This chart shows the 12-mo. rolling sum of federal revenues: total revenues in blue, and individual income tax receipts in red. A very remarkable thing has occurred over the 12 months ending last October: individual income tax receipts have increased by almost 22%, far outstripping the 7% increase in total federal revenues over the same period. If income tax receipts are booming, then it's a safe bet that incomes are booming as well. Although we have seen only modest jobs growth over the past year (130K per month on average, with a yearly gain in total jobs of only 1.2%), incomes are rising much faster. This helps explain why retail sales growth has been robust, and personal consumption expenditures have climbed almost 5% in the past year. It's not that consumers are over-spending, it's that consumers are in much better financial shape than the broader economic statistics suggest. Incomes are rising much faster than jobs, a fact that has somehow remained under the radar and under-appreciated. This is a very healthy development, to say the least. I note, furthermore, that income tax receipts are very real and not likely to be overstated.
Scoot - What is the explanation for Total Federal Revenue not climbing at the same increasing rate (22%) that the income tax is increasing? The blue line appears to be flattening relative to the red line.
ReplyDeleteI would venture two guesses (I haven't looked at the data however): 1) although corporate profits are at astronomical levels, the growth rate of profits has slowed down, and 2) for the past year social security withholding rates have been slashed in order, supposedly, to stimulate the economy. I note that social security taxes in recent years have been almost as large as income taxes.
ReplyDeleteIncome are rising?
ReplyDeletehttp://www.bea.gov/newsreleases/regional/spi/spi_newsrelease.htm
Incomes of employed folks are rising while the unemployed remain locked out of the market.
ReplyDeleteThis is consistent with the low levels of unemployment for people with university degrees (about 2%).
Issue is white guys with high school educations. But since the top 50% of the population paid 97% of all income taxes prior to the recession anyway, the high rates of unemployment among the bottom half haven't mattered.
And yes, Payroll tax holidays are making the government more dependent now and in the future on income taxes.