TaxProfBlog posted that the Congressional Budget Office is reporting "robust" growth in tax revenues for the first four months of FY2006.
I discussed this growth when it was first discussed months ago, and it seems that the growth is exceeding even those original projections. 11.2%?! Who knew that lower taxes would bring about growth and higher tax revenues? Oh, that's right, just about everyone.
What's even more amazing is how much this is cutting off the deficit: According to the new chart, in the month of April alone the government should cut $62 billion off the deficit. Now, if only the government would stop its ridiculous spending, that deficit could be gone within just a couple of years (just the interest on the public debt rose from $105b to $129b this year). Revamping Social Security ($314 billion for the first 7 months of FY2006) would be nice, too...
A real revamp of Social Security to put it on an actuarily sound basis had been planned for the 1940s, but World War II intervened. To do so today would be unbelievably expensive. Had Gore defeated Bush, it is possible (although unlikely) that he might have used the then-budget-surplus to do something like that, but I think that it will be another generation before we get that chance.
ReplyDeleteChile changed its social security system to an actuarily sound plan under the Pinochet dictatorship and the people under the new plan will be stuck with a much lower standard of living upon retirement than the older folks who were permitted to stay with the old plan.
Bush's plan allowed for people to choose to remain under the old system if they wished, though.
ReplyDeleteGranted, you're right it will be costly - but waiting makes it far more costly. I think now is the time to act.
Is this causality or mere correspondence?
ReplyDeleteI read the document, which is only an executive summary. I checked your earlier post, and would note that The S&P 500 TR rose 26.4 percent from 6/13/2003 to 6/15/2005. Your graph appears to represent a government gain of about 22 percent in revenue.
The report stated:
"A number of factors may be playing a role in the strength
of final payments transmitted with income tax returns. Various types of personal income not automatically subject to tax withholding may have increased faster than expected in 2005. Sources of such income could include capital gains, noncorporate business income, interest, and dividends. In addition, growth in incomes in 2005 may have been concentrated more than expected among higher-income taxpayers, who face the highest tax rates. Additional data from tax returns for 2005, which will start to become available later this year, will help CBO identify more clearly the sources of growth in taxable income."
Would income generated off eBay increase in 2005 at a fast rate? That would lead to a larger pull of tax revenue -- assuming people report it.
You see a Bush tax cut leading to more tax revenue. I see a strong economy and dividends. Now, were the tax cuts the fuel for that economy? In part. So is American credit card use.
The American credit card use was virtue of the extra money people felt they had, and would continue to get, because of the tax cuts - along with their seeing business and productivity grow, giving them greater ability to rely on future credit.
ReplyDeleteWell, they are relying on that credit at their peril. I've seen no sensible financial guru say that credit is at a sustainable and rational level for the American public as a whole.
ReplyDeleteThese numbers are interesting and worth pondering, though. Did you see Sebastian Malloby (sp?) in yesterday's Op Ed for the Washington Post? I've only skimmed it so far.
Yes I did - atrocious piece which is thoroughly debunked by this post alone. :) (A friend sent it to me.)
ReplyDeleteGranted, people in this country overspend. But it's not as if they weren't doing so beforehand - the only difference is this time, it may not come back to haunt them.
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ReplyDeleteJust read it. Wow. Again: mere correspondence or casuality.
ReplyDeleteSo many dumb people can write so well.
You know what drives me nuts about credit card debt? It's spent at Wal Mart, to a large extent, on Chinese goods. Perhaps the largest exchange of capital in history. The Brits invested in their colonies, and argueably their colonies saved them from destruction in two world wars. We invest in flat screen t.v.s.