Venture tax receipts fell 11% in FY2010?

posted at 1:55 pm on October 25, 2010 by Ed Morrissey

Tom Blumer from BizzyBlog takes a look at the data from FY2010, concluded four weeks ago, and reports some revealing information about the nature of the “recovery” in the first full year of Obamanomics, in a column for Pajamas Media.  While the White House and Congress struggle to explain why job creation and economic growth have yet to appear, the numbers from the Department of the Treasury makes the cause quite clear:

In fiscal 2008, before deducting IRS-generated stimulus payments that were substantively disbursements, the government took in over $2.6 trillion. In recession-dominated fiscal 2009, collections dropped about 20% to $2.104 trillion. In fiscal 2010, the supposed year of economic recovery, receipts were $2.162 trillion, a less than 3% increase that was over $100 billion short of the $2.264 trillion the Congressional Budget Office (CBO) projected in August 2009.

When you look at why any increase in receipts occurred at all, you realize how weak and two-tiered the economy really is. Only two major areas showed an increase: income taxes paid directly by corporations (up by 38% to $191 billion) and collections from the Federal Reserve (up by over 120%, from $34 billion to $76 billion, per the CBO). Large, established firms pay the vast majority of corporate income taxes; the increase in these collections demonstrates that, relatively speaking, their situation has improved. Collections from the Fed have spiked because its “money from nothing” quantitative easing (QE) portfolio has ballooned; interested and dividends earned on QE investments are handed over to the Treasury. After excluding QE earnings, the government’s operational receipts in fiscal 2010 amounted to $2.086 trillion, barely higher than fiscal 2009’s comparable $2.070 trillion.

Fiscal 2010 receipts trailed fiscal 2009 in the two other major categories. Collections of individual income taxes (down 2% to $898 billion) and for Social Security and Medicare (down almost 4% to $815 billion) were very disappointing. The Social Security system is running monthly cash deficits — right now, not 30 years from now.

The real receipts downer is buried within the individual income tax category. Look at what has happened during the past four years with gross non-withheld income tax receipts, which are predominantly paid by entrepreneurs, business owners, and investors (in billions):

- Fiscal 2007 — $437.6

- Fiscal 2008 — $455.3

- Fiscal 2009 — $312.4

- Fiscal 2010 — $278.2

From their peak in 2008, gross non-withheld receipts have dived by almost 39%. During fiscal 2010, the year of supposed economic recovery, they dropped 11%.

In FY2009, a decline made sense.  The markets tanked during the fiscal year, which began in October 2008 just as panic gripped the financial sector.  Assets dropped in value, which meant less trading as investors chose to hang onto assets for a longer term in order to keep from taking massive losses.  Also, investors held onto cash while the economy plummeted, afraid to lose their investments if the recession turned into a depression or lasted longer than predicted.

However, the recession technically ended in June 2009.  The Obama administration claimed that investors could return, and with stocks at low prices and labor entering a buyer’s market, the conditions should have encouraged the kind of investment that would eventually result in job creation.  Instead, though, tax revenues from entrepreneurial efforts dropped 11% from FY2009, which should have been the nadir.  Either investments simply didn’t pay off — although the stock market gained significantly over that period — or entrepreneurs stayed on the sidelines.

That’s not the only interesting nugget of data in Treasury’s figures.  The cost of government rose 7.5% in FY2010 over FY2009 despite inflation being around 1%.  Why?  Most of the big emergency spending packages took place in FY2009 — TARP and Porkulus.  Education spending rose 74%, the Commerce Department increased its budget 23%, and the EPA got a 36% increase.  However, Homeland Security took a 14% cut in spending.  It’s worth noting that Homeland Security’s staff is, unlike its sibling agencies, mainly non-union.

When the Obama administration speaks of recovery, they must be referring to the boom market of the public sector in Washington DC.  Be sure to read all of Tom’s analysis.


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I think we all know by now that the Obama “administration” has absolutely no idea what they are doing.

Democrats are so stupid, they believe their own lies.

NoDonkey on October 25, 2010 at 2:00 PM

“we’ve had 16months of private sector job growth” (at least that’s what my TOTUS tells me we had…)

/BHO

ted c on October 25, 2010 at 2:05 PM

I think we all know by now that the Obama “administration” has absolutely no idea what they are doing.

Democrats are so stupid, they believe their own lies.

NoDonkey on October 25, 2010 at 2:00 PM

Like Chavez they dont know economy , but they know how to persecute people.

the_nile on October 25, 2010 at 2:06 PM

NoDonkey on October 25, 2010 at 2:00 PM

No, the democrats think the PEOPLE are stupid enough to believe them!

belad on October 25, 2010 at 2:06 PM

WEALTH CREATION: The Real Fabric of Society!!!!!

Mutnodjmet on October 25, 2010 at 2:06 PM

what has happened during the past four years with gross non-withheld income tax receipts, which are predominantly paid by entrepreneurs, business owners, and investors (in billions):

The decline proves they must raise the taxes to bring in more money…anyway that is how they think.
Meanwhile…Google pays 2.4% and has Obama over for dinner and a few drinks…

right2bright on October 25, 2010 at 2:10 PM

Education spending rose 74%,

WTH?

WitchDoctor on October 25, 2010 at 2:14 PM

No, the democrats think the PEOPLE are stupid enough to believe them!

belad on October 25, 2010 at 2:06 PM

THINK? Look whose president…they know…

right2bright on October 25, 2010 at 2:18 PM

a less than 3% increase that was over $100 billion short of the $2.264 trillion the Congressional Budget Office (CBO) projected in August 2009.

CBO guesstimates can be wrong by 102 billion? Well I never heard of such a thing. Journalists accept CBO guesstimates as the gospel truth when discussing Obamacare, and anyone who doubts them is “spreading misinformation”. It must be true – I read it in a “fact check”.

forest on October 25, 2010 at 2:25 PM

Don’t worry. They’ll fix it with unemployment checks.

flataffect on October 25, 2010 at 2:26 PM

belad on October 25, 2010 at 2:06 PM

But they lie so often I really believe they don’t know what the truth is any longer.

We are ruled by sociopath “democrats”.

NoDonkey on October 25, 2010 at 2:27 PM

I can’t believe any of this until Biden tells me what the numbers are.

Electrongod on October 25, 2010 at 2:32 PM

I just had a plumber at my house. This man has put the plumbing and wiring in the three houses I’ve built in the last 16 years. He’s had to lay off everyone who was working for him. We started talking Obama-omics. The gist of the hour long conversation is that even dems are getting pissed.

Les in NC on October 25, 2010 at 2:36 PM

Instead, though, tax revenues from entrepreneurial efforts dropped 11% from FY2009, which should have been the nadir. Either investments simply didn’t pay off — although the stock market gained significantly over that period — or entrepreneurs stayed on the sidelines.

The market may be up but the dollar is still getting lower. Each dollar made buys less and less. Just look at the price of gold. It’s over $1300/oz as I type this. 100 years ago it cost around $20/oz IIRC. A dollar today is worth less than a nickel by comparison to 100 years ago.

Yakko77 on October 25, 2010 at 2:41 PM

Thanks for posting this info, Ed. It should be blasted to every media conduit and conscientious voter before this election. The Dems are destroying private enterprise.

onlineanalyst on October 25, 2010 at 2:59 PM

The market may be up but the dollar is still getting lower. Each dollar made buys less and less. Just look at the price of gold. It’s over $1300/oz as I type this.

The market is up because the dollar is down. There’s no place to park dollars that allows you to beat inflation, the Fed’s policy of punishing savers with low interest rates has always been about getting them to put money in the market. Long term it’s foolish because the companies we invest in are losing money in dollars AND losing costumers as the dollar loses value. It’s pretty much the end of the road and the Tea Party and Republicans can’t stop what’s been set in motion for decades.

Rob Taylor on October 25, 2010 at 3:17 PM

No, the democrats think the PEOPLE are stupid enough to believe them!

belad on October 25, 2010 at 2:06 PM

Four words:

Bill Clinton, Barack Obama.

Dark-Star on October 25, 2010 at 3:49 PM

However, the recession technically ended in June 2009. The Obama administration claimed that investors could return, and with stocks at low prices and labor entering a buyer’s market, the conditions should have encouraged the kind of investment that would eventually result in job creation. Instead, though, tax revenues from entrepreneurial efforts dropped 11% from FY2009, which should have been the nadir.

Ed, it’s well-established that the average American missed out on the bottom and resulting rebound of the stock market. After seeing the stock market collapse, many individual investors decided never to invest in stocks again. Because the plunge occurred under Bush, it’s difficult to link investor’s distrust of stocks as an asset class on politics. It’s simply a matter of pain and risk aversion among people who saw their life savings evaporate into thin air.

While the market has recovered, the sad truth is that a very large percentage of people nearing retirement age bailed on the market at or near its bottom, and didn’t ride it’s return to 10,000 territory. Sadly it means that retirement will become a difficult turn of events.

bayam on October 25, 2010 at 5:14 PM

In the new era of “Total Government” the creative edge of the world’s most creative economy has been destroyed! The big established firms, mostly run by committees, cannot hope to innovate at anything like the rate of the small entrepreneurial risk-takers and even though lower costs of capital makes the net present value of almost any proposal positive, the regulatory and legal environment is a complete enigma. So many omnibus “Reform” bills have been passed, tasking so many bureaucrats with the job of rewriting everything, that it will be years before anybody knows what the new rules will look like.
Unlimited government is a ravenous monstrosity, and the first thing it eats is creative risk-taking. Instead of creating the next new age, we’re all just hoping to survive this one.

Lew on October 25, 2010 at 10:14 PM