According to the Congressional Budget Office, fiscal year 2007 (which ended on September 30) saw dramatic improvements in the nation's fiscal picture:
CBO estimates that the federal budget deficit was about $161 billion in fiscal year 2007, $87 billion less than the shortfall recorded in 2006. Relative to the size of the economy, that deficit was equal to 1.2 percent of gross domestic product, down from 1.9 percent in 2006.You may say 'no big deal -- so what if the federal deficit was down dramatically -- we expected that.' You want to know about the bigger picture, right?
Well, income taxes and payroll taxes were up significantly -- as were wages and salaries:
Receipts of individual income taxes, the largest tax source, increased by an estimated $118 billion (or 11 percent), and receipts of social insurance (payroll) taxes, the second largest source, rose by an estimated $32 billion (or 4 percent). Receipts from withheld individual income and payroll taxes, the largest source of income and payroll taxes, grew by $107 billion—or 6.7 percent. Those receipts grew at similar rates of 6.9 percent in 2006 and 6.3 percent in 2005. Those gains in withholding reflect continued growth in wages and salaries.What about corporate taxes? They were up too -- but because of slow growth in corporate profits, they weren't up as much as in previous years:
CBO estimates that receipts in 2007 from corporate income taxes grew by about $18 billion (or 5 percent). That represents a substantial slowdown from the growth in the prior three years, which averaged 39 percent per year. Receipts slowed progressively through 2007, with gains in the first three quarters of 22 percent, 11 percent, and 4 percent, respectively, followed by a decline of 11 percent in the fourth quarter—reflecting slowing growth in corporate profits.All this is according to the Congressional Budget Office.
In light of all this, does it really seem wise for Congress to consider huge tax increases -- in particular on corporate profits? Wouldn't a wiser course of action be to continue current policies -- which are yielding significant economic growth, increasing wages and salaries, and increased corporate tax receipts?