5/27/2009

IRS tax revenue plummets

From USA Today:

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.
When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been."

For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago.

"These are staggering numbers," Lynch says. . . .

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3 Comments:

Blogger Martin G. Schalz said...

Due to government screwups, folks lose jobs, so taxes and spending must increase?

Is this not the response we have seen time and again?...

5/27/2009 9:34 PM  
Blogger John A said...

"Income tax revenue dropped 44% from a year ago."

Which explains the sudden interest in a VAT; even the unemployed or lowest income levels buy stuff.

And while a VAT might be workable if it replaced income taxes and other sales taxes, those who push it thinking it will replace what is already on the books should look at France, the UK, and other European countries.

5/28/2009 4:03 PM  
Blogger Harry Schell said...

Proof positive that without a vibrant private sector, government has nothing.

Government has nothing it doesn't take from the private sector. The idea that government spending will fix economic problems and promote prosperity is false...even Keynes renounced his "multiplier" late in life.

But with the private sector in trouble, government cannot find revenue to support spending. Increasing taxation changes behaviors and otherwise makes life harder in the private sector, so the impact rarely gets too close to predicted, always on the short side.

Add to this mix the fact that companies don't pay taxes, their customers do because companies either put the increased cost into their price or eventually fail, which hurts everyone and further depresses tax revenue.

"Progressive" is the wrong term for people who try old failed ideas thinking they are so smart it will work this time. "Regressive" is a better fit.

5/28/2009 7:23 PM  

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