The Temporary Shrinking Budget Deficit

[AmazonTania]

Been wanting to discuss this for a while, but I haven't had the time.

There's been a lot of talk in the media about the rapidly shrinking budget deficit. Economist and Analyst have been quick to assume that the increase in revenues (along with the slowing of Government Expenditures) was a sign of a strengthening economy. Pundits are also quick to assume that tax increases are helping to drop the budget deficit. It's really not as simple as it sounds.

The chart above those the budget surplus/deficit since 1947 to the current year to date. Real budget deficits did not occur until Post 1980's when debt occurred to offset a weakening economy. Even then, tax revenue increased as the government brought in more revenue driven my market fundamentals. Not necessarily the same phenomenon the economy is experiencing today.

The reality is that the surge in current tax revenues is the result of the 'Fiscal Cliff' that occurred during the 4th Quarter of 2012. As large companies rushed to pay out Special Dividends and Bonuses ahead of a potential increase in taxes, as well as what was perceived to be a fiscal disaster.

The large surge in personal income was primarily generated at the upper end of the brackets, where individuals were impacted by the higher taxes. These taxes were paid in April and October of 2013. Also good to remember that the payroll taxes also increase due to the expiration of the payroll tax cut presented in 2010.

And you can see, more than half of the increase in personal incomes was the result of income receipts on personal assets. Namely, the result of corporations cashing out dividends early. Thousands of companies decided that it was better to be paid in 2012 instead of 2013. GE, Goldman Sachs, Berkshire Hathaway, just to name a few. Also, the Rockefeller Institute wrote a report in September titled 'The Temporary Bubble in Income Tax Receipts' which points out a similar anomaly created on the state level.

"Personal income tax collections had the strongest growth among the major taxes, at 20.3 percent.

However, the strong growth is attributable not only to the acceleration of income into calendar year 2012 and the 2012 stock market, but also to strong growth in a single state, California, where income tax collections grew by nearly $7.1 billion, or 40.7 percent, in the second quarter of 2013. The large growth in income tax collections in California reflects the acceleration, as well as recent increases in income tax rates that were only partially reflected in withholding. On November 6, 2012, California voters adopted Proposition 30, which increased the personal income tax rate on taxpayers making over $500,000 for a seven-year period that is retroactive to January 1, 2012, through December 31, 2018. If we exclude California, income tax collections in the remainder of the nation grew 14.9 percent in the second quarter of 2013..."

The fiscal year for the US Government has already ended. For now, we should see an increase a projected budget deficit of at least 700 Billion or so. In the meantime, personal incomes remain flat and I don't expect any more income growth anomalies to happen similar to the one that happened last December. Also Personal Dividend Income is far away from the record highs of Q4 of 2012. Considering that the Fiscal Cliff targets dividend derived income, I also don't expect the same level of revenue to be collected the Fiscal Year of 2014.

Considering that the next debt ceiling debate is on the horizon (February), I don't think more tax increases will be on the table this time.

[Chris]

So, if I understand what you're saying, the pending fiscal cliff deal, higher taxes followed by sequestration, prompted early payouts of dividends and bonuses, iow, higher income and this, even prior to higher fiscal cliff tax increases, resulted in higher revenues to decrease the deficit, but this was in effect just a temporary distortion that won't likely be sustained, won't repeat itself since tax increases won't be part of next fiscal cliff.

[jillian]

Been wanting to discuss this for a while, but I haven't had the time.

There's been a lot of talk in the media about the rapidly shrinking budget deficit. Economist and Analyst have been quick to assume that the increase in revenues (along with the slowing of Government Expenditures) was a sign of a strengthening economy. Pundits are also quick to assume that tax increases are helping to drop the budget deficit. It's really not as simple as it sounds.

The chart above those the budget surplus/deficit since 1947 to the current year to date. Real budget deficits did not occur until Post 1980's when debt occurred to offset a weakening economy. Even then, tax revenue increased as the government brought in more revenue driven my market fundamentals. Not necessarily the same phenomenon the economy is experiencing today.

The reality is that the surge in current tax revenues is the result of the 'Fiscal Cliff' that occurred during the 4th Quarter of 2012. As large companies rushed to pay out Special Dividends and Bonuses ahead of a potential increase in taxes, as well as what was perceived to be a fiscal disaster.

The large surge in personal income was primarily generated at the upper end of the brackets, where individuals were impacted by the higher taxes. These taxes were paid in April and October of 2013. Also good to remember that the payroll taxes also increase due to the expiration of the payroll tax cut presented in 2010.

And you can see, more than half of the increase in personal incomes was the result of income receipts on personal assets. Namely, the result of corporations cashing out dividends early. Thousands of companies decided that it was better to be paid in 2012 instead of 2013. GE, Goldman Sachs, Berkshire Hathaway, just to name a few. Also, the Rockefeller Institute wrote a report in September titled 'The Temporary Bubble in Income Tax Receipts' which points out a similar anomaly created on the state level.



The fiscal year for the US Government has already ended. For now, we should see an increase a projected budget deficit of at least 700 Billion or so. In the meantime, personal incomes remain flat and I don't expect any more income growth anomalies to happen similar to the one that happened last December. Also Personal Dividend Income is far away from the record highs of Q4 of 2012. Considering that the Fiscal Cliff targets dividend derived income, I also don't expect the same level of revenue to be collected the Fiscal Year of 2014.

Considering that the next debt ceiling debate is on the horizon (February), I don't think more tax increases will be on the table this time.

cool… another fake graph and still using a plagiarized sig line.

[Chris]

cool… another fake graph and still using a plagiarized sig line.

IOW, you understood none of it but needed to express personal animosity.

[AmazonTania]

So, if I understand what you're saying, the pending fiscal cliff deal, higher taxes followed by sequestration, prompted early payouts of dividends and bonuses, iow, higher income and this, even prior to higher fiscal cliff tax increases, resulted in higher revenues to decrease the deficit, but this was in effect just a temporary distortion that won't likely be sustained, won't repeat itself since tax increases won't be part of next fiscal cliff.

Yeah, something like that. The Fiscal Year for the Government begins on October 1st, of which the impact of the Fiscal Cliff was first to be realised. Many corporations decided to pay out dividends and Executives decided to receive their bonuses before January 1st, 2013, the date were the Bush Tax Cuts expired. These bonuses are paid out immediately while the taxes are then collected on October and April. The surge results in a $400 Billion increase in Dividend Received income.

This accounts for the large surge in Personal Income in Nov-Dec 12', and the sharp decline a month later. Incomes are generally flat across the board. This is really the only form of tax revenue the government has managed to collect. Unless the Government can figure out a way to increase personal income, it's unlikely that the deficit will shrink to projected levels.

[AmazonTania]

cool… another fake graph and still using a plagiarized sig line.

It's perfectly understandable if you don't understand the data.

If you have nothing coherent to contribute, then your time is probably best suited being stupid elsewhere.

[Chris]

Yeah, something like that. The Fiscal Year for the Government begins on October 1st, of which the impact of the Fiscal Cliff was first to be realised. Many corporations decided to pay out dividends and Executives decided to receive their bonuses before January 1st, 2013, the date were the Bush Tax Cuts expired. These bonuses are paid out immediately while the taxes are then collected on October and April. The surge results in a $400 Billion increase in Dividend Received income.

This accounts for the large surge in Personal Income in Nov-Dec 12', and the sharp decline a month later. Incomes are generally flat across the board. This is really the only form of tax revenue the government has managed to collect. Unless the Government can figure out a way to increase personal income, it's unlikely that the deficit will shrink to projected levels.

Well, government could get out of the way of business producing value, wealth and jobs. Instead it looks for more ways to limit it with another round of minimum wage increase.

[waltky]

Granny says is cause dem politicians keep spendin' money we ain't got...

Feds Collect Record Individual Income Taxes Through June; Still Run $607B Deficit
July 12, 2018 | - The federal government collected a record $1,305,490,000,000 in individual income taxes through the first nine months of fiscal 2018 (October 2017 through June 2018), according to the Monthly Treasury Statement released today.

Despite the record individual income tax collections, the federal government still ran a deficit of $607,099,000,000 over those same nine months, according to the Treasury statement. The approximately $1,305,490,000,000 in individual income taxes that the Treasury collected in October through June of this fiscal year was $71,815,310,000 more (in constant June 2018 dollars) than the $1,233,674,690,000 (in constant June 2018 dollars) in individual income taxes that the Treasury collected in October through June of fiscal 2017—which was the previous record.


Although the federal government collected record individual income taxes in the first nine months of this fiscal year, overall federal tax collections were lower in the first nine months of this fiscal year than they were in any of the previous five fiscal years—including 2013, 2014, 2015, 2016 and 2017. In October through June of this fiscal year, the Treasury collected $2,540,804,000,000 in total taxes. That was down $39,029,250,000 from the $2,579,833,250,000 in total taxes the Treasury collected in the first nine months of fiscal 2017. Corporation income tax collections have also been declining in this fiscal year. In the first nine months of fiscal 2018, the Treasury collected $161,708,000,000 in corporation income. That is $67,964,050,000 less (in constant June 2018 dollars) than the $229,672,050,000 in corporation income taxes (in constant June 2018 dollars) that the Treasury collected in the first eight months of fiscal 2017.
The federal government ran a deficit of $607,099,000,000 during the first nine months of fiscal 2018, because while collecting its $2,540,804,000,000 in total taxes, it spent $3,147,903,000,000. The $2,540,804,000,000 in total tax collections through June included the record $1,305,490,000,000 in individual income taxes; the $161,708,000,000 in corporation income taxes; $847,062,000,000 in social insurance and retirement payroll taxes; $36,998,000,000 in unemployment insurance taxes; $3,312,000,000 in other retirement taxes; $63,039,000,000 in excise taxes, $16,978,000,000 in estate and gift taxes, $28,318,000,000 in customs duties; and $77,899,000,000 in miscellaneous receipts. Including the current month of July, there are three more months in this fiscal year.
Tax amounts were put in constant June 2018 dollars using the Bureau of Labor Statistics inflation calculator.


https://www.cnsnews.com/news/article...june-still-run

[donttread]

Been wanting to discuss this for a while, but I haven't had the time.

There's been a lot of talk in the media about the rapidly shrinking budget deficit. Economist and Analyst have been quick to assume that the increase in revenues (along with the slowing of Government Expenditures) was a sign of a strengthening economy. Pundits are also quick to assume that tax increases are helping to drop the budget deficit. It's really not as simple as it sounds.

The chart above those the budget surplus/deficit since 1947 to the current year to date. Real budget deficits did not occur until Post 1980's when debt occurred to offset a weakening economy. Even then, tax revenue increased as the government brought in more revenue driven my market fundamentals. Not necessarily the same phenomenon the economy is experiencing today.

The reality is that the surge in current tax revenues is the result of the 'Fiscal Cliff' that occurred during the 4th Quarter of 2012. As large companies rushed to pay out Special Dividends and Bonuses ahead of a potential increase in taxes, as well as what was perceived to be a fiscal disaster.

The large surge in personal income was primarily generated at the upper end of the brackets, where individuals were impacted by the higher taxes. These taxes were paid in April and October of 2013. Also good to remember that the payroll taxes also increase due to the expiration of the payroll tax cut presented in 2010.

And you can see, more than half of the increase in personal incomes was the result of income receipts on personal assets. Namely, the result of corporations cashing out dividends early. Thousands of companies decided that it was better to be paid in 2012 instead of 2013. GE, Goldman Sachs, Berkshire Hathaway, just to name a few. Also, the Rockefeller Institute wrote a report in September titled 'The Temporary Bubble in Income Tax Receipts' which points out a similar anomaly created on the state level.



The fiscal year for the US Government has already ended. For now, we should see an increase a projected budget deficit of at least 700 Billion or so. In the meantime, personal incomes remain flat and I don't expect any more income growth anomalies to happen similar to the one that happened last December. Also Personal Dividend Income is far away from the record highs of Q4 of 2012. Considering that the Fiscal Cliff targets dividend derived income, I also don't expect the same level of revenue to be collected the Fiscal Year of 2014.

Considering that the next debt ceiling debate is on the horizon (February), I don't think more tax increases will be on the table this time.

Deficits are deficits and despite the different mixes of donkephant power have not balanced a budget in 17 years.