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2003-2007 Tax Revenues Up - CBO

Mike

Well-known member
Tax Revenues in 2007
Revenues in the first seven months of fiscal year 2007 have continued to grow faster than GDP. Overall, revenues have grown by about 11 percent compared

with what they were during the first seven months of 2006, although CBO estimates that the growth is closer to 9 percent when adjusted to remove the effects of more accelerated crediting of amounts paid with personal tax returns this year. (In the first half of 2007, GDP grew by an estimated 5.3 percent from its level in the first half of 2006.) Revenues from both corporate and individual income taxes have continued to grow faster than GDP. Growth in corporate revenues, which has measured about 15 percent so far this year, remains rapid but has been been slowing throughout the year, presumably reflecting slowing increases in profits. Receipts from individual income taxes have grown by 13 percent so far this year when adjusted for accelerated payments with tax returns, CBO estimates. Final payments with tax returns grew just over 10 percent, CBO estimates, in line with expectations that called for a slowing in the growth of nonwage income in tax year 2006. The inclusion of 2007, however, does not seem to alter the fundamental conclusion that a substantial share of the revenue increase relative to GDP is associated with the corporate income tax.

Two caveats to this analysis should be noted. First, analyzing revenues as a share of GDP does not illuminate the underlying causes of GDP growth itself, including the possible influence on GDP from tax policy. Second, the detailed data required for more systematic analysis of revenue trends are not yet available. For example, detailed data based on tax returns provide the best basis for tracing sources of revenue trends, but those data are typically not available until about two years after collections occur. In addition, revisions to NIPA data can profoundly affect the interpretation of revenue trends.

If you or your staff have any questions about this analysis or would like further information, please call me or Tom Woodward.

Sincerely,


Peter R. Orszag
Director
 

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