enough goods and services to meet demand — prices start to rise. That’s inflation.

Taxes act like a drain. They pull money out of the pool, reducing the total amount in circulation. This helps cool things down when demand starts to outpace supply. In this sense, taxation is a form of economic climate control — a way to maintain balance and avoid overheating.

Taxes Create Demand for the Currency

There’s a reason we all accept dollars, even though they’re just pieces of paper or entries in a database. It’s because we need dollars to pay our taxes.

The government doesn’t just create money — it also creates demand for that money. It does this by requiring that taxes be paid in U.S. dollars. That’s what gives the dollar value and ensures that people, businesses, and banks are all willing to accept it in exchange.

In this way, taxation isn’t just a money sink — it’s part of what gives money its usefulness.

Taxes Shape the Economy

Beyond managing supply and demand, taxes can guide behavior and shape society’s priorities. That’s why we tax cigarettes and give deductions for donations. Taxes can discourage pollution, support struggling communities, or promote investment in clean energy.

And perhaps most importantly, taxes can help address inequality. When wealth concentrates too much at the top, it tends to stagnate — we’ll get to that soon — and taxes can help redistribute it in ways that keep the economy moving.

So while taxes don’t “fund” spending the way we were taught, they’re still essential. They’re how we make room in the economy for public goods. They’re how we keep inflation in check. They’re how we make the dollar worth something in the first place. And they’re how we ensure the economy works for more than just the people who already have everything they need.

Without taxation, even a money-creating government would eventually hit a wall — not because it ran out of dollars, but because it overheated the engine.

The Problem with Stagnant Wealth

If you’ve made it this far, you now know something that turns conventional wisdom upside down: the government doesn’t need our money to spend, and taxes aren’t about “paying the bills.” Instead, taxes help manage inflation, create demand for currency, and keep the economy balanced and moving.

So that brings us to a deeper, more uncomfortable question:

If too much money in the system causes inflation, where exactly is that money piling up?

The short answer? At the top.

Over the last few decades, a staggering share of new wealth has gone not into public goods or productive investment, but into private fortunes — massive concentrations of money that sit relatively idle in financial portfolios, luxury real estate, stock buybacks, and offshore accounts. This isn’t money being spent on groceries or home repairs or small business expansion. It’s money that’s parked. Money that’s been extracted from the real economy and now lives almost entirely on spreadsheets.

This kind of money is what economists often call stagnant wealth. And it poses a growing threat to the health of the entire economy.

Stock Buybacks: Corporate Profits in a Holding Pattern

One of the clearest examples of stagnant wealth in action is the rise of stock buybacks — a financial maneuver that’s become almost routine among large corporations.

Here’s what happens: instead of using profits to raise wages, expand operations, or invest in research and development, many companies use their cash to buy back their own shares on the stock market. This reduces the number of shares in circulation, which usually boosts the stock price. Shareholders — especially major ones like executives and investment firms — see a windfall. And because so much executive compensation is tied to stock performance, buybacks often function as an indirect bonus system for top leadership.

But while stock prices go up, the real economy doesn’t necessarily benefit. No new jobs are created. No new products or services are introduced. No infrastructure is built. It’s a maneuver that moves money around without creating new value — and that’s the definition of stagnation.

Why This Matters:

Stock buybacks concentrate wealth at the top, not by making the economy more productive, but by manipulating financial optics. They redirect money that could be used to invest in workers, innovation, or communities — and instead lock it away in private portfolios where it rarely recirculates.

And this isn’t happening on the margins — it’s become central to how big business operates. In some years, companies in the S&P 500 have spent more on buybacks than on capital investment. That means the dominant use of corporate profits is not to build or grow — but to enrich those who already own the most.

Buybacks are just one example of how money can appear active but still contribute little to the broader economy. When paired with low taxes on capital, deregulation, and financial incentives that reward short-term stock performance over long-term growth, they create a system where money constantly floats upward — and then gets stuck.

Money That Moves vs. Money That Sits

In a healthy economy, money moves. It flows from paycheck to store to supplier to payroll to rent and back again. Every time money changes hands, it supports jobs, goods, services, and the taxes that fund public life.

But when money gets trapped — especially in large amounts — it stops doing its job. It doesn’t buy anything. It doesn’t build anything. It just sits.

And the more money gets stuck in those upper layers of the economy, the harder it becomes for that money to “trickle down” in any meaningful way. Because it doesn’t trickle. It pools.

Stagnation Is a Drain — Not a Sign of Success

One of the biggest myths we’ve been sold is that extreme wealth accumulation is a sign of merit or efficiency. But in reality, it’s often a sign of dysfunction — of a system that allows money to be siphoned upward faster than it can circulate outward.

Imagine if a town’s entire water supply started collecting in a single mansion’s pool, leaving the rest of the neighborhood with dry taps. That’s not prosperity. That’s hoarding.

And hoarding doesn’t just happen in corporate boardrooms or stock portfolios. Trillions of dollars in personal and corporate wealth are now parked in offshore tax shelters — hidden from taxation, untouched by commerce, and invisible to the real economy. This is money that could be funding schools, public transit, or clean energy — but instead, it’s legally shielded behind walls of secrecy, compounding interest for people who already have more than they could spend in a hundred lifetimes.

Then there’s real estate — not homes for living in, but high-end properties bought purely as investment vehicles. In many major cities, entire luxury apartment towers sit mostly empty, owned by global investors as safe places to park cash. These buildings don’t house families, create jobs, or generate much economic activity. They’re just vaults made of glass and steel.

In a money system like ours, where circulation matters more than accumulation, this kind of stagnation isn’t just inefficient — it’s a slow bleed. It keeps the economy running below its potential. It makes inequality worse. And it leaves more and more people wondering why — if there’s so much wealth in the world — everything still feels so hard.

Next, we’ll look at how taxation can play a powerful role — not as punishment, but as a way to restore balance. Because the problem isn’t that some people have too much money — it’s that too much money has stopped moving.

Why Taxing the Rich Helps Everyone

When people hear the phrase “tax the rich,” it often stirs up a mix of emotions — support, suspicion, even resentment. Some hear it as a call for fairness. Others hear it as punishment for success. And many, understandably, wonder how taking money from one group will make life better for everyone else.

So let’s set the record straight: taxing the wealthy isn’t about jealousy or revenge. It’s about function.

In an economy where too much money gets stuck at the top, taxation is how we get that money moving again — out of vaults and spreadsheets and back into the real world, where it can fund schools, rebuild roads, launch new businesses, and pay people to do useful, meaningful work. Taxing the rich doesn’t weaken the economy. It strengthens its foundation.

The Rich Are Different — Financially and Systemically

Let’s be clear: we’re not talking about someone making $200,000 a year and saving up for their kid’s college. We’re talking about the wealthiest 0.1% — people whose fortunes stretch into the hundreds of millions or billions of dollars. People whose wealth grows not from wages or productivity, but from investments, inheritance, and financial instruments most of us will never see.

And here’s the kicker: the ultra-wealthy often pay lower effective tax rates than teachers, nurses, and construction workers. That’s because most of their income comes from capital gains — the increase in value of stocks or assets — which is taxed at a lower rate than wages. Often, it’s not taxed at all until the asset is sold. In some cases, it’s never taxed, due to loopholes and tax shelters.

This isn’t about breaking the law — it’s about exploiting a system that was designed to reward accumulation over circulation.

A Dollar Hoarded vs. a Dollar Spent

A dollar parked in a Cayman Islands trust or sitting in a third vacation home does very little for the economy. A dollar spent on childcare, public transit, or small business loans creates multiple rounds of activity: wages paid, goods bought, taxes collected. It circulates. It builds.

That’s why taxing wealth at the top is so powerful. It doesn’t destroy value — it reactivates it.

It takes idle dollars and puts them to work.

Counterpoint: “But They Already Paid Taxes on That Money”

This is a common objection — and a fair-sounding one. But in reality, much of the wealth at the top has never been taxed. That includes:

• Unrealized capital gains (wealth increase without selling assets)

• Inherited assets that bypass taxes entirely due to “step-up in basis” rules

• Money shielded in trusts, shell companies, and offshore entities

And even when income is taxed, it’s often at far lower rates than regular wages. The average billionaire pays an estimated 8% effective tax rate. Many working families pay double that.

So no — this wealth isn’t being double-taxed. In many cases, it hasn’t been taxed once.

Counterpoint: “But They Give to Charity!”

It’s true: many wealthy people make large charitable donations. And that’s commendable. But charity is not a substitute for a functioning public system. Donations depend on the donor’s whims, not on public need. You can’t run a national infrastructure plan or universal preschool on the hope that a billionaire feels generous this year.

Taxes are how we make democratic, accountable decisions about what we build together — not what we’re gifted from above.

Taxing the Rich Helps… Everyone

When wealthy people pay more in taxes, it:

• Frees up money for infrastructure, healthcare, education, and climate resilience

• Reduces the burden on working- and middle-class families

• Helps stabilize the economy by discouraging dangerous speculation

• Restores trust that the system isn’t rigged for the top

And most importantly, it gives the economy the oxygen it needs to grow from the middle out — not just from the top down.

Next, we’ll explore how we can use tax policy not just to patch holes, but to actively improve the economy for everyone. Because once you understand that money is not the constraint — but stagnant wealth is — the path forward becomes clearer.

A Healthier Economy Through Smarter Taxation

So far, we’ve seen how money really works: how it’s created, how it flows, how it gets stuck — and how taxation isn’t about punishing success, but keeping the system moving. That brings us to the real challenge: what should we do about it?

Because if too much wealth is stagnating in unproductive places, then the goal isn’t to tear down prosperity — it’s to make sure prosperity works. Not just for the ultra-wealthy, but for the people who grow food, teach children, drive trucks, code software, build homes, and care for aging parents.

The good news? We already have the tools to fix this. The better news? They’re not radical. They’re rooted in common sense.

Tax Wealth, Not Just Work

Right now, most of our tax system falls on people who earn a paycheck — not people whose money makes money. That’s backwards.

If you go to work every day and get paid $60,000 a year, you might pay 20–30% in taxes. But if you make $10 million on the stock market and never sell your shares, you might pay nothing for years — or ever. That creates an economy where passive wealth is rewarded more than productive effort.

We can fix this by:

• Taxing large unrealized capital gains on billionaires

• Closing loopholes that let assets be inherited tax-free

• Implementing modest annual wealth taxes on ultra-high net worth individuals

These policies don’t hurt the middle class. They don’t touch retirement accounts. They simply ensure that the very top isn’t forever insulated from contributing.

Close the Escape Hatches

It’s no secret that many wealthy individuals and corporations go to extraordinary lengths to avoid taxes — setting up offshore shell companies, exploiting vague trust laws, or using high-priced accountants to manipulate taxable income.

The solution isn’t complicated. It’s enforcement.

Fully funding the IRS, modernizing its systems, and enforcing existing laws would generate hundreds of billions in recovered taxes — without raising rates a single point. In fact, the Congressional Budget Office estimates that every $1 spent on tax enforcement brings in up to $6 in revenue.

Tax fairness doesn’t require new laws so much as the political will to apply the ones we already have.

Invest Where the Market Won’t

There are some things the private sector simply won’t do on its own — even when they’re urgently needed. Affordable housing. Public health infrastructure. Clean energy grids. Universal broadband. These aren’t luxuries; they’re the foundation for a stable and competitive economy.

Smart taxation gives the government the room it needs to invest directly in these public goods — especially during downturns when private investment dries up. And when done well, these investments create jobs, lower costs, and raise living standards for everyone.

Build an Economy That Works for More People

Ultimately, the goal of tax policy — and economic policy as a whole — shouldn’t just be “growth.” It should be broadly shared prosperity. We need to stop asking whether the stock market is up, and start asking whether people are housed, healthy, educated, and hopeful.

A smarter tax system can:

• Fund universal childcare and paid family leave

• Rebuild decaying infrastructure and climate-proof cities

• Lower costs for healthcare and education

• Support small businesses and local economies

• Ensure that essential workers aren’t living in poverty while billionaires fund their fourth space launch

None of this is about envy. It’s about value. It’s about making sure the people who create value in society — not just those who accumulate assets — can thrive.

Next, we’ll bring it all together. Because once you understand how money works, how taxes work, and how wealth gets stuck, a very different picture of the economy emerges — one that points not toward scarcity, but toward possibility.

How National Debt Fits Into the Picture

At this point, you might be wondering: if the government doesn’t need tax revenue to spend, why does it bother borrowing at all? What’s the deal with the national debt?

Here’s the key: when the federal government spends more than it taxes — what we call a deficit — it creates money in the economy. That deficit becomes part of the national debt, which isn’t a pile of unpaid bills, but rather a ledger of dollars the government has spent and not yet removed via taxation.

Those dollars don’t disappear. They show up as Treasury bonds — safe, interest-bearing assets held by banks, pension funds, individuals, even foreign governments. In fact, much of the national debt is simply money the private sector saves. From this perspective, the debt isn’t a burden. It’s a financial asset.

What happens if the government tries to reduce the debt? It would need to run surpluses — taxing more than it spends — which effectively pulls money out of the economy. This can be appropriate in times of overheating or inflation, but harmful during slow growth or rising inequality.

In other words, debt and taxes are both tools. Debt injects money into the system. Taxes remove it. The goal isn’t to balance the federal checkbook like a household — it’s to balance the economy: fight inflation, reduce inequality, and make sure public resources are serving the public good.

Money Is a Tool, Not a Trophy

For most of us, money feels like the finish line — the reward for hard work, saving, and sacrifice. And that’s not wrong. But when we zoom out and look at the economy as a whole, we start to see money differently.

Money isn’t just a prize. It’s a tool. A shared resource. A current that flows through our lives, connecting what we do with what we need. And like water or electricity, it has to keep moving to be useful. When it stops flowing — when it pools in the hands of a few or gets locked away in untaxed assets and empty condos — the rest of the system dries up.

That’s what we’re living through now.

We’ve built an economy that’s awash in wealth, yet constantly running short on what matters: affordable housing, good jobs, healthy communities, and resilient infrastructure. Not because we lack the money — but because too much of it is stuck. Idle. Hoarded. Trapped in a game of high-stakes accumulation that adds little and destabilizes much.

And yet, we continue to treat money like it’s scarce. We cut school budgets while billionaires fund private space races. We hesitate to fix our bridges or expand healthcare because someone insists we can’t “afford it” — as if the only money that counts is the money we can squeeze out of working people.

But now we know better.

The government is not like a household. It creates money. It spends first and taxes later. Taxes don’t fund spending — they manage the flow. And the biggest problem we face today isn’t too much spending — it’s too much wealth sitting still.

The national debt fits into this framework too. It’s not a threat looming over future generations — it’s a reflection of past investment, and a source of private sector savings. When used wisely, deficits and debt expand the economy. When reined in too harshly, they can choke off recovery and growth.

Taxation isn’t theft. It’s maintenance. It’s how we drain excess, reroute resources, and keep the engine of the economy from stalling out under its own weight. When done right, taxation doesn’t slow the economy down — it unclogs it. It frees money to move again. It turns passive wealth into active progress.

So when we talk about taxes — especially taxes on the wealthy — we’re not talking about punishing success. We’re talking about protecting the system that made that success possible in the first place. We’re talking about pulling money off the sidelines and putting it back to work — building homes, hiring teachers, funding science, raising kids, and solving problems that markets alone will never fix.

In the end, the question isn’t can we afford to tax the rich.

It’s can we afford not to?

Addendum: The “Big Beautiful Bill” — A Deficit That Deepens Inequality

Some readers might ask: if deficits can be useful, does that mean any deficit is good?

Not quite. Like any tool, it depends on how you use it.

The recently passed “Big Beautiful Bill” — a sweeping tax and spending package — dramatically increases the federal deficit. But unlike investments in infrastructure, education, or healthcare that broadly benefit society, this bill directs a significant portion of its benefits to the wealthiest Americans.

According to analyses by the Tax Policy Center, while more than 80% of households would receive a tax cut in 2026 under the bill, 60% of the tax cuts would go to the top 20% of households, and more than one-third would go to those making $460,000 or more.

In dollar terms, the average middle-class household earning between $51,000 and $92,999 could receive a projected tax cut of $815, whereas top 1% earners stand to gain significantly more—an estimated $44,190 in after-tax income.

This approach not only increases the national debt but also exacerbates wealth inequality by concentrating financial gains among the already affluent.

Deficits that fund broad-based investments—like schools, healthcare, and infrastructure—keep money moving.They create jobs, strengthen communities, and lay the foundation for long-term prosperity. These types of deficits tend to pay for themselves indirectly by boosting the productive capacity of the economy.

But deficits that primarily benefit the wealthy? They often lead to increased savings among the rich, reduced consumer spending, and greater economic disparity.

So while deficits aren’t inherently bad, deficits that deepen inequality are problematic. They not only strain public finances but also undermine the very purpose of taxation: to manage the economy’s flow of money and ensure a fair distribution of resources.

If we’re going to incur deficits, let’s ensure they’re used to lift people up—not to further enrich those already at the top.