Posted on 05/27/2009 8:37:10 AM PDT by BP2
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.
"It's one of the drivers of the ongoing expansion of the federal budget deficit," says John 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."
School District, Municipal and State budgets will
take a BIG hit next year from lower Property Values,
too. And when hyper-inflation hits from the expansion of
the monetary base, watch out.
For those who can't afford gold, Wampum may become
the preferred currency again.
This is the best news I’ve heard in a long time. I hope it plunges further and chokes off Capitol Hill.
Welcome to obamamerica.
Liberal economics ping.
It’s been a long time coming and it’ll be a looooong time going.
What's the problem here... by my calculations (available to any 'rat), just up a tad the income tax rate to make up for the shortfall. Lets see, a drop of 44% means the gov now has $56 when they had $100 before, so just increase the tax rate by 80% to collect $100 again!
And repeat this for property taxes. No need for a town or municipality to settle for anything less!
likewise, estate taxes, user fees, sales taxes, gas taxes, sin taxes...
Does this mean there will be layoffs at the IRS?
In related news - the sky is blue.
April 2009 had a deficit of $20 billion. April 2008 had a surplus of $155 billion. Revenue for April 2008 and April 2009 has fallen 34%.
We are sooooooooooooooo screwed!
Maybe those in Washington will figure out that they ought to quit bashing the goose that lays the golden egg...
Naaaahhhhh
They never will
China warns Federal Reserve over ‘printing money’
China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed’s direct purchase of US Treasury bonds.
By Ambrose Evans-Pritchard
Last Updated: 1:52PM BST 27 May 2009
....The Oxford-educated Mr Fisher, an outspoken free-marketer and believer in the Schumpeterian process of “creative destruction”, has been running a fervent campaign to alert Americans to the “very big hole” in unfunded pension and health-care liabilities built up by a careless political class over the years.
“We at the Dallas Fed believe the total is over $99 trillion,” he said in February.
“This situation is of your own creation. When you berate your representatives or senators or presidents for the mess we are in, you are really berating yourself. You elect them,” he said.
His warning comes amid growing fears that America could lose its AAA sovereign rating.
You can deny reality all you want, but reality seems to have a way of kicking you in the ass eventually.
And at the same time AP reports that most economists agree that the resession will be over in 09....
Fools everywhere.....fools who voted for Obama and fools who believe economists!
Starve the Beast. That is the only way to deflate the bloated federal government.
Wonder when the “experts,” who are relying on increased consumer spending to save our economy, will realize that many of the 46 million voters who voted against BO are not going to spend their money to bail out his presidency?
In the coming binge of hyper-inflation, guns and ammunition will be far more valuable and reliable than all other commodities combined.
“reality seems to have a way of kicking you in the ass eventually.”.....
Problem is....liberals don’t have enough common sense for their own good! They will die with their ideology before saving themselves.
And, like a charcater out of Lewis Carroll’s fantasies, Obama handles the situation not merely by increasing spending, but by doing so exponentially and beyond any hope or possibility of ever paying off in our lifetimes.
It’s as if the family were going broke just handling the mortgage and the bills for food, clothing, and Grandma’s hip replacement, and Uncle Arnie went out and bought a mansion in the Hamptons, a yacht, a couple dozen Armani suits, a gold Rolex, and a Hummer, all on credit, and all on the strength of his janitor’s pension as collateral.
So what percent of GNR (gross national revenues) is the deficit?
That number may scare and wake up some people.
April is when people who owe or expect to owe money mail their forms with last year's final reconciliation and first quarter estimated taxes. Did they separate out whether 2008 final reconciliation vs 2007 final was the problem or was it 2009 1st quarter estimate vs 2008 1st quarter estimate? Was there a drop in regular income and taxes on it, a drop in business schedule C and E business income from 2007 to 2008 or was the drop from 2007 capital gains to 2008 "OMG the market crashed" capital losses?
More specifics will point to the cause.
For those that HAVE gold, Wampum is what the government will give you for it when they confiscate it like they did in the 30's.
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