Taxes revenues fall

[Guest guest]

I'm sure that this surprises a great many politicians who think that because they raised taxes the revenues should have increased, tanking economy aside. After all, Obama's economic advisors painted such a rosy picture of the economy by this time. This article makes some very good points, such as how hard it will be to pare back a lot of this new spending once the economy improves, that it will instead continue to increase.

What I find interesting is how far beyond its means the US government is. If a mere $138 billion is a one third reduction in taxes yet we have a $1.7 trillion deficit, our government is beyond profligate to outright wastrel. It really needs to get the social spending, which accounts for two thirds of government spending, under control.

http://www.usatoday.com/money/perfi/taxes/2009-05-26-irs-tax-revenue-down_N.htm

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.

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.

FIND MORE STORIES IN: Baby Boomer | Moody's

"It's one of the drivers of the ongoing expansion of the federal budget deficit," says 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." Dinner Made Easy Newsletter - Simple Meal Ideas for Your Family. Sign Up Now!

[Guest guest]

You make a good point there william, one would think under the current

government that we would be getting either some form of incentive or some tax

breaks but with this country in such debt it's going to take alot more than that

to get us out of debt. It's going to take alot of time and dedication to get us

to where we need to go in life and to get this country back on its feet again.

Signed,

Greg

>

> I'm sure that this surprises a great many politicians who think that

> because they raised taxes the revenues should have increased, tanking economy

> aside. After all, Obama's economic advisors painted such a rosy picture of the

> economy by this time. This article makes some very good points, such as

> how hard it will be to pare back a lot of this new spending once the economy

> improves, that it will instead continue to increase.

>

> What I find interesting is how far beyond its means the US government is.

> If a mere $138 billion is a one third reduction in taxes yet we have a $1.7

> trillion deficit, our government is beyond profligate to outright wastrel.

> It really needs to get the social spending, which accounts for two thirds

> of government spending, under control.

>

>

>

> _http://www.usatoday.com/money/perfi/taxes/2009-05-26-irs-tax-revenue-down_N

> .htm_

>

(http://www.usatoday.com/money/perfi/taxes/2009-05-26-irs-tax-revenue-down_N.htm\

)

>

>

> 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.

> 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.

> FIND MORE STORIES IN: _Baby Boomer_

> (http://content.usatoday.com/topics/topic/Baby+Boomer) | _Moody's_

> (http://content.usatoday.com/topics/topic/Moody)

> " It's one of the drivers of the ongoing expansion of the federal budget

> deficit, " says 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. "

> **************Dinner Made Easy Newsletter - Simple Meal Ideas for Your

> Family. Sign Up Now!

>

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F%2Fad.doubleclick.net%2Fclk%3B215225819%3B37274678%3Bs%

> 3Fhttp:%2F%2Frecipes.dinnermadeeasy.com%2F%3FESRC%3D622)

>

[Guest guest]

" I'm sure that this surprises a great many politicians who think that because

they raised taxes the revenues should have increased, tanking economy aside. "

Aside from the fact that not as many people are earning money, the other thing

Democrats forgot about is the Roth IRA conversions which have been going on.

When you are out of work, you are in a lower tax bracket, and that makes it a

prime time to convert regular IRAs to Roths. The transaction is taxable, but

once the money is converted, the principle and interest is non-taxable upon

withdrawl.

And so people who have been converting and who ar enow retiring, are not paying

taxes on IRA withdrawals. At the same time, others are converting monies at the

lowest possible tax rate.

So tax revenues are down everywhere. Customers are not buying as much, and so

fewer taxes are collected on sales. Businesses are not earning as much, so they

are taxed less. Imports have fallen, so they are taxed less. People are earning

less, and so there are lower income taxes. People are losing their homes, and so

the properties are being sold at bargain nasement prices and re-assessed

partially on that basis in some places. And then of course there are all the tax

breaks which have been put into effect by the Bush Administration.

Administrator

[Guest guest]

Yes, there are many reasons the tax revenues are down. My point was that added more taxes isn't going to change that. Tax more and people will have less money to spend resulting in depressed economic activity and the cycle repeats.

Bush cut taxes in the wrong way. He cut taxes on people trying to garner votes. However, those people he cut taxes for paid about 2% of the total taxes, even though they were about 50% of the population. He was simply trying to buy votes and it didn't work.

What he should have done was cut the corporate tax rate and set a schedule to bring it down to the global average of 20% (it is currently over 40%) over a period of years. Giving American business and industry back 20% of its income would mean greater activity in the US. More manufacturing and other business means more people having better paying jobs. More better paying jobs might not mean a whole lot of personal income tax revenue increase, but it would mean more business activity which would be taxed. Basically, revenues would increase as the tax rate fell.

That said, government would still have to rein itself in and cut spending. A tremendous effort would have to be made to stamp out corruption which wastes countless billions each year, streamline social programs into a single new agency and two or three programs rather than the current 120 plus programs across dozens of federal agencies. Things like this would go a long way toward reducing cost and size of government.

In a message dated 5/28/2009 12:10:44 A.M. Eastern Daylight Time, no_reply writes:

So tax revenues are down everywhere. Customers are not buying as much, and so fewer taxes are collected on sales. Businesses are not earning as much, so they are taxed less. Imports have fallen, so they are taxed less. People are earning less, and so there are lower income taxes. People are losing their homes, and so the properties are being sold at bargain nasement prices and re-assessed partially on that basis in some places. And then of course there are all the tax breaks which have been put into effect by the Bush Administration. Administrator Cooking Dinner For Two? Sign Up Get Immediate Member-Only Savings.