Federal revenues up: Where did the money come from?
FY2010 saw a 3 percent rise in revenue over the previous year, despite the ongoing recession, thanks to increased corporate taxes and higher Fed earnings.
Federal revenues rose nearly 3 percent from fiscal year 2009 to FY2010. But virtually the whole increase came from higher corporate income taxes and a more than doubling of Federal Reserve earnings. Preliminary data in the Congressional Budget Office’s October Monthly Budget Review reveal that revenue climbed $57 billion to $2.16 trillion in the fiscal year that ended last month (see graph). Combined with a $67 billion fall in outlays, that revenue gain cut the federal deficit by $125 billion to a still astronomical $1.3 trillion, or 8.9 percent of GDP. Bad as that is, it’s well below 2009’s deficit of 10 percent of GDP.Skip to next paragraph
The Tax Policy Center is a joint venture of the Urban Institute and Brookings Institution. The Center is made up of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government. TaxVox is the Tax Policy Center's tax and budget policy blog.
Subscribe Today to the Monitor
Year-over-year revenue changes were highly uneven, however. Corporate income taxes jumped about 40 percent to $192 billion—up $54 billion from 2009—largely because profits rose but also because temporary provisions allowing firms to depreciate assets more rapidly expired. (Congress extended accelerated depreciation retroactively in September, but any tax savings won’t come until FY2011.) Federal Reserve receipts jumped more than 120 percent ($42 billion) on the Fed’s greatly expanded investment portfolio, mostly acquired to boost the economy and prop up the ailing housing market.
But both individual income and social insurance taxes fell in FY2010-- fallout from continuing high unemployment. Income tax receipts were down 1.6 percent ($14 billion) and the taxes supporting Social Security and Medicare dropped more than 3 percent ($28 billion). Had these revenue sources held constant, the deficit would have shrunk another 0.3 percent of GDP.
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.