April 22, 2009

When Will the Press Catch On to Uncle Sam’s Collections Meltdown?

Almost a year ago, I was posting on what I called the “Supply-Side Stunner” (at NewsBusters; at BizzyBlog).

In April 2008, the US Treasury collected an all-time record $407.3 billion ($403.75 billion after subtracting the first $3.35 billion wave of stimulus checks, which really should have been treated as outlays, that went out just before month-end). It was an indication that, as I said at the time, “many (entrepreneurs, businesspeople, and investors) are thinking, in the face of relentless media harping to the contrary, that 2008 will be at least as profitable (as 2007).”

This year, it’s shaping up to be the “Bailout Year Bummer.” Uncle Sam’s fiscal year began on October 1 of last year, mere days before Congress passed the legislation that has come to be known as TARP, and a bit more than three months after Nancy Pelosi, Barack Obama, and Harry Reid promised to starve the economy of energy and punitively tax its highest producers, creating what I have since called the POR (Pelosi-Obama-Reid) Economy.

Through March, federal receipts were running 14% behind the previous year. Each month during the fiscal year has trailed the previous year, and degree of the difference has steadily increased.

Now look at what we’re facing in April:

USreceipts1008thru0409

My estimate of April’s final result is almost 40% lower than April 2008, and further ratchets down the trend of collections decay that goes back to last summer. The receipts shortfall is far more than one would expect from an economy that shrank only 1.74% in the final half of last year (without annualization, the economy shrank 0.125% in the third quarter, and 1.614% in the fourth). It is also probably far greater than the White House and the Congressional Budget Office are anticipating.

Here is where things stand as of the April 21 Daily Treasury Statement, which was just released at 4:00 p.m. today, and how it compares to April 22 of last year (a Tuesday-to-Tuesday comparison during a month is more meaningful in the context of how cash comes in within different categories):

DTScompared042209v042108

It would appear that getting to $250 billion by month-end might be a stretch.

So when does the receipts crater become news?

Cross-posted at NewsBusters.org.

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30 Comments

  1. Apparently no one’s heeding Joe (It’s patriotic to pay higher taxes) Biden’s revenue raising prescription. Not only did I ask for my 2008 tax refund rather than apply it to my 09 estimate & pay the lesser of 90% of 09 estimate or 08 tax liability (110% if AGI exceeds $150,00), I bought Munis. And what did this unpatriotic action cost me? A bigger bank account. So sorry Joe, but when you push me, I push back.

    Comment by Helen G — April 22, 2009 @ 6:13 pm

  2. I work for myself and I wake up depressed every morning. I am not “going Galt” on purpose, but working hard just seems like such a waste of time, since we have no idea how the business climate will change (radically) from day to day and from week to week. So I really just can’t work the way I used to. Pelosi-Obama-Reid have killed my productivity.

    Comment by Lauren G — April 24, 2009 @ 7:11 am

  3. #2, don’t know what you sell, but I can definitely relate to your frustration. Multiply it by a few million or so and you get a POR economy.

    It’s easier said than done, but don’t let them control you. Work around them.

    Comment by TBlumer — April 24, 2009 @ 7:18 am

  4. I’m no Obama fan, but calling it “Obama’s economy” a month before he was elected (even though it was apparent he was going to win) is not technically historically accurate. The economy we’re living in right now, however, after all of his “emergency do-or-die measures” with more to come and nothing but job losses since the coronation, is the Obama economy.

    So just a small asterisk for that point, but the overall point is valid and will likely become more so in ensuing years.

    Reid-Pelosi? Sure – they’re now past the point where they can’t pretend they have nothing to do with it. Obama? Well, he was certainly part of the Senate during the “Bush economy” (although he spent his last two years doing absolutely nothing there and opting instead to campaign for President). What a hero.

    So we got a greenhorn at the helm and an incompetent, buffoonish group of mobsters and hustlers in Congress trying to find ways to steal more of your money for their political self-interests.

    Awesome!

    Comment by Good Lt. — April 24, 2009 @ 7:41 am

  5. I lowered my withholding. Why should Uncle Sam keep more of my money to play around with? I figure it would be better for the country to make Treasury borrow more from China.

    In other words, I want to take the bottle away from the drunk.

    Comment by Geoff — April 24, 2009 @ 8:05 am

  6. I prepare tax returns of all types and frankly I am really surprised at the refunds comparison. On the average most of the returns I prepared had significant refunds this year while last year they owed money. Maybe the treasury is dragging it’s feet a little with the refunds?

    Comment by Billy T. — April 24, 2009 @ 8:52 am

  7. #4, I didn’t claim that it was “Obama’s economy.”

    It has been Pelosi’s, Obama’s, and Reid’s economy as of June of last year, for reasons noted here.

    They and their party are the ones who took it down. They own it, and have for 10-plus months.

    Comment by TBlumer — April 24, 2009 @ 8:53 am

  8. [...] Tom Blumer and the Bizzy Blog: In April 2008, the US Treasury collected an all-time record $407.3 billion ($403.75 billion after [...]

    Pingback by Federal Tax Receipts Are Tanking | Behind Blue Lines — April 24, 2009 @ 8:56 am

  9. Another big blow is coming to tax receipts; refund checks. We pay provisional tax and usually pay thousands of bucks to Uncle Sam at year end. This year, we are getting a substantial refund. Multiply us by the millions who lost a lot of money as the stock market plunged, and you’ll see that the Feds have a major problem.

    Comment by Pat — April 24, 2009 @ 9:03 am

  10. #5, people should really do that anyway, but now it’s turning into a matter of self-defense. Some states have already slowed down their refunds by months. KS is one. If it’s bad enough at Uncle Sam’s place, I wouldn’t rule out seeing the IRS do the same thing.

    #6 and #9, I would not discount the possibility of an IRS refund slowdown. That’s a big wild card in what April’s final number should be. In their defense, Friday is usually the big day for refund checks. May 1, just after cutoff, happens to be a Friday. Of course, that just kicks the problem to May, which is a pretty low receipts month anyway, and would make it come in even worse.

    Comment by TBlumer — April 24, 2009 @ 9:16 am

  11. The stock market started its big slide in Septemenber, just after prediction markets settled on Obama as the winner.

    Investors and business owners decided to get ready for the new “tax and regulate” regime by shedding workers, and putting money into safer (and less productive) areas.

    I have anecdotal evidence of this, too – a small business owner who said he’d have to lay off some construction workers if Obama won – starting with the ones with Obama bumper stickers on their cars.

    So yes, I’ll blame the decline since September on the fascist-in-chief.

    Comment by Calvin Dodge — April 24, 2009 @ 9:46 am

  12. Something else to think about. The 52% who voted Obama in are the spongers of America. The 48% who voted against him are the producers. Most of those 48% folks see the Obama train wreck as being even worse than they imagined. Lots of them are going to prepare their taxes with true hatred for government in their hearts. That hatred is bound to make for the taking of lots more iffy deductions. From a right-wing point of view, taxes paid to this government is ammunition given to class enemies who have already declared their intention to punish you for existing. Anyone who thinks that isn’t going to play a part here is dreaming.

    America isn’t one country anymore. If someone killed Obama tomorrow, at least one third of the country would think it was no loss. The breakdown in social cohesion is damned near too deep to be mended and this administration is ramming the wedge in as deep and as fast as they can. There’s a reason the only really vibrant sector in the American economy nowadays is guns and ammo manufacturers.

    Comment by mac — April 24, 2009 @ 9:49 am

  13. [...] The economy is down 1.74%, but IRS receipts for April are down 39%, and 14% for the year: [...]

    Pingback by Economy down 1.7%, IRS Loot down 14% — April 24, 2009 @ 9:50 am

  14. No cap gains income. Unemployed don’t pay taxes. But the biggest cause must be under employment. Real-estate folks, framers, car salesman. All have jobs, but aren’t making diddly.

    Comment by Ken Nelson — April 24, 2009 @ 9:52 am

  15. #2,

    Lauren, right there with ya.

    #6,

    Billy, that’s me to a T.

    It seems I’m howling at a hurricane in some quarters. “Going Galt” for those like us isn’t just, or even primarily, an idealogical exercise; it’s sound business practice. Hunkering down and waiting for the storm to blow itself out. In this new age of regulatory instability and almost certain negative tax consequences, it’s time to fold the hand and wait for one that isn’t dealt from a deck so cold it’s frozen solid.

    And those bastiches in Topeka still have my money . . .

    ‘Berg

    Comment by Mark B. — April 24, 2009 @ 10:28 am

  16. We had a confluence of life’s changes this year resulting in 50% less income for POR. ‘Cratering’ will be emblematic of their tenure together.

    Comment by gary gulrud — April 24, 2009 @ 10:43 am

  17. [...] I found this little piece about tax receipts on BizzyBlog.  The tax collections for FY 2009 are running 14% behind compared to last year.  The [...]

    Pingback by Above The Fold, Friday, April 24, 2009 « The Lone Maryland Conservative — April 24, 2009 @ 11:08 am

  18. [...] Bizzy Blog, The Business End of the Blogosphere, reports, Through March, federal receipts were running 14% behind the previous year. Each month during the fiscal year has trailed the previous year, and degree of the difference has steadily increased. [...]

    Pingback by Federal Receipts Down 14% From Last Year — April 24, 2009 @ 11:49 am

  19. [...] Economic contraction is the new black. There is no recovery from a $3 trillion Federal budget, with an even greater contraction in Federal revenue. [...]

    Pingback by The New Normal « Maenianum Secundum — April 24, 2009 @ 11:59 am

  20. I accidentally overpaid my 2008 taxes by a large amount. My accountant said I could thank George Bush for a one-time capital gains rule change for 2008. My earned income was quite low, which resulted in my large capital gain for the year(real estate related) being taxed at virtually zero. Lucky timing. Now I am moving into an early semi-retirement. I am not going to be a productivity slave for Obama’s grand plans. Someone else will have to pull the wagon, I’m going fishing. If sanity returns in the future, I can ramp up again easily.

    Comment by Meremortal — April 24, 2009 @ 12:20 pm

  21. Good point about people in certain industries not making any money.

    My youngest son works at a Coldwell-Banker affiliate in LA. Their top performer in 2007 made $2.7 million due to a couple of giant deals. He made $75,000 in 2008, and as of the end of the first quarter of 2009, had not earned a cent.

    My son told me yesterday that in 2007 and early 2008, about 75 % of his deals went through. This year it’s 40 – 45 %, and the deals are far smaller (shorter leases, smaller properties). Not pretty.

    Comment by GaryS — April 24, 2009 @ 3:08 pm

  22. I’m a research biochemist during good times. I haven’t worked a day job since August. (soft money evaporated for science)

    I also had two small family businesses. One went under last summer with the financial crisis (microdistillery). Now the other I started up last fall is looking mighty sketchy with the current “regulatory” climate and I now have to decide how much sweat, treasure, and tears to pour into it to make it fly (distillery technology transfer).

    I’m not going Galt, but I’m sure they got very little from my efforts last year. But then, I didn’t get much for my efforts last year either…

    Comment by Aaron — April 24, 2009 @ 4:28 pm

  23. I really liked not having to make an estimated payment in January and not having to make a payment with my tax return in April. It made clear to me how much effort I was putting into just paying my taxes.

    I look forward to the next decade being one in which I do
    not have to pay much tax.

    The shortfall of revenues may be the key to serious tax
    reform: A shift to a consumption tax, because the income
    will simply not be their to produce the desired revenues.
    It might be worth it to get rid of the Internal Revenue Code.

    Comment by Henry Mohrman — April 24, 2009 @ 5:08 pm

  24. Yes you DO pay taxes on unemployment compensation but it isn’t withheld from the check. That was a rude shock to the system when I was unemployed and broke in the early 90s round of recession and layoffs.

    Comment by kentuckyliz — April 24, 2009 @ 6:11 pm

  25. [...] via BizzyBlog » When Will the Press Catch On to Uncle Sam’s Collections Meltdown?. [...]

    Pingback by When Will the Press Catch On to Uncle Sam’s Collections Meltdown? at incredulous — April 24, 2009 @ 6:38 pm

  26. [...] BizzyBlog » When Will the Press Catch On to Uncle Sam’s Collections Meltdown? [...]

    Pingback by BizzyBlog » When Will the Press Catch On to Uncle Sam’s Collections Meltdown? | alazycowboy.com — April 25, 2009 @ 9:35 am

  27. #21
    Your son’s scenario is EXACTLY the same one I find myself in in Central Texas.

    I, too, am in commercial real estate. Last year was my first full year in the business. I made $75,000 in ’08. Since November, I’ve made $3,000. It was like a light switch was flipped off for our business. No sales, and only small leases.

    We’ve burned through our savings, racked up credit card debt to keep food on the table and fuel in our vehicles, and now we’re supposed to write a check to Uncle Obama for $12,000 in self-employment taxes when we don’t even have a pot to piss in.

    We’re staring bankrupcy in the face. I filed for an extension on my taxes to put off the inevitable, but Obama isn’t going to be getting any of my money. Not because I’m going Galt, but because I’m going broke!

    Jason
    Central Texas

    Comment by Jason — April 27, 2009 @ 11:32 am

  28. [...]  BizzyBlog (When Will the Press Catch On to Uncle Sam’s Collections Meltdown? April 22, [...]

    Pingback by Hemorrhaging – Especially Uncle Sam « Maenianum Secundum — May 10, 2009 @ 10:47 am

  29. [...] this terrifying economy puzzle and that is government revenue. The folks at Maenianum Secundum and BizzyBlog have done an amazing job of detailing the decline in Federal revenue over the past 6 months, and [...]

    Pingback by Generational theft: continued | Radio Vice Online — May 11, 2009 @ 2:17 pm

  30. [...] decline in federal tax revenues shown on the accompanying chart (courtesy of BizzyBlog (When Will the Press Catch On to Uncle Sam’s Collections Meltdown? April 22, 2009) is staggering and suggests that the economy is in much worse shape than believed and heading in the [...]

    Pingback by The Taxman Shrinketh « Vox Clamantis in Deserto — May 12, 2009 @ 6:38 pm

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