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Archive for the ‘Tax Revenue’ Category

February 2010 Federal Tax Withholdings Plunge To Multiyear Low

Submitted by Tyler Durden

February was not an auspicious start to Obama’s record budget deficit-busting plans. The Daily Treasury Statement for the full month of February was just released, and it disclosed that while corporate tax withholdings, net of refunds, actually climbed marginally to $3.4 billion from $(3.4) billion in February 2009, individual tax withholdings plunged to a multi-year low of $30.7 billion. Combined, the two items also posted a multi low of $34 billion, less than the previous recent low from February 2009 when the first leg of the Greater Depression was allegedly at its zenith (see chart below). We can’t wait to hear how the “recession is over” brigade will paint this particular data point.

On a rolling twelve month basis, the government has to plug an LTM hole of about $250 billion in annual tax withholdings. The LTM individual tax withholdings have dropped to an unprecedented low of $1.275 trillion, compared to the $1.43 trillion as of September 2008 when the recession was about to start. If the government is unable to resurrect tax withholdings to historical levels before the interest rate on the $7.9 tillion in marketable debt starts climbing (even as the $7.9 is set to become about $10 trillion in just over a year), call it a ballgame.

I’m Sure Glad The Recession Ended

It’s a good thing the recession ended. Otherwise, key economic charts might look something like this.

Total Loans and Leases Percent Change From Year Ago

Total Loans and Leases

Total Revolving Credit

Total Revolving Credit Percent Change From Year Ago

Housing Starts

State Income Tax Receipts

State Income Tax Receipts Percent Change From Year Ago

If you believe retail sales are going up because of government reports on Advance Sales, then please think again.

You owe it to yourself to read Retail Sales Rise: Where? Let’s Take a Look; Expect Nothing Less Than Panic.

After you click on and read the above link, take a good hard look at that last chart and ponder the implications in regards to union salaries, school budgets, pension promises, medical benefits, etc.

Next think about what the massive wave of boomer retirements might do to boomer spending habits and future tax revenue.

Next think about the implications on consumer spending habits were tax hikes attempted to cover any shortfalls.

Then please consider just what might happen if the US stock market went sideways for five years.

Finally, please consider just what might happen if the US stock market were to mimic the Japanese Nikkei like this.

Nikkei Monthly Chart

click on chart for sharper image

But hey, not to worry, after all the recession is over, the above charts are a mere figment of everyone’s imagination, and what happened in Japan cannot possibly happen here.

Or can it?

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Government Lies = Lawsuit?

Posted by Karl Denninger

Now here’s an interesting idea….

State Tax Revenues See Third Consecutive Double-Digit Drop

The Rockefeller Institute’s Lucy Dadayan and Donald J. Boyd write: (emphasis added)

Tax collections nationwide declined by 10.9 percent during the third quarter of 2009, the third consecutive quarter during which tax revenues fell by double-digit percentages, according to the latest report from the Rockefeller Institute of Government.

Combining current data with comparable historical figures from the U.S. Census Bureau, the Institute reported that the first three quarters of 2009 marked the largest decline in state tax collections at least since 1963.
…

For the fourth quarter of 2009, early data showed continuing declines, although the negative trend of the past year appeared to be moderating.
…

Overall, 48 states saw tax collections fall during the third quarter of 2009, with 22 states experiencing a double-digit percentage decline. During the previous quarter, 36 states saw a double-digit decline, suggesting some moderation during the most recent quarter.

Full report here. (pdf file)

Where’s My Recovery? (Tax Receipts)

Posted by Karl Denninger

From The Wall Street Examiner:

Month to date tax receipts are now in for the entire month of December. They’re down 7.7% from December 2008, which is exactly the same rate of decline as November’s. We know that the TBAC and Treasury officials were not anticipating that in their debt sales forecast for the first quarter. They had assumed that a recovery was taking root and would continue to do so.

But I thought that we were in the midst of a strong economic recovery?  So say all the pundits, all the Tout TV folks, everyone…

So how come I can’t find it in the sales tax receipts of the states, and I also can’t find it in the Federal tax receipts?

Doesn’t recovery mean more spending, some hiring, or at least people getting more hours even if they don’t have new jobs?

If this is all happening, as we’re being told incessantly on ToutTV, shouldn’t tax receipts be going up?

Remember, last December was pretty much the bottom, or so the pundits have told us.  We keep hearing that sales are improving, durable goods are improving, employers aren’t firing any more (and indeed many people are looking for a positive employment number for December and a positive revision to +ve for November) – and yet none of that makes any sense – especially employment turning to an actual positive number – if Treasury tax receipts are actually down on a y/o/y basis from last December.

That’s not the worst of it when it comes to macro level stuff.  From The Wall Street Journal came this piece that was largely ignored:

First, in most state capitals the stimulus enticed state lawmakers to spend on new programs rather than adjusting to lean times. They added health and welfare benefits and child care programs. Now they have to pay for those additions with their own state’s money.

Second, stimulus dollars came with strings attached that are now causing enormous budget headaches. Many environmental grants have matching requirements, so to get a federal dollar, states and cities had to spend a dollar even when they were facing huge deficits. The new construction projects built with federal funds also have federal Davis-Bacon wage requirements that raise state building costs to pay inflated union salaries.

Worst of all, at the behest of the public employee unions, Congress imposed “maintenance of effort” spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs, from road building to welfare, if the state took even a dollar of stimulus cash for these purposes.

Wait a minute. 

Isn’t there a requirement in State Constitutions that a bill go through the Legislature to authorize spending that is then signed by the Governor (or vetoed and overridden)?

The article goes on to say:

A few governors, such as Mitch Daniels of Indiana and Rick Perry of Texas, had the foresight to turn down their share of the $7 billion for unemployment insurance, realizing that once the federal funds run out, benefits would be unpayable. “One of the smartest decisions we made,” says Mr. Daniels. Many governors now probably wish they had done the same.

The Governor of a State does not have the right to legislate from his office!

This sort of crap has been pulled by The Federal Government for decades – shove a program down The State’s throat, acceptance of which is either automatic in some form or which occurs by the action of some administrative agency within a state and thus bypasses the entire State Legislative process.

This is beyond outrageous and yet it is one of the means by which our Federal Government has effectively destroyed the Federal/State boundary, usurping into The Federal Tax mechanism state governments and legislatures.

It would be one thing if the legislature was to have taken up these “stimulus” packages and passed acceptance of them as an act of the legislature, signed by the governor.  That would be lawful.

But they didn’t.  In some cases the governor explicitly acted, but in others the decision was effectively made by an administrative arm of the state (e.g. the road department) via acceptance of Federal Funds.

Both are blatantly unlawful as acts of legislation without the legislature!

The States should have put a stop to this crap back in the days of “double nickel” speed limits, when it made its “high pressure” debut, demanding that all such effective appropriations occur through legislative action.

They didn’t.

Now the States are saddled with impossible-to-pay budgetary requirements, in some cases leaving them with as little as 10% of their budgets open to discretionary action - all as a result of unlawful appropriations made without the state legislatures passing a bill that is then signed by the governor!

The Journal continues onward with claims that this is all a liberal conspiracy. 

Nonsense. 

This is a raw abuse by both political parties that has been crammed down the throat of the states since the 1970s, through both Republican and Democrat Congresses and Administrations, and it is flatly unlawful as it violates the Constitution of every state of the union to legislate without action of the legislature!

The States must rise and pass 10th Amendment resolutions with the binding force of law that all such unlawfully-enacted “appropriations” are void as unconstitutional usurpations of The State Legislature and will not be complied with.

This is no longer a matter of political expedience.  It is now a matter of budgetary survival and maintenance of what we are supposed to be as a nation – a union of States that each have a Constitution that must be respected and abided by all parties.

Treasury uncaps credit line for Fannie, Freddie

WASHINGTON (Reuters) – The Obama administration pledged on Thursday to back beleaguered mortgage finance giants Fannie Mae and Freddie Mac no matter how big their losses may be in the next three years.

Housing Market

Treasury also said it would not require the two agencies to reduce their portfolio size next year, in a move that would allow them provide even greater support for the housing market as it begins to recover from its worst slump in decades.

The Treasury Department said it made the changes to assure markets it was fully behind both Fannie and Freddie and to give the agencies more time to reduce the size of the portfolios.

The two agencies each had a credit line of $200 billion. Combined, the two have thus far tapped about $111 billion.

Under the arrangement established under the previous administration, Treasury Secretary Timothy Geithner had until the end of this year to increase the limit without asking Congress for approval.

Treasury said it still hopes that Fannie and Freddie will reduce the size of their portfolios “in the future.” Under the newly announced rules, Fannie and Freddie will have to reduce their portfolio to $810 billion by the end of 2010 and annual increments of 10 percent thereafter.

The two agencies each hold portfolios in the high $700 billion range, officials said, meaning that they would not be forced to sell assets next year.

The 2010 reprieve was designed in part to avoid putting too much strain on the mortgage finance companies just as Treasury and the Federal Reserve were wrapping up their purchases of mortgage-related securities.

As part of Thursday’s announcement, Treasury said it was ending its mortgage-backed securities purchase program as of the end of 2009, and will have bought around $220 billion.

The Fed had previously said it would winding down its more than $1 trillion in mortgage asset buys in the spring of 2010.

The government’s hope is that private sector buyers will step in. By putting an unlimited guarantee behind Fannie and Freddie through 2012, the Obama administration hopes investors will feel more confident and will step up to fill the void left by the end of the Treasury and Fed buying programs.

Without healthy demand for mortgage-backed securities and the finance companies’ debt, mortgage interest rates would likely spike, sending a chill through the still-shaky housing market, which could derail the economic recovery.

(Reporting by Corbett B. Daly and Emily Kaiser; editing by Leslie Adler)