Thanks to Democrat demagoguery, we now have an incredibly unbalanced tax base. The top 10% of all earners pay 65% of all taxes, but woe betide those that suggest this is not sensible! Tax cuts for the rich and balancing the budget on the backs of the poor are things only hateful greed-mongers would suggest.
Unfortunately, when your tax base consists of just 10% of your population, if enough of them decide to go John Galt and slow down or stop their earning, you get things like this.
The economy contracted by 6% or so in the last quarter of 2008. At that rate, you'd expect to see about a 6% drop in tax revenues, not the 17% we see in reality. Tom Blumer over at Pajamas Media has more, but the essence is this: we've exposed ourselves to these kinds of swings in tax revenues by narrowing our tax base to fewer and fewer people.
The Obama deficit is going up, up, up.
Look for the CA and NY numbers... I believe the effect is even more dramatic.
ReplyDelete(orgati)
Hey KTC:
ReplyDeleteThanks for noticing.
The economy really only contracted 1.75% during the last two quarters. The government always releases annualized figures.
3Q08's -0.5% was thus really only -0.125%, which 4Q08's -6.3% was really only -1.61%. The total is a bit less than -1.75%.
So the drop in comparison to the GDP drop is way more dramatic than you indicated. You would expect it to drop by a bit more than GDP, but not by as much as it has.
And I'm sure you caught on the second page of the column how bad March was, and April will be....
Tom Blumer
BizzyBlog.com
PajamasMedia.com
Tom, thanks for the comment. As I've thought about it more, much of the drop may have come from the fall in corporate profits. While the economy may have contracted 6% annualized, corporate profits have fallen much farther. Since taxes and jobs both come from profits, unemployment and tax receipts are getting much worse.
ReplyDeleteThe solution, then, is to INCREASE GOVERNMENT SPENDING AT A FANTASTIC RATE!
Err, maybe not.