Weekend reflections

Weekend Reflections is on again. Please comment on any topic of interest (civilised discussion and no coarse language, please). Feel free to put in contributions more lengthy than for the Monday Message Board or standard comments.

3 thoughts on “Weekend reflections

  1. Tax Revenue in the USA has “surged” according to recent media reports. I did ask this on Monday and SJ offered two theories.

    1. It is due to a temporary upturn in the stock market.
    2. It is due to cuts in the tax rate and a laffer curve effect.

    George Bush is claiming that it is theory number two. SJ disparaged theory number two. I have problems seeing how theory number one would actually work (capital gains are not taxed unless realised).

    Interestingly I also see articles about sales tax “surges” in some of the US states. So on face value it does seem to me that it is being caused by a general increase in economic activity. If that was the case then the next question might be whether this activity was due to a reduction in tax rates (George Bushes prefered explaination) or some other factor.

    I am keen to hear other views on what is causing a tax revenue surge in the USA and what it might mean.

  2. Here is an example of one of the media articles:-

    http://www.tax-news.com/asp/story/story_open.asp?storyname=24210

    Revenues continued to grow strongly, up by about 13 percent over receipts at the same time last year.

    Net corporate income tax receipts continued to show the largest percentage increase, but the rate of growth waned in June. Nevertheless, net corporate receipts during the first nine months of the fiscal year grew by 26 percent, or $52 billion, compared with the same period in 2005.

    Although significant uncertainty remains regarding the quarterly estimated tax payments due in September, CBO expects that corporate receipts will exceed $330 billion for the entire fiscal year, an increase of at least 18 percent over the amount collected in 2005.

    Withheld individual income and payroll taxes grew by almost $88 billion (or 8 percent) during the first nine months of fiscal year 2006 compared with 2005.

    Note that the US Fiscal year closes at the end of September.

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