Flashback - July 2005 - Sharp Rise in Tax Revenue to Pare U.S. Deficit

[Henry Hawk]

http://www.nytimes.com/2005/07/13/business/13deficit.html?adxnnl=1&adxnnlx=1311185658-Thj0nAiL+hVmBmbFkBaV+w

WASHINGTON, July 12 - For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.

The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be "significantly less than $350 billion, perhaps below $325 billion."

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

Mr. Bernanke said the tax cuts had undoubtedly contributed to economic growth, which in turn bolstered tax receipts.
"One consequence of strong income growth is that we are enjoying higher-than-expected levels of tax collections," he said.

[Exterminator]

No sense reinventing the wheel when someone else has already run the numbers:

Inflation adjusted (2005 dollars) federal tax receipts (in billions) and (% of GDP)
First column is the year, the next column is the amount of tax collected and the third column is the % of GDP represented by those tax receipts.

2001: $2,215 (19.5)
2002: $2,208 (17.6)
2003: $1,901 (16.2)
2004: $1,949 (16.1)
2005: $2,153 (17.3)
2006: $2,324 (18.2)
2007: $2,414 (17.5)

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

Graubman was quoting somewhere (Heritage foundation?) pointing out the increase in revenue between 2003 and 2007 and attributing that increase to the 2003 tax cuts. I pointed out at the time that the analysis left out the period from 2001 to 2003 where there was a big decrease in revenues, following the Bush tax cuts of 2001.

If you look at the whole period from 2001 to 2008, there was half a trillion dollars less taken in than if revenue had simply stayed at 2001 levels with zero economic growth.

There is one important factor I left out, however. Look at the additional column here:

Inflation adjusted (2005 dollars) federal tax receipts (in billions) and (% of GDP)


2001: $2,215 (19.5) - $2,072
2002: $2,208 (17.6) - $2,201
2003: $1,901 (16.2) - $2.303
2004: $1,949 (16.1) - $2,377
2005: $2,153 (17.3) - $2,472
2006: $2,324 (18.2) - $2,563
2007: $2,414 (17.5) - $2,702

The last column is total federal spending, adjusted to 2005 dollars. Notice it goes up every year (that is it increases faster than inflation.)

If you total the increased spending for 2001 through 2007, it adds up to a little over $2 trillion!

Now, the conservative think tanks want you to believe that the Bush tax cuts stimulated the economy, created jobs, increased federal tax revenues. But, they are totally ignoring the contribution to the economy of that $2 trillion of increased government spending!

And remember, that half a trillion less was taken in, so that means $2.5 trillion more on the national debt as a result of tax cuts and increased government spending.

So, let's review - Republicans cut taxes from already low levels to even lower levels, they pump $2 Trillion more into the economy running up an enormous deficit and then claim that the tax cuts stimulated the economy and we should cut them even more.

[Henry Hawk]

whoops I almost screwed up and argued....

[Exterminator]

Had they not cut taxes but still increased spending, yes, the economy would have been just as strong.  The problem with expecting the private sector to do the spending is that you have no control over it and after 9/11, the private sector stopped spending.

It's easy for everyone to sit around and say that we should make the government cut spending but everyone expects the government to provide more services at the same time.  It's always an issue of cutting the spending somewhere where it doesn't affect me.  Representatives are over a barrel because unlike parents, who can say no to their kids without the kids choosing new parents, when representatives say no to their constituents, those constituents simply turn around and vote in someone else who will say yes.

[Exterminator]

whoops I almost screwed up and argued....

Argue all you'd like.  I'm sure that your point in posting this in the first place was to support your ridiculous assertion that lowering taxes increases revenue which, of course, was disproven...again.  The problem with you people is that you start with a premise and then only pay attention to the individual pieces of information that support that premise rather than considering that information as part of a larger, more complicated formula.  This scenario provides a perfect example of this because the increase in revenues, by itself, would seem to be an indication of the success of the tax cuts in question.  When those increases in revenues are considered, however, as a percentage of the GNP with inflation and other factors figured in, they aren't really increases at all but indicative of a net loss in revenue.

[The Troll]

  I don't remember who said it, or wrote it, or what movie it was in, but the statement of "GREED IS GOOD" has created a new America which is the cheapest product is the best and the most profit for the the poorest item that will sell is good.

  The quality of the products that you find at Walmart and other box stores are just plain trash.  But with all of the advertising of cheap is good and the lowering of every ones wages and income a lot of people can only buy cheap.

  Buying cheap foreign products because a person has too only deepened the loss of American jobs.  Buy the big expensive ticket items like cars only deepens our deficit because all of the profit of those foreign cars leaves the country and used to the betterment of that foreign country.  Just look at China, it is being totally rebuilt, new sky scrapers,  the fastest bullet trains, largest dams, largest bridges, new super highways, super cities and it is being built by American money, off the backs of the American workers, for the benefit of the mega-corporations and the super rich who owns them. 

  Why in hell don't the American  people "We have discovered the enemy Pogo, it's us." wake up and the Stupid Republican Party wake up?

  I know why, GREED IS GOOD!   The GOP, the Grand Old Party doesn't exist anymore, it now is a cult of crazy people who worship money and the power and great life style it brings.  For they the American dream is so much bullshit to anyone but themselves.

                                                               

[Exterminator]

Not sure what all of that has to do with this topic but, "greed is good," is a quote from Gordon Gekko (Michael Douglas) in the movie Wall Street.

[The Troll]

Not sure what all of that has to do with this topic but, "greed is good," is a quote from Gordon Gekko (Michael Douglas) in the movie Wall Street.

  Maybe in not politically correct for this topic, but you have shown all of Henery's figure lie.  Just like the statement "figures lie and liars figure".  It's just a statement to state my opinion of what has caused all of our problems.  Sorry!  Just saying.

[Henry Hawk]

Argue all you'd like.  I'm sure that your point in posting this in the first place was to support your ridiculous assertion that lowering taxes increases revenue which, of course, was disproven...again.  The problem with you people is that you start with a premise and then only pay attention to the individual pieces of information that support that premise rather than considering that information as part of a larger, more complicated formula.  This scenario provides a perfect example of this because the increase in revenues, by itself, would seem to be an indication of the success of the tax cuts in question.  When those increases in revenues are considered, however, as a percentage of the GNP with inflation and other factors figured in, they aren't really increases at all but indicative of a net loss in revenue.

I will probably regret doing this, because it is fruitless, but.....IF tax cuts are bad, then why are most economist, even the POTUS suggest the tax cuts should stay in place while the economy is down....that is why the Bush Tax Cuts were extended. 

I have posted several reasons by economist who support tax cuts and proof where they worked.....YOU have done what you claim that I do, (the way I see it) by finding sources to support YOUR theory.

To me, Ex... it is common sense to keep taxes as low as possible.  I know there is a "point" where we have to be.  I even believe that perhaps it could be raised on those who make millions.  But, to raise them on those in the $250,000 area seems like a bad idea.

I also believe, instead of our government spending money on "pet projects", they should give incentives to the private sector to spend their money for growth here in the U.S.

Also, while I am on it.  I think we should cut spending on "useless and fruitless" projects and work hard at all of the fraudulent spending....BEFORE we begin to raise taxes.  IF, we raise the debt ceiling then it should be matched dollar to dollar on spending cuts.  We have got to begin to ge serious about our debt.

I believe if we just raise the debt, along with raising taxes....they will NOT fix anything but make our hole yet larger.

[Exterminator]

I never said that taxes shouldn't be kept as low as possible as long as the bills are being paid.  The pet projects you mention are certainly problematic but both sides of the aisle are equally at fault for initiating them and certainly, they amount to a drop in the bucket compaerd to the enormity of the budget as a whole.  Where you and I differ is where the tax cuts should be applied.  The rich would have you believe that they should get any tax cuts because they create jobs but in practice, it doesn't work.  Bush gave them tax cuts and the economy ultimately tanked.  Obama gave tax cuts to the middle class who then went out and spent that money and the economy is now recovering...slowly, but recovering nonetheless.

[Henry Hawk]

I never said that taxes shouldn't be kept as low as possible as long as the bills are being paid.  The pet projects you mention are certainly problematic but both sides of the aisle are equally at fault for initiating them and certainly, they amount to a drop in the bucket compaerd to the enormity of the budget as a whole.  Where you and I differ is where the tax cuts should be applied.  The rich would have you believe that they should get any tax cuts because they create jobs but in practice, it doesn't work.  Bush gave them tax cuts and the economy ultimately tanked.  Obama gave tax cuts to the middle class who then went out and spent that money and the economy is now recovering...slowly, but recovering nonetheless.

are you referring to the meek tax cut in the ARRA bill?....that was amazingly insignificant, on average $35 a month, and in no way has that or could that boost the economy.  It is also just a one year, one time cut.  They go back to the way it was next year.  Those who was getting used to the extra cash will now have it taken away from them.  That is going to hurt the economy, once again. 

[Henry Hawk]

Real economic growth has got to come from those who innovate, invent and invest....I think it is okay to help those who need help, but real economic growth will come from the rich, who will in turn, HIRE people to make their product, to sell their product, to store thier product....we need people to HIRE right now.

The more BURDEN (Taxes) we place on entreprenuers, the harder it is for them to make a profit, which what they need right now to GROW. 

It is pure and simple.

Ex, I am not trying to be as if I am saying your ideas are wrong....I'm am pointing out what seems so very, very obvious.

When entreprenuers hire more people....more individual taxes are paid to Washington, the more the revunue increases....So, I say, lets invest by NOT raising the BURDEN on the rich (Business owners and investors)...give them the confidence to once again invest.

Also, we need to encourage them to keep their money HERE (In the USA) by giving them CUTS for doing so.

It really is a simple fix. 

[Exterminator]

You're simply repeating what they've led you to believe like a good little follower.  The most significant "innovation" to come from the wealthy in the past decade was mortgage derivatives; how many jobs did that create and how did it ultimately work out?

[Henry Hawk]

You're simply repeating what they've led you to believe like a good little follower.  The most significant "innovation" to come from the wealthy in the past decade was mortgage derivatives; how many jobs did that create and how did it ultimately work out?

Those are not the folks I am talking about....but, if we want to get nit-picky about it the least we can do is directly blame Chris Dodd and Barney Frank (and their ilk) for allowing this to happen, they are the ones who set this up to fall.....it is NOT because the wealthy created the mess....they merely capitalized from liberal idiocy.....people should be going to jail, starting with politicians in Washington.

We need to enforce some laws that are already on the books to handle those creeps....

Ex....what I believe is shared by many economist and history has sided with this belief to be true.  It is not as complicated as you make it out to be.

To me, it boardlines "conspiracy theories".....

The bottom line Ex is this....are you saying if we raise taxes on the wealthy, things will improve for our economy?

[Exterminator]

The bottom line Ex is this....are you saying if we raise taxes on the wealthy, things will improve for our economy?

Contrary to what you've been brainwashed to believe, it absolutely will not hurt it.