Tax Tidal Wave
According to the most recent release from the Congressional Budget Office, the budget deficit has fallen by $68 billion, to $250 billion for FY 2006, which just ended on September 30. Compared to our GDP of $13 trillion, the current budget deficit is 1.9% of economic output, down from 2.6% in 2005, and well below the 2.7% average since the 1960s.
As the WSJ points out, most states have budget surpluses, and including those brings the total U.S. public sector borrowing down to 1.5% of GDP.
The reason for the falling budget deficit? Well, it's not because of decreased government spending. According to the WSJ, "the federal budget expanded to $2.7 trillion last year, a 9% increase, or three times the inflation rate. Over the past six years the federal budget has increased by 49.2%."
The budget deficit is shrinking because of a "tidal wave of tax revenues:" Tax collections have increased by $521 billion in the last two fiscal years, the largest two-year revenue increase in American history (even adjusting for inflation).
* Individual income tax receipts rose by 13% in FY 2006, to a record-high of $1.049 trillion, surpassing the previous record set in 2000 at the height of the last economic expansion. From the WSJ, "The IRS tax-return data just released last month indicates that a near-record 37% of those income tax payments are received from the top 1% of earners -- 'the rich,' who are derided regularly in Washington for not paying their 'fair share.'"
* Corporate inclome tax receipts rose by more than 27% this year to $354 billion, a new record, and 71% higher than the peak of the last economic expansion in 2000.
Hmmmmmmmmm...... Sure seems like the "2003 tax cuts for the rich" turned out to be the largest tax hike in history. And what's not to like? Tax revenues are at an all-time high, the rich are paying more in taxes, the deficit is falling, and way below historical average as a percent of GDP?
Well, if you can't deny the reality of a healthy economic expansion, you can always claim that ''The benefits of the economic expansion have not been equally distributed.'' See the NY Times for that quote.