TAX CUT DIVIDENDS
August 23, 2005
The Congressional Budget Office has now confirmed that federal revenues will rise this year by more than $262 billion -- the largest single-year increase in tax revenues in American history, says the Wall Street Journal.
The CBO report contained other noteworthy facts as well:
- At 17.5 percent of gross domestic product (GDP) this year, tax revenues are climbing back to normal levels and close to the 17.9 percent postwar average; CBO estimates as the economy continues to grow, tax revenues will slowly rise throughout this decade to 17.8 percent.
- The federal budget deficit has also declined to close to its modern average and is expected to fall to 2.7 percent of national output in the fiscal year ending at the end of next month.
- Non-withheld personal income tax receipts -- much of which is from capital gains and dividend income -- have exploded by one-third since 2003, suggesting lower tax rates on investment income may have paid for themselves.
- As a result of higher productivity and wage growth, coupled with two million new jobs in the U.S. economy this year, total wage income is up about $75 billion this year over projections.
However, the Journal says if it were not for the continuous spending orgy on Capitol Hill, the budget news would be even better. Federal expenditures continue to grow at about 7 percent annually and the Republican Congress's highway and energy bills are only the latest indication of a lack in spending discipline.
In addition, the CBO report also sounds the alarm over longer-term federal spending, which is driven by Medicaid, Medicare and Social Security. More than 50 cents of every revenue dollar will be devoured by just these three programs by the year 2030 and by 2050, there will be no money left for national defense, the courts, transportation or anything else.
Source: Editorial, "Tax Cut Dividends," Wall Street Journal, August 17, 2005; and "The Budget and Economic Outlook: An Update," Congressional Budget Office, August 2005.
For CBO report:
Browse more articles on Tax and Spending Issues