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Thursday, December 8, 2005

Growth in Federal Tax Revenues Since 2003 Tax Act

Revenue20growthTreasury Secretary John Snow released this chart today, showing the growth in federal tax revenues since the 2003 Tax Act.

[click to enlarge]

http://taxprof.typepad.com/taxprof_blog/2005/12/growth_in_feder.html

IRS News | Permalink

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» Worst. Economy. Eveh. from Ace of Spades HQ
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» Whos The Better Proprietor? from Literal Barrage
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Comments

Next thing you know, they'll be telling me that there's gambling going on at Ricks....

Posted by: Brian | Dec 9, 2005 10:51:05 AM

Quite an impressive chart.

Bush should hold a press conference standing before a giant version of that chart.

Posted by: Observer | Dec 9, 2005 10:54:16 AM

Charts should be shown from zero. Otherwise, it makes it seem like revenues tripled.

Now if we could just do something about that spending...

Posted by: Ivan Kirigin | Dec 9, 2005 11:03:32 AM

Um, wasn't Bush's first tax cut in 2001? How come that wasn't the turning point?

Posted by: DR | Dec 9, 2005 11:17:14 AM

Congress is now moving yet more tax relief. WashingtonWatch.com reports that the foregone revenue amounts to nearly $750 per U.S. family.

http://www.washingtonwatch.com/ww/sum.php?cn=200500303

Will this too save taxpayers money and increase receipts?

Posted by: Jim H. | Dec 9, 2005 11:43:07 AM

Actually the fall of Baghdad was probably the real turnaround point for the economy, since it removed a huge amount of uncertainty, with companies and persons willing to make big-time capital purchases again. Sec. Snow can try to claim pivot on whatever he wants but honestly it takes a couple of years for economic policy to filter through the system. There's no question that the activity today is largely due to the Bush policies, but the mere passage of that one act certainly wasn't responsible for the immediate turnaround.

Posted by: Ursus | Dec 9, 2005 11:58:41 AM

What's the point? That the 2003 tax cuts caused this? Then what about the 2001 tax cuts? Did they cause a fall in revenues?

More likely, the pickup in revenues is due to (gasp) coming out of a recession. It's what we call the business cycle.

Posted by: Tom | Dec 9, 2005 12:12:17 PM

Too bad a certain segment of society believes the only way to raise more money is to tax more.

Heck if America went Fairtax, it's coffers would probably overflow. Could you imagine a world without income tax? I knew you could.

Posted by: James Stephenson | Dec 9, 2005 12:28:06 PM

Since it does not say, I must assume these numbers are not inflation-adjusted. If this is so, how useful is this information?

Posted by: Anonymous | Dec 9, 2005 1:02:13 PM

Tax the Rich! Tax the Rich!
The fat sheep flee the herder!
Call your Senator! —sire or bitch—
They’re getting away with murder!

Letter the Editor! show your spleen!
Let’s stop this vile unfairness!
Boost their percentage to heights unseen,
(Be damned to fiscal awareness!)

Tax the Rich! Tax the Rich!
Demand a committee hearing!
With your percentage a chronic itch,
The fat sheep need more shearing!

For 92 years it is safe and sound,
Well known to Pol and staffer;
That "revenue lost" is patronage found
(Be damned to Arthur Laffer)

Tax the Rich! in your envy lies
The key to this populist racket.
While productivity brings; "surprise!
You’ve moved to a higher bracket!"

Be a careful chump in demanding who
And where a levy exacts,
Soon little old you may be subject to
The Alternative Minimum Tax.

Posted by: Stephen | Dec 9, 2005 1:16:52 PM

The classic "How to Lie With Statistics" by Darrell Huff and Irving Geis defines a "Gee Whiz graph" as a graph that truncates the lower portion in order to exaggerate the magnitude of the movement. Tax revenue growth of 20% over 2 years is certainly excellent, but not as good as it looks in the graph.

Posted by: David | Dec 9, 2005 1:49:00 PM

Any chance we could get a chart with revenues as % of GDP?

Posted by: Neema | Dec 9, 2005 2:35:52 PM

I'm all for limited government and thus the tax cuts, but highlighting graphs like this just make us look silly. Not shockingly, revenues rebound when the economy recovers from a downturn. There are lots of factors that explain the recovery: (1) monetary policy (2) the tax cuts (3) natural mean-reversion in the economy. More importantly, academic research documents the supply-side effect of the tax cuts is (unlikely), revequite small. My point is that unless you can attribute most of the recovery to the short-run effects of tax cuts nue would likely be higher without the cuts. That does not make the cuts bad, as they help constrain government spending, but these "laffer curve" type need to be forgotton.

Posted by: Porter | Dec 9, 2005 2:42:05 PM

I'm curious what it looks like for the last 30 yrs in real dollars. Anyone know?

Posted by: Kevin | Dec 9, 2005 8:57:44 PM

This graph is interesting, but not entirely surprising to anyone who has been paying attention. It begs a few questions though.

1) Why is it that liberals are universally opposed to tax cuts, given that tax cuts clearly provide more revenue to their favorite organization, the Federal Government?

2) Is it just because they hate Bush so much? (Actually, I suspect that they hate anyone who calls himself a Republican, and that Bush gets their enmity simply because he is the Republican du jour.)

3) Is it because the rates are more important to them than the results, in other words, they don't really want to pay higher taxes themselves, but they think the symbolism of high tax rates will advance their agenda?

I have never heard a liberal argue that the Kennedy tax cuts in 1963 were a terrible idea, which plunged the country into the quagmire of Vietnam. Does anyone doubt that if Kennedy had been a Republican (he was arguably more conservative than Nixon), this argument would have become a fixture of the liberal mindset?

Posted by: Pink Pig | Dec 9, 2005 10:19:04 PM

"More importantly, academic research documents the supply-side effect of the tax cuts is (unlikely), revequite small."

World results dispel that. Eastern Europe, Chile, etc.

But that depends of so much variables like tax level, justice and institutions working or not, existence of a functional market. If you have a "working" country, the answer is usually yes.

What i found amuzing is jornalists talking about "galloping economy" but with always missing a word : Bush.

For some reason i have the feeling that if it was dire it will be in every paragraph...

Posted by: lucklucky | Dec 9, 2005 10:34:12 PM

Isn't it a little dumb to conclude that tax cuts caused tax revenue to increase, unless we know what tax revenue would have been without the tax cuts? Angry Bear (somebody mentioned them above) makes the pretty good point that tax revenues would have been much higher in 2005 without the tax cuts, so saying that the tax cuts caused the growth in revenue doesn't make much sense.

http://angrybear.blogspot.com/2005/12/budgetary-effects-of-bush-tax-cuts.html

Posted by: Joey Z. | Dec 10, 2005 6:42:15 AM

JoeyZ et al.

The tax rate cuts didn't directly cause the revenue increase. They caused an economic stimulus. This stimulus caused the economy to boom and the resulting tax revenue increase. There is a delay between the tax cut and the point when their effects can be felt in the economy (roughly 2 years).

To question what the revenue would be without the cuts, you would have to speculate on the state of the economy without the cuts (it certainly wouldn’t be as healthy as it is today). My bet would be that the economy would be in a full blown recession with rampant unemployment and that revenue chart would be somewhat different (a steady down slope comes to mind). Take a look at the 2000 – 2001 portion of the chart. There is the start of a down slope even before the tax cuts were enacted.

Posted by: Brian H | Dec 11, 2005 9:25:35 AM

Tax cuts work something like the sales at the store. You go in to purchase the item on sale and next thing you know, you've spent a couple hundred on items you hadn't thought to buy.

It's (tax cuts) incentive to save, invest and spend more. All of these are activities that stir the economic cauldron. Keep people working and businesses running and both paying taxes.

Posted by: joated | Dec 11, 2005 9:33:02 PM

Could this really be the result of tax cuts, and supply side theory working? Or is it just a side effect of the Fed's policy encouraging Americans to stockpile debt?

Posted by: RobertDean | Dec 12, 2005 9:02:17 AM

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wad Medani,
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Email address [email protected]

Posted by: MAHGOUB EMAD AHMED | Sep 17, 2006 5:49:15 AM

In this situation, the runner posts(shows) an impertinent physical condition, while the others sink into the effort. At the conclusion of the journey(running) this runner shows an exceptional state of coolness, as if he had crossed(gone through) only some kilometres.

Posted by: starcycle | Jan 25, 2007 7:54:12 AM

First, I would like to thank the Main Stream Media for continually talking down the economy for the last 7 years. Since they have lowered the consumers and workforce expections on the strength of the economy, we were able to have very low wage inflaction over the last 5 or so boom years (the hidden boom years it should be called). Since workers were brain washed to believe they were one pay check away from being laid off, they were subdued in their demands for wage increases. Even though the job growth and unemployment statistics showed trends that should have lead to extream wage inflation, worker were rluctant to push the issue because "recession was in store for next quarter". I have a stack of MSM articles saying since 2004 that we were on the brink of a recession. Even a broken clock is right twice a day, but while we were wating for the recession, the Stock market boomed, jobes were created, and the economy zoomed along.

Posted by: James | Feb 3, 2008 9:52:00 AM

The answer to the question "Isn't it a little dumb to conclude that tax cuts caused tax revenue to increase" is:
1) effect #1 - Increased economic activety - It is better to get 10% of 1$ spent 100 times (goest to vendor 1, who buys from vendor 2- who buy from vendor 3 - that 1$ gets taxed many times over. High taxes reduces our ability to have disposible income to spend.
2) The fairnes principle as I call it. First, there is a large undergoround economy of "cash" business run by 25 million small business owners (you and I). These buinesses are less than 10 employees and are usually the sole support for a family who ownes them..barber, hairdresser, deli, bakery, ect. These small failily business usualy make less than 100K/year in "profit". When tax rates go too high, like before reagan tax cut (70% rate), the choice was usually, pay all your leagal tax bill, or skim some of the business revenue in cash transactions (hide these revenues) as to not pay taxes on them, or pay your taxes and go bankrupt. Guess what they choose. So by lowering the rate, business are less likely to skim revenue and pay the full amount. People will not risk jail bu skimming for 15% but they will for 70%. So when you lower the rate to somthing people will accept as "fair" they will pay and not skim.

Posted by: James | Feb 3, 2008 10:05:23 AM

James hits an important point: voluntary compliance goes up when rates are lower. Additionally, with lower rates, people take less planning steps to avoid taxes.

Working example: In the mid 1990s, if you were going to sell appreciated real estate, you might consider engaging in a like-kind exchange in order to avoid 28% taxes. You might buy a replacement property merely to avoid the taxes, thereby accepting a lower rate of return. The tax savings justify the move. But with 15% taxes, you might choose to pay the tax, and invest in something that provides a higher rate of return. Over the long term, the cumulative weight of these decisions makes a difference. One leads to lower growth, the other to higher growth.

Posted by: Think38 | Jun 14, 2008 12:31:58 AM

Tax relief help is the assistance offered by various service agencies and companies that engage in tax-related matters. These companies have specialized in personnel who are typically taxation experts and attorneys who assist taxpayers with receiving the full benefits that they are entitled to under the federal and state tax-relief programs. Even though the program introduced by the IRS in 1992 allows taxpayers who are in financial hardship to settle their tax liabilities for less than the full amount, the task of interacting with the IRS can be very emotionally draining. This is particularly so in the case of tax-relief programs since most of them are aimed at low-income persons and senior citizens.

Posted by: deepak taxes relief | Jul 28, 2008 2:36:07 AM