NYT: Surprising Jump in Tax Revenues Is Curbing Deficit

[stopbush]

Surprising Jump in Tax Revenues Is Curbing Deficit

By EDMUND L. ANDREWS
Published: July 9, 2006
WASHINGTON, July 8 — An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.


On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year's levels and that the deficit will be about $100 billion less than what they projected six months ago. The rising tide in tax payments has been building for months, but the increased scale is surprising even seasoned budget analysts and making it easier for both the administration and Congress to finesse the big run-up in spending over the past year.

Tax revenues are climbing twice as fast as the administration predicted in February, so fast that the budget deficit could actually decline this year.

The main reason is a big spike in corporate tax receipts, which have nearly tripled since 2003, as well as what appears to be a big increase in individual taxes on stock market profits and executive bonuses.

http://www.nytimes.com/2006/07/09/washington/09econ.html?ei=5094&en=df780df37a78590f&hp=&ex=1152504000&partner=homepage&pagewanted=all

Comments?

[kentuck]

1. Well, I paid $1100.00 on April 15th to help pay down the deficit...

I don't know how many others paid taxes this year. I think a lot of people had paid less than they actually owed and had to pay more at the end of the year. On top of that, a lot of 401K's had withdrawals with an additional tax penalty. And this is an election year....

[Warpy]

2. As money is being mined from the working and middle classes

and handed to the rich, the taxes collected on it from the rich will rise.

However, what needs to be asked is how much MORE revenue that money might have generated by people who pay not only FIT but also OASDI, 40% of which still goes into the general fund to be used as ordinary revenue.

All this means is that the rich are getting richer.

[napi21]

3. I agree it's linked to corp. profits and exec. bonusus.

Look at the profit increases that have been announced by the oil companies! Highest profits ever in history! Then there's the exec's who are retiring with MONSTER bonusus!

This is NO indication that the economy or the Country is doing well economically! It simply means that a small part of the elite population is doing VERY WELL, and the rest of us are stagnated.

[Toots]

4. Well let's eliminate these taxes and really rake in the dough

:crazy: We believe you....Honest...

[bananas]

5. Graph from the article

[Roland99]

7. Well, tax revenue as a % of GDP had hit 40+ year lows.

Not much else to go but up. Esp. when corporate profits are at 22-year highs while the average worker is barely keeping pace w/inflation.


Huzzah to the new robber barons!

[hatrack]

6. Is the NYT including Iraq & Afghanistan spending?

They're off-the-books supplementals, and therefore do not show up in the budget deficit. If they're not, then the NYT is once again full of shit.

[kentuck]

10. I think they just voted on a $90-$100 billion appropriation for Iraq?

Add that to the deficit. They would love to put everything off budget. Then, look how great everything is doing!

[Nickster]

8. Check out the tax cuts they gave out. They had a special giveaway

for the corporations so that if they brought back their money to the US this year, they would get a special tax rate that was lower than if they kept their money off shore. So the corporations brought their money back to the US and got the lower tax rate for this year and made the illusion that we were raking in tons of tax money. Next year, that loop hole won't be there, so we will have plummeting corporate tax receipts. It's just an optical illusion that was manufactured for the upcoming elections.

[kentuck]

11. That is true.

I had heard that reported a few weeks ago.

[tanyev]

12. Yes. They'll have to pull another rabbit out of the hat for 2006.

The $104 Billion Refund
The most absurd corporate tax giveaway of 2005.
By Michelle Leder
Posted Thursday, April 13, 2006, at 12:33 PM ET
Feeling flush because you're getting a nice tax refund this year? You're not alone. Some of America's largest corporations—a virtual who's who of the Fortune 100—have been reporting their own hefty tax windfalls, thanks to an absurd provision of a law designed to create jobs.

IBM, for example, is banking a $2.8 billion refund—well, better to call it a "tax savings"—because instead of paying the normal corporate tax rate of 35 percent on $9.5 billion in profits it earned overseas, the company paid only 5.25 percent. That's the magic of the American Jobs Creation Act, a piece of legislation that passed with comfortable margins in both the House and the Senate and was signed into law by President Bush just two weeks before the 2004 elections.

The AJCA, which was pushed through during the last fit of panic about outsourcing, was ostensibly designed to encourage companies to add jobs here. It gave a small tax deduction to American manufacturers, and it offered a one-time tax holiday in 2005 when corporations could repatriate their foreign income at a massively reduced tax rate. This repatriation, the theory went, would encourage R & D and capital investment in the United States, leading to new positions down the road. But, like President Bush's creatively named Clear Skies initiative and Healthy Forest Restoration Act, the American Jobs Creation Act has not lived up to its title.
http://img.slate.com/id/2139782/?nav=navoa

[Nickster]

20. There ya go. Thanks for providing the details for me. n/t

[AirAmFan]

15. Apparently, the ENTIRE 'unexpected $100B reduction' is just the expiration

of a "one-time" giveaway to corporations last year: A $104 billion giveaway enacted just 2 weeks before the 2004 election.

Conceivably, the deficit well may go up by MORE than $100 billion right AFTER the election in November. Nothing says "thank you" to big corporations for their generosity in campaign bribes than a rebate plan, right at the end of campaign "fundraising".

See an analysis of the "American Jobs Creation Act" from Slate, posted in another thread on this topic at http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=2378082&mesg_id=2378142

Journalism at the NY Times apparently continues to slip, severely. This story well may have been a deliberate right-wing election-year plant that slipped by brain-damaged editors.

[Selatius]

9. This means "More tax cuts for the rich = everyone better off!"

[progressive_realist]

13. The Homeland Investment Act

The American Jobs Creation Act (AJCA) of 2004 contained a provision known as the Homeland Investment Act (HIA). The HIA allowed for a one-time repatriation of overseas profits by multinational corporations at reduced tax rates. JPMorgan estimated that $500 billion would find its way back to the USA due to this act. Due to technical issues, companies didn't really start taking advantage of this act until the summer of 2005. So this act has been having a major impact during the entire period of "booming" revenues covered in the OP.

The direct taxes on this repatriated amount are fairly trivial, amounting to only about $25 billion, but the infusion of cash has served both to buoy the stock market and to support the US dollar over the past year. I suspect this is the primary driver behind the increase in tax revenues, but unlike those quoted in the OP I am not a professional economist. :eyes:

This is a temporary provision. Its effects can be expected to taper off this year and completely end by summer, 2007.

For more information, try here: http://www.jpmorgan.com/cm/ContentServer?cid=1133530809217&pagename=jpmorgan%2Fwss%2FTS_Content%2FGeneral&c=TS_Content

[Radical Activist]

14. They'll all getting rich off the war in Iraq.

And Bush's other giveaways to corporations. They should be giving all their new profits back to the government since that's where it came from.

[fat dad]

16. Election year spike

Check out the following graphs detailing income growth Dem vs Rep comparing the difference during election years and non-election years.

The first chart is non-election years. Growth, for all income groups, especially the working and middle class, is particularly strong during non-election years under Democrat government. And weak, especially for the lower income brackets under Republicans.

Seems that there looks like a concerted effort, maybe between the Fed, corporate America, etc which somehow creates the appearance of Republicans producing great economic growth for all income classes in election years. Would you put it past them?



The next graph tracks the difference of income growth, overall, between Dem's and Rat's.




http://www.washingtonmonthly.com/archives/individual/2005_05/006282.php

[populistdriven]

17. Tax Cuts have NEVER cut the debt and NEVER will - (graph)

I like this % of GDP graph (data from whitehouse.gov)

[Democrats_win]

18. WMD in Iraq are a slam dunk too. Can you say BULL SH**?

[kentuck]

19. They are cutting foodstamps on people drawing about $600 per month

I know one person who draws about $600 per month and was getting about $100 in food stamps. She signed up on the new Medicare program that George W Bush continues to tout. They just cut her food stamps down to $29 per month! Give it to one pocket and take it out of the other, I suppose?

[ComerPerro]

21. Those are exactly the taxes the right wants to get rid of, taxes on stocks

especially