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| Economy |
| Income tax revenue dropped 44% from a year ago. |
| 2009-05-28 |
| Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago -- the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says. And then Reagan reduced taxes to stimulate the economy, it worked. When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been." For example, 6 million people lost jobs in the 12 months ended in April -- and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago. "These are staggering numbers," Lynch says. Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years. "It's one of the drivers of the ongoing expansion of the federal budget deficit," says John Lonski, chief economist for Moody's Investors Service. The Congressional Budget Office projects a $1.7 trillion budget deficit for fiscal year 2009. The other deficit driver is government spending, which, the AIER's report says, is the main culprit for the federal budget deficit. The White House thinks that tax revenue will increase in 2011, thanks in part to the stimulus package, says the report from AIER, an independent economic research institute. But it warns, "Even if that does happen, the administration also projects that government spending will be so much higher each year that large deficits will continue, and the national debt held by the public will double over the next 10 years." The government may have a hard time trimming spending to reduce the deficit when the recession ends. The 77 million Baby Boomers-- those born in 1946 through 1964 -- will start tapping their federal retirement benefits soon, which means increased government outlays for Social Security and Medicare. "It will be doubly difficult for federal government to reduce expenditures and narrow the deficit as rapidly as they did following previous recessions," Lonski says. At the end of the last major recession, in 1981, Boomers were in their 30s. Their incomes were expanding, as was their appetite for goods and services. The Boomers now are in their 50s and 60s and unlikely to keep increasing incomes for long, which means that revenue from income taxes could flatten in the next few years. Also, Lonski says, they are more likely to save for retirement than spend -- and consumer spending is a big driver of the economy. "The American consumer led us out of previous recessions with some semblance of gusto," Lonski says. "They're too old to do it now." |
| Posted by:GolfBravoUSMC |
| #12 Hey, you got a Democrat president and congress. Who pays taxes? Geitner? Daschle? anyone? |
| Posted by: Skunky Glins 5*** 2009-05-28 21:29 |
| #11 Indian Territory and West Coast. See: "1800's" |
| Posted by: Frank G 2009-05-28 19:57 |
| #10 Has America ever had a mass exodus of people Emigrating before? And where are we supposed to go? |
| Posted by: Omoth Forkbeard9960 2009-05-28 19:33 |
| #9 I've talked to several people lately who have told me they're working less, bartering their services, or asking to be paid in cash in order to cut their tax bill. Many are putting their non-claimed income into gold and silver, or into other thing of value other than cash. Obviously they believe you don't have to have a weapon to rebel against "the Man". Expect the trend to increase as Congress passes more and more tax legislation. |
| Posted by: Old Patriot 2009-05-28 19:12 |
| #8 "How about The Republic of Texas?" Home of LITERAL bloodsucking government officials? http://blogs.dallasobserver.com/unfairpark/2009/05/this_weekend_dallas_police_to.php No thanks. |
| Posted by: ebrown2 2009-05-28 16:19 |
| #7 when the gov't stops looking at taxes as a source of "revenue" and starts living within its own means as every citizen is supposed to this will no longer be an issue. |
| Posted by: Andy Ulusoque aka Broadhead6 2009-05-28 15:12 |
| #6 Just where is there to go? Mars? How about The Republic of Texas? Progressive tax rates are a big part of the problem here. During boom times highly progressive rates create mountains of cash. That all disappears during 'normal' times and recession. For example, say you have a hair dresser who starts selling houses during a real estate boom. Suddenly she's making $300k/year. Unlike people who are accustomed to high income, she has taken no steps to shield any of this from taxes. Result is lots of new tax revenue. Then the real estate bubble pops and our heroine is back to cutting hair. Tax revenues disappear. The nastiest part of all this is that government budgets assume that the boom will last forever, and even grow. When the boom goes bust they have to make up for the lost revenue somehow (real spending cuts are the last thing they would consider) so the burden gets passed on to the middle class. Rinse and repeat. |
| Posted by: Iblis 2009-05-28 13:38 |
| #5 Has America ever had a mass exodus of people Emigrating before? Just saying cos it might happen soon. Just where is there to go? Mars? |
| Posted by: Anguper Hupomosing9418 2009-05-28 13:24 |
| #4 Well, the Crown Loyalist who departed after the last war over the issue of taxes came up comes proportionately as close to a 'mass' exodus we've had. On the other hand, that war was fired up by the tax issue as was another 'disturbance' over there in France a couple years later when that government went bankrupt. |
| Posted by: Procopius2k 2009-05-28 12:01 |
| #3 Has America ever had a mass exodus of people Emigrating before? Just saying cos it might happen soon. |
| Posted by: Bright Pebbles 2009-05-28 11:16 |
| #2 I guarantee it's the best paid losing pay, rather than the unemployed that has made 90% of the "loss". It also shows how the most productive are fined the most for their efforts. |
| Posted by: Bright Pebbles 2009-05-28 11:14 |
| #1 The Boomers now are in their 50s and 60s and unlikely to keep increasing incomes for long, which means that revenue from income taxes could flatten in the next few years. On the other hand, IF the kids are out of the house and those 80% who are not in mortgage trouble are finishing off their house payments, discretionary income should be increasing or at least compensating the shift from full time to retirement income. Income taxes won't increase per se, though consequently you can expect the government to fully tax retirement incomes soon, but consumption taxes should be in better shape. Of course, that will mean the pols will lust for the VAT. It's the 'utes' who'll be slammed for both the full income tax and VAT, and the mandatory national health insurance. Hope and change - hope you have any change left after the tax man. |
| Posted by: Procopius2k 2009-05-28 09:31 |