REPORTCARD2000.COM
The
following is an analysis of the Revenue section of the January 2001 CBO Budget
and Economic Outlook. The text in *RED are comments included by
the website host.
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The Budget and Economic Outlook: Fiscal
Years 2002-2011 |
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Chapter Three
The Revenue Outlook
The
Congressional Budget Office estimates that total federal revenues will exceed
$2.1 trillion in fiscal year 2001 *
(Actual was $1.991 trillion) if current policies remain
unchanged, marking the ninth consecutive year in which the growth of revenues
has outstripped the growth of the nation's gross domestic product (see Figure
3-1). Revenues
are expected to grow more slowly than GDP (nominal)
through 2007 and then faster than GDP through 2011 * (CBO has previously stated the out years are hardest to
project). In that year, revenues are projected to be $3.4 trillion,
or about 20.4 percent of GDP. * ( 20.4% is a high rate when compared to
historical averages.)
Figure
3-1.
Annual Growth
of Federal Revenues and GDP, Fiscal Years 1960-2011
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SOURCE: Congressional Budget Office. |
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CBO expects
that the growth of receipts will be slower than the rapid pace of the past few
years. From 1994 to 2000, revenues rose at an average annual rate of 8.3
percent, much faster than GDP * (What
was the tax policy in effect to allow tax revenues to rise higher than
GDP? Is it the graduated income tax
rate or is it a tax not based on GDP?) In 2000, at 10.8 percent, the growth of
receipts was faster than in any year since 1987 (when growth was subject to a
one-time boost from the Tax Reform Act of 1986). * (Again, was there a tax policy change to cause the 2000
increase as cited for 1987?) Consequently, as
a share of GDP, revenues rose from 18.1 percent in 1994 to a post-World War II
high of 20.6 percent in 2000--a level exceeded only once, in 1944
(see Figure
3-2). * (How did this happen?)
Although slowing in 2001, the growth of receipts, projected at 5.4 percent over the previous year, still outpaces the projected growth of GDP, pushing the ratio of receipts to GDP to 20.7 percent in 2001 * (Actual 2001 was 19.7%), which is expected * (“Expected” but did not happen) to become the new postwar peak. In 2002, the growth of receipts is projected to slow further, to 4.7 percent--less than the growth of GDP--so as a percentage of GDP, receipts will slip to 20.5 percent * (Actual 2002 was 17.7% but there was some tax law changes). The growth of receipts remains at about that rate through 2007 but as a percentage of GDP continues to fall, to 20.2 percent. After 2007, the growth of receipts is expected to rise, to 5.4 percent in 2011, and to increase relative to GDP, reaching 20.4 percent by the end of the projection period.
The
current revenue outlook is $919 billion higher through 2010 than CBO projected
last July (see Table
3-1). About seven-eighths of that increase--or about $800 billion--stems
from changes in CBO's economic forecast * (In spite of the acknowledging a slow down, CBO is estimating an
increase in revenues based on the economic forecast), which
causes a boost in receipts from individual and corporate income and social
insurance taxes. The net effect of recently enacted legislation--primarily the
Community Renewal Tax Relief Act of 2000 (H.R. 5662) and the FSC (Foreign Sales
Corporation) Repeal and Extraterritorial Income Exclusion Act of 2000 (H.R. 4986)--reduces
projected revenues by about $37 billion over the 10 years from 2001 to 2010.
The remainder of the increase since July results from a number of adjustments
in the methodology and assumptions that determine how much tax is generated by
the tax base. * (CBO notes there have
been adjustments in assumptions resulting in higher revenue
projections.) Those technical revisions total $153 billion over
the 10 years.
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Table 3-1. |
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2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
Total, |
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July 2000 Projection of Revenues |
2,109 |
2,202 |
2,290 |
2,380 |
2,486 |
2,594 |
2,706 |
2,826 |
2,960 |
3,102 |
n.a. |
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Legislative Changes |
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Individual Income |
-1 |
-1 |
-2 |
-2 |
-2 |
-2 |
-3 |
-3 |
-3 |
-3 |
-22 |
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Corporate Income |
0 |
-1 |
-1 |
-1 |
-1 |
-1 |
-2 |
-2 |
-2 |
-2 |
-14 |
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Other |
-1 |
-1 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
-1 |
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Subtotal |
-2 |
-2 |
-3 |
-3 |
-3 |
-4 |
-4 |
-5 |
-6 |
-5 |
-37 |
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Economic Changes |
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Individual Income |
-4 |
-1 |
10 |
22 |
31 |
41 |
51 |
61 |
72 |
84 |
366 |
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Corporate Income |
4 |
15 |
24 |
29 |
31 |
33 |
36 |
42 |
49 |
58 |
319 |
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Social Insurance |
-3 |
-2 |
2 |
8 |
12 |
16 |
20 |
26 |
30 |
33 |
143 |
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Other |
-4 |
-5 |
-4 |
-3 |
-2 |
-2 |
-1 |
-1 |
-2 |
-2 |
-26 |
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Subtotal |
-6 |
7 |
32 |
56 |
72 |
88 |
106 |
128 |
148 |
173 |
802 |
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Technical Changes |
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Individual Income |
25 |
20 |
12 |
8 |
5 |
2 |
0 |
-2 |
-4 |
-6 |
60 |
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Corporate Income |
11 |
11 |
10 |
10 |
10 |
9 |
8 |
8 |
7 |
6 |
90 |
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Other |
-3 |
-1 |
1 |
1 |
1 |
0 |
1 |
2 |
1 |
2 |
4 |
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Subtotal |
33 |
29 |
24 |
20 |
15 |
11 |
9 |
7 |
4 |
2 |
153 |
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Total Changes |
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All Sources |
25 |
34 |
53 |
73 |
84 |
95 |
110 |
129 |
146 |
170 |
919 |
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January 2001 Projection of Revenues |
2,135 |
2,236 |
2,343 |
2,453 |
2,570 |
2,689 |
2,816 |
2,955 |
3,107 |
3,271 |
n.a. |
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SOURCE: Congressional Budget Office. |
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NOTE: n.a. = not applicable. |
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Federal revenues consist of
individual income taxes, corporate income taxes, social insurance taxes, excise
taxes, estate and gift taxes, customs duties, and miscellaneous receipts.
Individual income taxes produce about half of total revenues, an amount equal
to roughly 10 percent of GDP (see Table
3-2 and Figure
3-3). Corporate income taxes contribute about a tenth of revenues, equaling
approximately 2 percent of GDP. Social insurance taxes (including Social
Security taxes, which are off-budget) are the second largest source of
revenues, equaling about a third of total receipts and less than 7 percent of
GDP. Other taxes and miscellaneous receipts, including profits from the Federal
Reserve System, make up the balance.
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Table 3-2. |
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Actual |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
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In Billions of Dollars |
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Individual Income |
1,004 |
1,076 |
1,125 |
1,176 |
1,230 |
1,289 |
1,354 |
1,424 |
1,500 |
1,583 |
1,675 |
1,774 |
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Corporate Income |
207 |
215 |
217 |
226 |
236 |
246 |
255 |
264 |
276 |
289 |
303 |
319 |
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Social Insurance |
653 |
686 |
725 |
762 |
797 |
840 |
879 |
921 |
963 |
1,010 |
1,059 |
1,110 |
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Excise |
69 |
71 |
74 |
76 |
78 |
81 |
83 |
86 |
88 |
91 |
94 |
97 |
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Estate and Gift |
29 |
30 |
32 |
34 |
35 |
36 |
37 |
39 |
43 |
46 |
48 |
52 |
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Customs Duties |
20 |
21 |
23 |
24 |
25 |
26 |
27 |
27 |
28 |
29 |
30 |
31 |
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Miscellaneous |
43 |
36 |
41 |
44 |
51 |
52 |
54 |
55 |
57 |
59 |
61 |
63 |
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Total |
2,025 |
2,135 |
2,236 |
2,343 |
2,453 |
2,570 |
2,689 |
2,816 |
2,955 |
3,107 |
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