TAX TIDAL WAVE
October 6, 2006
Congress keeps breaking the Beltway Book of World Records for spending money, but the government will soon report that the federal budget deficit for the just-completed 2006 fiscal year fell to about $260 billion, says the Wall Street Journal.
What's the secret of this deficit success that you aren't reading much about this election year? It isn't spending restraint. The federal budget expanded to $2.7 trillion last year, a 9 percent increase, or three times the inflation rate. Over the past six years the federal budget has increased by 49.2 percent.
- The main cause of the deficit decline -- 90 percent of it, says White House budget director Rob Portman -- is a tidal wave of tax revenue.
- Tax collections have increased by $521 billion in the last two fiscal years, the largest two-year revenue increase -- even after adjusting for inflation -- in American history.
Where are these revenues coming from?
- Corporations, whose tax collections have climbed by 76 percent over the past two years thanks to greater profitability.
- Personal income tax payments are up by 30.3 percent since 2004 too, despite the fact that the highest tax rate is down to 35 percent from 39.6 percent.
- The IRS tax-return data released last month indicates that a near-record 37 percent of those income tax payments are received from the top 1 percent of earners -- "the rich," who are derided regularly in Washington for not paying their "fair share."
As for the budget deficit, at $260 billion it is now about 2 percent of our $13 trillion economy, well below the 2.7 percent average of the last 40 years, says the Journal. Most states and localities are also afloat in tax collections, and including their revenue surpluses brings the total U.S. public sector borrowing down to roughly 1.5 percent of gross domestic product (GDP).
Source: Editorial, "Tax Tidal Wave," Wall Street Journal, October 6, 2006.
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