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WASHINGTON, D.C. – According to the Congressional Budget Office the amount of money the federal government derives in taxes from the U.S. economy will rise by more than 30 percent from 2012 to 2014. In its Budget and Economic Outlook report, the CBO also forecasts the economy will continue to show sluggishness, due in part to higher taxes.
Summing up its findings the CBO said: “In particular, between 2012 and 2014, revenues in CBO’s baseline shoot up by more than 30 percent, mostly because of the recent or scheduled expirations of tax provisions, such as those that lower income tax rates and limit the reach of the alternative minimum tax (AMT), and the imposition of new taxes, fees, and penalties that are scheduled to go into effect.”
Things don’t look much better for several years beyond 2014. The CBO projects unemployment at 7% for another three years and the economy in general performing “below its potential” for at least six more years.
“The pace of the economic recovery has been slow since the recession ended in June 2009, and the Congressional Budget Office (CBO) expects that, under current laws governing taxes and spending, the economy will continue to grow at a sluggish pace over the next two years,” said CBO.
The report continues: “That pace of growth partly reflects the dampening effect on economic activity from the higher tax rates and curbs on spending scheduled to occur this year and especially next. Although CBO projects that growth will pick up after 2013, the agency expects that the economy’s output will remain below its potential until 2018 and that the unemployment rate will remain above 7 percent until 2015.”
According to the CBO report, federal tax revenues equaled $2.302 trillion in fiscal 2011, and will increase to $2,523 trillion in fiscal 2012, $2,988 trillion in fiscal in 2013, and $3,313 trillion in 2014. As a percentage of GDP federal tax revenues were 15.4 percent in fiscal 2011, and will be 16.3 percent in 2012, 18.8 percent in 2013, and 20.0 percent in fiscal 2014.
In dollar terms, the anticipated increase in federal tax revenue from fiscal 2011 ($2.302 trillion) to fiscal 2014 ($3.313 trillion) is $1.011 trillion. That is an increase of 43.9 percent. From just 2012 to 2014, the increase in federal tax revenues from $2.523 trillion to $3.313 trillion equals $790 billion—or 31.3 percent.
What is missed by many is these numbers in relationships to the GDP. The jump from 15.4 percent of GDP in fiscal 2011 to 20.0 percent of GDP in fiscal 2014 equals an increase of 29.8 percent. The jump from 16.3 percent in fiscal 2012 to 20.0 percent in fiscal 2014 equals an increase over two years of 22.7 percent.
According to CBO, Federal tax revenues have averaged “about 18 percent of GDP for the past 40 years,” That means the percentage of the total economy coming from tax revenues will rise in the next two years to levels unseen in the last 40 years.
Observers at Off the Grid News and elsewhere note the similarities in the economy to the mid- 1970s. The style and economic tone of the current administration has often been compared to that of the president who last oversaw such a sluggish economy – Jimmy Carter.
