How Government Made an Extra $57 Billion in 2010
The 2010 fiscal year is over, and the federal deficit is only $1.3 trillion. Income tax revenue fell, and payroll tax revenue fell. But the government made an extra $57 billion. That's a lot of money, kind of! Where did it come from? Corporate profits and the Fed, says Bob Williams at the Tax Policy Center.
Year-over-year revenue changes were highly uneven, however. Corporate income taxes jumped about 40 percent to $192 billion--up $54 billion from 2009--largely because profits rose but also because temporary provisions allowing firms to depreciate assets more rapidly expired. (Congress extended accelerated depreciation retroactively in September, but any tax savings won't come until FY2011.) Federal Reserve receipts jumped more than 120 percent ($42 billion) on the Fed's greatly expanded investment portfolio, mostly acquired to boost the economy and prop up the ailing housing market.
We're still down $400 billion from tax revenues in 2007, which is about one-third of our deficit. If you forecast where 2010 tax revenue would have been without a recession, you'd find that depressed taxes made up closer to half of our deficit.