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August 19, 2005
CBO: Tax Receipt Increase Temporary; Big Deficits Still Projected
TO: The Right Wing Noise Machine
FROM: Bonddad
RE: Increased tax receipts are in fact temporary.
Dear RWNM,
Over the last few weeks, you have been touting the increased tax revenue of 2005 as signs the laugher curve (that is a deliberate misspelling) is in fact real and currently working in the US economy. However, yet more evidence has emerged indicating this crowing is not based on fact but instead on your desire to promote an economic policy that enriches your constituents at the expense of the soundness of the country’s finances. According to the Congressional Budget Office (CBO) the budget deficit projections made earlier this year are little changed. Perhaps this is because the CBO recognizes the increase in revenue is in fact the result of temporary factors and not the glory of supply-side tax cuts.
In the Recent Budget and Economic Outlook: an Update, the CBO makes the following observations. CBO estimates that corporate tax receipts will increase 42% this year. When reading this, you obviously became so giddy that you stopped reading. However, further reading would have added some very important clarity to your excitement.
“Receipts through April generally reflect operations through 2004, while receipts between April and October reflect firms’ activities in 2005.” This is very important, because the most recent receipts – not those earlier in the year -- have gotten you all excited. However, the most recent receipts are from the expiration of a tax deduction, not the creation of a deduction: “The partial expensing provisions expired at the end of calendar year 2004, resulting in additional tax liability for 2005 and to a lesser extent 2006.” In other words, recent increased receipts are the result of a tax break expiring.
I will also note the CBO has barely changed their budget outlook for the coming years. Deficits are here to stay, and will only meaningfully decrease when the tax giveaway to the wealth expires in 2011 and they once again contribute their fair share to the national infrastructure that helps them preserve their wealth. The CBO is still projecting a total Bush created deficit of 1.3 trillion dollars during his presidency.
I realize that a retraction of your previous statements won’t happen, but at least you are aware of the facts.
In case you want to read the report (it has some really pretty pictures; see if you can color between the lines), it is here:CBO Paper
Sincerely,
Bonddad
PS: Have a nice day.
Posted by Hale Stewart at August 19, 2005 08:57 AM | Permalink
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