SO MUCH DONE, SO MUCH YET TO DO...:

FEDERAL INCOME TAXES, AS A SHARE OF GDP, DROP TO LOWEST LEVEL SINCE 1942, ACCORDING TO FINAL BUDGET DATA: Erosion of income tax base drives other key budget developments (Isaac Shapiro, Center on Budget and Policy Priorities)

The final budget figures for fiscal year 2003 were released on October 20 by the Treasury Department.  They indicate that income tax receipts (including receipts from both the individual and corporate income tax) equaled just 8.6 percent of the Gross Domestic Product.  This is the lowest level of income tax collections, as a share of the economy, since 1942.  The decline in income taxes as a share of the economy to a level last seen six decades ago helps explain several other key findings about the final budget tally.

* In 2003, total federal revenues as a share of the Gross Domestic Product dropped to 16.6 percent.  The last time that total revenues as a share of the economy fell below 17 percent was in 1959, near the end of the Eisenhower Administration.  (The Gross Domestic Product is the basic measure of the size of the U.S. economy.)

* Not only are income taxes at historically low levels relative to the size of the economy, they are also at historically low levels as a share of all federal revenues.  In 2003, the share of federal revenues consisting of income taxes fell to its lowest level since 1941.  Conversely, the share of federal revenues consisting of payroll taxes reached the highest level in the history of the tax system.

* The sizable federal deficit in 2003 of 3.5 percent of GDP is more directly a reflection of diminished revenues than of increased spending.  While revenues as a share of GDP fell to their lowest level in 44 years, spending as a share of GDP was below its level in any year from 1980 to 1996, and far below its levels during the downturns of the early 1980s and early 1990s.

* The federal deficit would have been much larger in 2003 except for the fact that receipts going into the Social Security system exceeded Social Security expenditures.  The “on-budget” deficit in 2003 — the government’s measure that excludes consideration of Social Security receipts and expenditures — was 5.0 percent of the economy.

When we get to the tax and spending levels of the 1920's we'll have succeeded.

Posted by Orrin Judd at October 21, 2003 10:02 PM