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May 10, 2010


After an in-depth analysis of the cost side of our federal government, we should at least take one look together at where the government gets its money and the forecast of how much it is projected to collect by whom over the next five years.  From the White House website (the same place I found the cost estimates), the income taxes are collected from the following entities:
Individual Income- Our classic income taxes
Corporate- taxing the profits of companies, or as I like to call them, our employers
Social Insurance- taxes for Social Security and Medicare
Excise Taxes- various taxes the federal government has passed to raise money (like the federal takeoff tax for buying an airline ticket)
Other- includes customs revenues and estate tax receipts
Let’s take a look at the income tax revenue from 1934 through the 2015 projected number.

This is a useful chart for those who believe the federal government is not growing at a rate faster than the rest of the economy, or that the federal government has not gotten too large.  I’m curious as to how we are going to go from annual tax revenue of $2 trillion in 2009 to $3.5 trillion in 2015.  Additionally, are we going to do this without raising taxes?
Let’s have a closer look at individual income over the 30 year period from 1985 to 2015.

Notice that the President’s budget team is expecting the tax revenues to grow much faster than they did in the bullish parts of the last two business cycles. Can this be done without higher taxes? How can tax revenues rise so quickly when members of the administration have told us this will be a “slow recovery?”

I should add that despite the huge jump in revenue by 2015, the federal government is still projecting a trillion dollar deficit for the year. What will the deficit be if they don’t collect what they are expecting?

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