Paul Krugman: Strangely Only Interested in Iraq's Economy | Main | States' Budgets: Back in Black
May 05, 2004

Surging Tax Revenues Indicate Something's Brewing on the Jobs Front

Earlier came the good news that surging revenues would lower the deficit by perhaps $100 billion or more.

But now comes even more good news. It seems you can't have that kind of blockbuster growth in receipts unless, get this, a lot more people are working for more money than they used to.

This great article puts the surge in tax-revenues into perspective:

May 4 (Bloomberg) -- Budget analysts were expecting a windfall of tax refunds this year as cuts in marginal tax rates, retroactive to January 2003, caused an over-withholding of income.

In other words, the government was expecting to pay out a lot of money in refunds. She's not terribly clear, there. Or maybe we're just morons.

At any rate....

They were disappointed. What they got instead was a surge in withheld personal income tax payments in recent months, a sign that something is brewing in the labor market.

Individual withheld employment taxes account for about 40 percent of the federal government's total receipts. Because taxes are actual cash payments to the Treasury -- no surveys, no model- based forecasts, no statistical extrapolations -- they provide a kind of check and balance on what's going on in the labor market, which for most of us is the primary source of income.

The current perception that the labor market is weak and income growth lousy is being challenged by recent tax data, according to Chris Wiegand, an economist at Citigroup Global Markets.

"Given the tax cuts, the tax liability should have been down a lot,'' a result of bigger refunds and smaller final payments, Wiegand said.


"Were it not for the tax cut, April final payments would have been up about 15 to 20 percent from last year,'' said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

In other words, people are making 15 to 20 percent more than they did last year-- huge.

That suggests "we're at the point where (budget) surprises start to run in the other direction. Deficit revisions tend to be massively directional.''

We likes the sound of that.

Regarding the announcement as to how much the Treasury would be borrowing this quarter:

The Treasury confirmed its improving fiscal position yesterday when it announced plans to borrow a net $38 billion in the April-to-June quarter, half the amount estimated three months ago.

Half? Again, sounds pretty damn good to us.

But back to the implications for the labor market. In the last two months, "withheld receipts jumped 12.5 percent annualized,'' Wiegand said. "The message is, there is no way that you can see withheld income taxes rising unless there's a decisive turn in labor market conditions, including payrolls, hours and compensation.''

Hmmmm... It seems we have two problematic birds, unemployment and the deficit.

And yet we've only got this one stone: Explosive economic growth.

What to do, what to do...?

Wait-- we think we've got an idea! Stand back...! We don't quite know if this is gonna work...!

digg this
posted by Ace at 07:21 AM

| Access Comments

Recent Comments
Ben Had: "Wranglers, the only thing you want hanging out of ..."

Diogenes: "Dungarees..." ( snicker).... Posted by: kraken ..."

Insomniac: "276 Braenyard: "Ace could make a boatload of money ..."

Furious George: "Posted by: Gilligan at August 14, 2018 05:23 PM (A ..."

Shep!!!!!: "I lift my but every summer for 4 days straight dur ..."

Flawless Male Logic: "  Brazil butt lifts are resulting in an alar ..."

Jollyroger: "289 Brazil butt lifts are resulting in an alarming ..."

The Horde : "[I]FIFY! Posted by: The Horde at August 14, 2018 ..."

Cannibal Bob : "Is there a gun range in the cruise? ..."

grammie winger: "How the voting in Ryan's district is going Post ..."

Born Free: "Who is Judge Backus? ..."

JPS: "OK, I thought for sure someone would have beat me ..."

Recent Entries

Polls! Polls! Polls!
Frequently Asked Questions
The (Almost) Complete Paul Anka Integrity Kick
Top Top Tens
Greatest Hitjobs

The Ace of Spades HQ Sex-for-Money Skankathon
A D&D Guide to the Democratic Candidates
Margaret Cho: Just Not Funny
More Margaret Cho Abuse
Margaret Cho: Still Not Funny
Iraqi Prisoner Claims He Was Raped... By Woman
Wonkette Announces "Morning Zoo" Format
John Kerry's "Plan" Causes Surrender of Moqtada al-Sadr's Militia
World Muslim Leaders Apologize for Nick Berg's Beheading
Michael Moore Goes on Lunchtime Manhattan Death-Spree
Milestone: Oliver Willis Posts 400th "Fake News Article" Referencing Britney Spears
Liberal Economists Rue a "New Decade of Greed"
Artificial Insouciance: Maureen Dowd's Word Processor Revolts Against Her Numbing Imbecility
Intelligence Officials Eye Blogs for Tips
They Done Found Us Out, Cletus: Intrepid Internet Detective Figures Out Our Master Plan
Shock: Josh Marshall Almost Mentions Sarin Discovery in Iraq
Leather-Clad Biker Freaks Terrorize Australian Town
When Clinton Was President, Torture Was Cool
What Wonkette Means When She Explains What Tina Brown Means
Wonkette's Stand-Up Act
Wankette HQ Gay-Rumors Du Jour
Here's What's Bugging Me: Goose and Slider
My Own Micah Wright Style Confession of Dishonesty
Outraged "Conservatives" React to the FMA
An On-Line Impression of Dennis Miller Having Sex with a Kodiak Bear
The Story the Rightwing Media Refuses to Report!
Our Lunch with David "Glengarry Glen Ross" Mamet
The House of Love: Paul Krugman
A Michael Moore Mystery (TM)
The Dowd-O-Matic!
Liberal Consistency and Other Myths
Kepler's Laws of Liberal Media Bias
John Kerry-- The Splunge! Candidate
"Divisive" Politics & "Attacks on Patriotism" (very long)
The Donkey ("The Raven" parody)
Powered by
Movable Type 2.64