Summary
The Congressional Budget Office's recent federal fiscal update drew attention for its positive deficit news, while its more ominous news on the rising tax burden was largely overlooked. Measured as a percentage of the U.S. economy, this year's federal tax receipts will exceed the last 40 years' average by an even greater amount than last year's. Projections are for this burden to increase next year as well - and this increase is with the 2001 tax cuts, to expire after 2010, still in place.
The concern is threefold. Five of the last six recessions have occurred when the federal tax-to-economy ratio exceeded the 40-year average. Five of those six recessions have come on the heels of far stronger growth than our economy is now experiencing. And two political factors will only add to the tax burden pressure: the near- term expiration of the 2001 tax cuts and coming entitlement spending explosion.See the full content of this document
Extract
Tax Burden Saps Economy
It is clear the economy is cooling. As CBO states, "After growing at an average rate of 3 1/2 percent from early 2003 to the middle of 2006, real GDP increased by only 1 1/4 percent during the second half of 2006 and the ...
See the full content of this document
Sponsored links
