Decibel (decibel45) wrote,
Decibel
decibel45

Record tax income in April...

My Aunt recently sent me ...

Here's the "surge" you aren't reading about: the continuing flood of tax revenue into the federal Treasury. Tax receipts for April were $70 billion above the same month in 2006, and April 24 marked the single biggest day of tax collections in U.S. history, at $48.7 billion, according to the latest Treasury report.
The April comparison is slightly askew because the IRS processed more returns than usual this year. But there's no denying that Americans are sending more money than ever to Washington; revenues for the first seven months of fiscal 2007 are up 11.3%, or $153 billion. This Beltway bonanza has helped to slash the projected federal budget deficit by more than half from the same point last year. Across the past three Aprils, federal red ink has sunk by nearly $300 billion. The deficit this year could tumble to $150 billion, or an economically trivial 1% of GDP.
This revenue boom certainly casts doubt on the political wails about tax loopholes for the rich. So far this year, the taxes paid on so-called nonwithheld income, which are dollars that don't come from normal wages and salaries, have climbed by nearly 30%. This is income largely derived from capital gains, dividends and other investment sources -- i.e., the tax rates that President Bush cut in 2003. Individual income taxes are also up by 17.5% -- a handsome fiscal dividend from rising wages and low unemployment.
In other good news, the pace of federal spending, which was pedal-to-the-metal in Mr. Bush's first term, has finally decelerated. So far this year federal outlays have climbed by 3%, and, save for Medicare and Medicaid, federal expenditures are nearly flat from 2006. Spending will climb again once the Iraq supplemental passes, and revenues can't keep rising at a double digit pace forever.
Still, you'd think this dramatic fiscal turnaround would cheer up Capitol Hill. Instead, Congressional Democrats seem to live in a parallel universe -- one that they claim is starved for revenues, with a runaway deficit, and is dominated by the rich who pay no taxes at all. The reality is that the wealthy are financing Democratic spending ambitions, and the deficit could easily vanish within a year or two if Congress has the good sense to leave current tax policy in place.
NOTE: With the stock market hitting new highs and the interest rates staying steady, the 1% federal deficit will soon disappear unless we are dumb enough to elect Dems. In my life time we never had it so good even during the tech bubble in the late '90s.


(I believe that's from the Wall Street Journal).

I started emailing a reply, but I thought instead I'll put it in a blog post:

Wow, funny how the major media seems to have largely missed this story. Searching for "april tax receipts" in Google provided a number of news links.

Interestingly, this has also occurred in Pakistan: http://lnk.nu/brecorder.com/elq.php I suspect we'll see more of that as technology work becomes more global in nature.

I'd be much happier if instead of record taxation we had record spending cuts. Perhaps that would push tax freedom day closer to March rather than nearly into May: http://www.taxfoundation.org/taxfreedomday/

This revenue boom certainly casts doubt on the political wails about tax loopholes for the rich. So far this year, the taxes paid on so-called nonwithheld income, which are dollars that don't come from normal wages and salaries, have climbed by nearly 30%. This is income largely derived from capital gains, dividends and other investment sources -- i.e., the tax rates that President Bush cut in 2003. Individual income taxes are also up by 17.5% -- a handsome fiscal dividend from rising wages and low unemployment.


Or perhaps the loophole is just getting smaller... http://www.washingtonpost.com/wp-dyn/content/article/2005/05/04/AR2005050402134.html "Taxpayers were confronted with unexpected tax bills, many from capital gains and the alternative minimum tax, a parallel income tax system designed to hit the rich but that is increasingly pinching the middle class."

Politics aside, the problem with the AMT (as well as much of the rest of the tax code) is that it's tied to hard dollar amounts. When it was enacted in 1970 the intent was to target 155 households (no, that's not a typo) that had become eligible for so many tax benefits that they owed next to nothing. (From http://en.wikipedia.org/wiki/Alternative_Minimum_Tax)

So clearly this was targeted at the ultra, ultra rich. Think Bill Gates, Warren Buffet, or the Walton family (aka: Wallmart) in todays terms. But according to the Congressional Budget Office, in 2010 one in five taxpayers will have to pay AMT. I'm pretty sure that I'll fall into it this year, but what's most disturbing to me is that "nearly every married taxpayer with income between $100k and $500k will owe". $100k may sound like a lot, but if both parents are working it's very easy to hit that.

Of course, if we're serious about closing loopholes then we should be looking at something like the FairTax (http://fairtax.org), which replaces the IRS, personal and corporate income tax, gift, estate, capital gains, AMT, sosial security, medicare and self-employment taxes with a simple sales tax. How high a sales tax? 23% Sounds like a lot? Consider this: the lowest federal income tax bracket is 15%, and on top of that everyone pays 7.65% for FICA and Medicare. That's 23% right there. Now consider that employers have to match that 7.65%. And if you're lucky and make enough to push you out of the 15% tax bracket? Oh, and because the FairTax is a sales tax in order to truly equate it, you'd have to spend 100% of your income.

NOTE: With the stock market hitting new highs and the interest rates staying steady, the 1% federal deficit will soon disappear unless we are dumb enough to elect Dems. In my life time we never had it so good even during the tech bubble in the late '90s.


Well, I don't know who wrote that note, but if you look at the national debt, we've never had it so bad in my lifetime: http://zfacts.com/p/318.html

If you want to draw partisan conclusions from that, then it seems that modern-day republicans are not who we want to be looking to in order to reduce our debt. And reducing that debt is becoming more and more important; in FY2006 we spent $406B on interest alone. Compare that to $520B in DOD spending.. and $61B on education. http://www.federalbudget.com/

All the talk we hear about approvals for spending in Iraq? According to http://zfacts.com/p/447.html , the *entire* war in Iraq has cost $392B... which means that we could have paid for the entire 4+ year war with what we would have saved on interest in 2006 if we didn't have a debt.
Tags: politics tax
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