Eli5: How does national debt pay bonds, but those bonds are then taxed?

Question

Does the tax go back into paying the bonds? Is this just a big loop in perpetuity?

In: Economics

Answer 1

To be clear, only the *interest* on treasury bonds is taxable. When the bond reaches maturity, the face value is repaid, and this is not subject to income taxes (assuming you also purchased the bond at face value).