Last week the Treasury Department released the final figures for federal income and spending and the budget deficit for fiscal year 2015, which ended on September 30. The US government’s budget deficit shrank to its lowest amount in eight years (2007), thanks mostly to a record amount of income tax revenue.
Total tax receipts paid to Uncle Sam rose 7.6% over FY2014, while federal spending rose 5.2%, causing the deficit to fall to its lowest amount since the global financial crisis. In dollar terms, taxpayers paid a record $3.25 trillion in FY2015 – which equates to $21,833 for every person in the country who had a full-time or part-time job in September (apprx. 149 million workers).
Federal Tax Revenue in 2015: $3.25 Trillion
Of the record $3.25 trillion in tax receipts, individuals paid in $1.54 trillion (up 10.5%), and corporations paid almost $348 billion (up 7.2%). The balance came from other fees including payroll taxes (which go into a separate trust fund), excise fees, customs duties, etc. paid by individuals and corporations.
Meanwhile, the government spent a record $3.68 trillion in FY2015 – what else is new? But thanks to record tax inflows, the budget deficit fell from $483 billion (2.8% of GDP) in FY2014 to just under $439 billion (2.5% of GDP) for FY2015, a 9.2% decline from the prior year.
The Congressional Budget Office projects that the budget deficit will fall to $414 billion for FY2016. Yet the CBO warns that deficits are projected to begin rising each year starting in 2017.
Most analysts attribute the large increase in tax receipts this year to the improving economy, and to an extent that is true.
Yet it is also true that rising tax receipts in recent years have been the result of higher income taxes and higher tax rates on dividends and capital gains.
In 2012, President Obama convinced Congress to increase the top income tax rate from 35% to 39.6% and increased the top rate on dividends and capital gains from 15% to 20%. In addition, personal exemptions and deductions were phased-out for those making $250,000 or more starting in 2013.
Rarely does the media mention that rising tax receipts in recent years are also a result of Obama’s higher tax rates.
The Debt Ceiling Battle – Deadline November 3
At the beginning of this month, the Treasury estimated that the government will run out of money on November 5; however, Treasury Secretary Jack Lew sent a letter to House Speaker John Boehner last Thursday warning that the new deadline is November 3 when the Treasury will no longer be able to pay all of its bills.
Actually, the $18.1 trillion debt limit was reached earlier this year, so the Treasury Department suspended the issuance of some securities, and has instead been juggling its accounts with “extraordinary measures” to finance the government on a temporary basis and pay the bills.
Apart from the debt ceiling issue, Congressional leaders and the White House have been holding closed-door talks on reaching a new two-year budget deal. The government is currently funded by a $1 trillion “Continuing Resolution” that was passed on September 30, but this CR expires on December 11.
Assuming the debt ceiling is raised by November 3 or soon thereafter (after all, it has been raised every time we’ve hit the statutory limit), then we could face another budget/debt fight as we approach December 11.
The GOP is currently in disarray, with over a dozen presidential candidates and Speaker Boehner resigning at the end of this month. As a result, I don’t expect much of a fight from the Republicans over the debt ceiling or the budget. Sadly, I expect Boehner to cut a deal on both issues before he retires. At this point, he has nothing to lose by cooperating with the Democrats. Good riddance!
For whatever this is worth, the website USDebtClock.org shows the US national debt at $18.4 trillion, or $154,494 per taxpayer (or $57,203 per citizen) as of today. US Gross Domestic Product was roughly $17.6 trillion in 2014 (after all the revisions), so our national debt now exceeds total GDP.
The national debt stood at $10.6 trillion when President Obama took office. The non-partisan CBO repeatedly warns that the debt trajectory since 2008 is “unsustainable.” Yet the annual budget deficits are projected to start rising again as early as 2017 if we don’t do something to reverse course.
But will we?
[…] That meant violating the Budget Control Act of 2011, which included spending caps and “sequestration” that Republicans fought so hard for, and won, back then. But GOP leaders John Boehner and Mitch McConnell caved to Obama’s demands rather than block them and risk a government shutdown. I predicted exactly this in last week’s BLOG. […]