According to an AP analysis, tax revenue is expected to fall 18% this year, the largest single year drop since the great depression. According to the article, individual income taxes are down 22%, corporate income taxes are down 57%. The news comes as the current Congress seeks to pass several new initiatives, including a health care overhaul with an estimated price tag of over $1 trillion. An ambitious agenda, especially when one considers the current state of the economy.
Unfortunately, lawmakers have a way of skirting around the lack of funds in the treasury, borrowing. So far, Congress has borrowed 50 cents of every dollar they’ve spent this year. The White House continues to signal they are serious about the deficit, but so far their actions have not followed their rhetoric. Treasury Secretary Timothy Geithner, appearing on Sunday morning talk shows, fueled speculation of a middle class tax hike to balance the budget, which the White House vehemently denies is part of the solution to the deficit. There seems to be a disconnect between the priorities of the administration and the priorities of the treasury. One thing is clear however, at least to the Congressional Budget Office and the Chinese, our current fiscal policy is unsustainable and needs to be addressed.