May 10, 2006
House and Senate GOP conferees finally agreed yesterday on extending the 15 percent tax rate on dividends and capital gains for two more years through 2010. This means you can expect lots of media and liberal rhetoric about "the deficit" and "the rich," but the real news is how well these lower rates have been soaking the rich to fill government coffers, says the Wall Street Journal.
The latest evidence is Treasury's monthly budget report for May:
- It shows that tax receipts were up by $137 billion, or a remarkable 11.2 percent, for the first seven months of the 2006 fiscal year through April.
- The rate of increase is more than triple the inflation rate and it comes on top of the $274 billion, or 14.6 percent, increase in federal revenues for all of fiscal 2005, which ended September 30, 2005.
Overall state revenues climbed by 8 percent in 2004 and nearly 9 percent in 2005, according to the Census Bureau, and more and more states are piling up big surpluses. According to the Journal, politicians like to disguise these tax windfalls so they can spend it all with impunity and still plead poverty. Journalists contribute to this ruse by focusing their budget coverage on deficits, rather than on the spending and revenue trends that are the actual components of any budget.
The current revenue rush also refutes the prevailing Washington consensus that the federal deficit is the result of the Bush tax cuts. In fact, this revenue tsunami is the direct result of the expansion that took off in earnest at about the time the 2003 tax cuts passed. Lower tax rates have since had precisely the result that supporters predicted, says the Journal.
Source: Editorial, "Revenue Revelation," Wall Street Journal, May 10, 2006.
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