The US government is collecting a lot – a real lot – less tax revenue this year than is the norm. The normal amount is about 18.3% of GDP.
Much attention has been paid this year to the record-high spending and deficit accrued because of the financial and economic crisis.
But one of the driving factors that has gotten less notice: plummeting tax revenue. The crisis, after all, walloped company profits and savaged Americans’ income stream.
Through the end of August, Uncle Sam collected 25% less in tax revenue for the year than he did during the same period a year earlier. The two biggest culprits — a 56% drop in corporate income tax revenue and a 20% drop in individual income tax revenue.
On balance, the Congressional Budget Office expects that tax receipts will be 14.9% of gross domestic product this year, well below the historical 18.3% average.
Worse yet, even the CBO is predicting anemic growth next year – and that is based on some pretty unlikely scenarios – such as Congress not “fixing” the alternative minimum tax again (a guaranteed vote loser for the party in power, trust me, therefore probably not going to go unfixed). Take those improbabilities away and things are looking exceptionally bleak.
The Democrat’s solution?
The very definition of insanity is running the country.