Tax Revenues Tanking
Chris Wood
Casey Research, LLC
Weds. Jan 6, 2010
If there’s one thing the federal government is good at, it’s taking our money. So, if the underlying economy is improving and we are producing more, you’d think tax “revenues” would be rising.
All of the Obama administration’s plans are predicated on growing tax revenues, from individuals and from corporations. The truth of the matter is, however, that rather than increasing, tax revenues from these sources, and overall, are falling fast.
If you comb through the past couple dozen editions of the “Monthly Treasury Statement of Receipts and Outlays of the United States Government,” which is compiled and published by the Treasury Department’s Financial Management Service, you’d find some disturbing trends.
Over the most recent 12 months for which there is data (through November 2009), individual income taxes are down 22.4% from the previous 12 months, corporate income taxes are down an astounding 56.5%, and total tax receipts have fallen 17.6%.
Looks like all that money the government is spending will have to come from somewhere else, i.e., the hidden tax known as inflation.
Debt Continues to Grow
Although consumer credit and home mortgage debt declined 0.8% and 0.9%, respectively, in the third quarter, increases in government debt more than made up for this marginal decline. Federal, state, and local government debt outstanding grew 4.2% in the third quarter, pushing total debt outstanding to a new all-time high of $34,551.9 billion, according to the Federal Reserve’s newly released Z.1 Flow of Funds document.
This document also revealed that in the third quarter, personal savings dropped 17.8% based on the seasonally adjusted annual rate figures.
Personal Bankruptcy Rising
As icing on the cake comes this story from The Wall Street Journal. And I quote:
The number of Americans filing for personal bankruptcy rose by nearly a third in 2009, a surge largely driven by foreclosures and job losses.
And more people are filing for Chapter 7 bankruptcy, which liquidates assets to pay off some debts and absolves the filers of others. That is significant because a 2005 overhaul of federal bankruptcy laws aimed to encourage Chapter 13 filings, which force consumers to sign onto debt-repayment plans in exchange for keeping certain assets.
The changes were designed to make it more difficult for people to shed their debt, particularly in a Chapter 7 filing. A "means" test, for example, was introduced to separate those who could afford to repay their debt from those who couldn't. A Chapter 7 filing is off the table if the means test determines a person is able to pay back at least a portion of the debt after it is restructured.
The worst U.S. recession in a generation is testing the effectiveness of these laws. The economic downturn also has prompted more middle-class Americans to file for bankruptcy protection.
Overall, personal bankruptcy filings hit 1.41 million last year, up 32% from 2008, according to the National Bankruptcy Research Center, which compiles and analyzes bankruptcy data. It is the highest level of consumer-bankruptcy filings since 2005. Consumers rushed to file in 2005 before the new bankruptcy laws took effect in October of that year.
Chapter 7 filings were up more than 42% as of November 2009, compared with the same period a year earlier, according to the research center. November is the most recent month with analyzed data available. Chapter 13 filings rose by 12% and made up less than a third of 2009 filings as of November.
AI
