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.