The latest monthly Treasury report on taxes and spending shows that gross tax receipts in February were $1.4 billion higher than the year before. Weren’t the Republican tax cuts supposed to explode the deficit?
According to the report, the government took in $238.2 billion in taxes in February. The year before, tax revenues were $236.8 billion.
For fiscal year 2018, which started last October, taxes are up $50.5 billion compared with the same months last year, and are at a record high level for this five-month span.
The report does show that net receipts were lower in February compared with last year, but the main reason is that individual income tax refunds jumped $13.3 billion, while corporate tax refunds went up $4 billion, neither of which is the result of the tax cuts that took effect in January.
Even so, net receipts are up by $29.6 billion for the current fiscal year — a 2.4% increase — compared with the same period last year. That’s also a record high. (See nearby chart.)
Does this mean tax cuts are “paying for themselves”?
Not exactly. Income taxes collected in February were down $2.5 billion from last year — reflecting the new withholding tables. Corporate income tax collections, however, were essentially flat.
But remember, income taxes are hardly the only source of revenue for the federal government. And a faster-growing economy means more money pouring in from these other sources.
Payroll taxes, for example, are dependent on the number of people working and their wages. In February, the economy added 313,000 jobs, unemployment levels are now at or near record lows, and wages are climbing.
As a result, payroll taxes brought in $1.5 billion more in February than they did last year, and are up $11.4 billion this fiscal year. Federal excise taxes and customs duties are up $3.8 billion and $1 billion, respectively, this fiscal year.
What these numbers do show is that all the hand-wringing about the impact of the tax cuts on federal deficits was based on wildly exaggerated estimates of revenue losses, which failed to take into account the fact that a faster growing economy would offset at least of the lost revenue. That’s a point we’ve made repeatedly in this space.
In contrast, tax hikes almost always bring in less revenue than expected, because they dampen economic growth.
Democrats once understood this truism. It was JFK, after all, who said in 1962 “it is a paradoxical truth that tax rates are too high today and tax revenues are too low — and the soundest way to raise revenues in the long run is to cut rates now.”
Today’s Democrats, in contrast, uniformly opposed the Trump tax plan, and are now pushing to repeal most of it so they can spend an additional $1 trillion on government make-work infrastructure projects.
Their plan has no chance of being enacted, but at least voters will have a clear choice this November.
$2,883,250,000,000: Federal Taxes Set Record Through August; $19,346 Per Worker; Feds Still Run $530B Deficit
By Terence P. Jeffrey • Investor’s Business Daily
The federal government raked in a record of approximately $2,883,250,000,000 in tax revenues through the first eleven months of fiscal 2015 (Oct. 1, 2014 through the end of August), according to the Monthly Treasury Statement released Friday.
That equaled approximately $19,346 for every person in the country who had either a full-time or part-time job in August.
It is also up about $198,425,330,000 in constant 2015 dollars from the $2,684,824,670,000 in revenue (in inflation-adjusted 2015 dollars) that the Treasury raked in during the first eleven months of fiscal 2014. Continue reading
By My Way News•
Oregon is about to embark on a first-in-the-nation program that aims to charge car owners not for the fuel they use, but for the miles they drive.
The program is meant to help the state raise more revenue to pay for road and bridge projects at a time when money generated from gasoline taxes are declining across the country, in part, because of greater fuel efficiency and the increasing popularity of fuel-efficient, hybrid and electric cars.
Starting July 1, up to 5,000 volunteers in Oregon can sign up to drive with devices that collect data on how much they have driven and where. The volunteers will agree to pay 1.5 cents for each mile traveled on public roads within Oregon, instead of the tax now added when filling up at the pump.
Some electric and hybrid car owners, however, say the new tax would be unfair to them and would discourage purchasing of green vehicles.
“This program targets hybrid and electric vehicles, so it’s discriminatory,” said Patrick Connor, a Beaverton resident who has been driving an electric car since 2007.
State officials say it is only fair for owners of green vehicles to be charged for maintaining roads, just as owners of gasoline-powered vehicles do.
“We know in the future, our ability to pay for maintenance and repair… will be severely impacted if we continue to rely on the gas tax,” said Shelley Snow with the Oregon Department of Transportation.
Other states are also looking at pay-per-mile as an alternative to dwindling fuel tax revenues.
Last year, California created a committee to study alternatives to the gas tax and design a pilot program; Washington state set money aside to further develop a similar program; and an Indiana bill directs the state to study alternatives and a test project.
While growing in popularity, electric vehicles and hybrids are still in the minority on American roads, even in a state as green-minded as Oregon. Of 3.3 million passenger cars registered in Oregon at the end of 2014, about 68,000 were hybrid, 3,500 electric and 620 plug-in hybrid. A decade ago, only 8,000 hybrids were registered.
However, fuel-economy for gas-powered vehicles has been increasing as technology is developed that addresses public concerns about greenhouse gas emissions and dependence on foreign oil.
Oregon is the only state to actually test-drive the pay-per-mile idea.
The gas tax provides just under half of the money in Oregon’s highway fund, and the majority of the money in the federal Highway Trust Fund, of which Oregon receives a portion.
Oregon’s share of the fuel tax over the past two decades has been mostly flat and in some years declined, state data show. In 2009, the Legislature raised the tax from 24 cents to 30 cents per gallon, but that’s not enough to avert shortfalls, state officials said, because construction costs increase with inflation.
Oregon previously held two rounds of small-scale tests involving GPS devices to track mileage.
The current program, called OreGo, will be the largest yet and will be open to all car types. Of these, no more than 1,500 participating vehicles can get less than 17 miles per gallon, and no more than 1,500 must get at least 17 miles per gallon and less than 22 miles per gallon.
Volunteers will still be paying the fuel tax if they stop for gas. But at the end of the month, depending on the type of car they drive, they will receive either a credit or a bill for the difference in gas taxes paid at the pump.
Private vendors will provide drivers with small digital devices to track miles; other services will also be offered. Volunteers can opt out of the program at any time, and they’ll get a refund for miles driven on private property and out of state.
After the American Civil Liberties Union of Oregon raised concerns about privacy and government surveillance, the state built protections into the program, said ACLU’s interim executive director Jann Carson.
Drivers will be able to install an odometer device without GPS tracking.
For those who use the GPS, the state and private vendors will destroy records of location and daily metered use after 30 days. The program also limits how the data can be aggregated and shared. Law enforcement, for example, won’t be able to access the information unless a judge says it’s needed.
“This is the government collecting massive amounts of data and we want to ensure the government doesn’t keep and use that data for other purposes,” Carson said.
The OreGo program is projected to cost $8.4 million to implement and is aimed to gauge public acceptance of the idea of charging motorists per mile of road they travel. It will be up to the Legislature to decide whether to adopt a mandatory road usage charge.
One of the biggest concerns will be whether a program like OreGo could actually discourage people from buying electric or hybrid vehicles.
Drive Oregon, an advocacy group for the electric-vehicle industry, supports the program because every driver should pay for road repairs, executive director Jeff Allen said. Still, he said, “The last thing we need to do right now is to make buying electric cars more expensive or inconvenient.”
by Stephen Moore • The Washington Post
It was 40 years ago this month that two of President Gerald Ford’s top White House advisers, Dick Cheney and Don Rumsfeld, gathered for a steak dinner at the Two Continents restaurant in Washington with Wall Street Journal editorial writer Jude Wanniski and Arthur Laffer, former chief economist at the Office of Management and Budget. The United States was in the grip of a gut-wrenching recession, and Laffer lectured to his dinner companions that the federal government’s 70 percent marginal tax rates were an economic toll booth slowing growth to a crawl.
To punctuate his point, he grabbed a pen and a cloth cocktail napkin and drew a chart showing that when tax rates get too high, they penalize work and investment and can actually lead to revenue losses for the government. Four years later, that napkin became immortalized as “the Laffer Curve” in an article Wanniski wrote for the Public Interest magazine. (Wanniski would later grouse only half-jokingly that he should have called it the Wanniski Curve.) Continue reading
Federal tax revenues continue to run at a record pace in fiscal 2014, as the federal government’s total receipts for the fiscal year closed April at $1,735,030,000,000, according to the Monthly Treasury Statement.
Despite this record revenue, the federal government still ran a deficit of $306.411 billion in the first seven months of the fiscal year, which began on Oct. 1, 2013 and will end on Sept. 30, 2014.
In the month of April itself, which usually sees the peak tax revenues for the year, the federal government ran a surplus of $106.853 billion. While taking in $414.237 billion in total receipts during the month, the government spent $307.383 billion.
In fiscal 2013, the federal government also ran a one-month surplus in April, taking in $406.723 billion during the month and spending $293.834 billion, leaving a surplus of $112.889 billion. Continue reading
“After President Bush in late May 2003 signed the largest tax cut since President Reagan . . . government receipts from individual income taxes rose from $793.7 billion to a peak of $1.16 trillion in 2007, when the mortgage crisis began, a 47% jump.”
by Paul Sperry
While President Obama insists the Bush tax cuts caused the recession and record deficits, his own economists say otherwise.
He might want to consult their data for the truth.
Kicking off fiscal cliff negotiations last month, Obama said: “What I’m not going to do is extend Bush tax cuts for the wealthiest 2% that we can’t afford and, according to economists, will have the least positive impact on our economy.”
During the White House press conference, he added, “If we’re going to be serious about deficit reduction, we’ve got to do it in a balanced way.” Obama argued voters made it clear in the election that they don’t want to go back to Republican policies that “cost” the Treasury revenues and “blew up the deficit,” as he told them repeatedly during the campaign.
The Washington media by and large share these assumptions. And they’re driving the debate over what to do about the federal budget crisis before Jan. 1, when the tax cuts and spending programs are set to expire. Continue reading