Tags: Government | revenue | increase | continue

Consultant Jahncke: Federal Revenue Increase Unlikely to Continue

By    |   Tuesday, 14 May 2013 09:11 PM

Commentators may have been jumping for joy on Friday's news of increasing government revenue, but the happiness will almost certainly prove short-lived, says Red Jahncke, president of the Townsend Group, a management consulting firm.

Individual income-tax receipts jumped 23 percent in the first four months of the year to $483 billion from $393 billion in the year-earlier period.

"The influx surprised the CBO [Congressional Budget Office], and many other observers, but it shouldn't have," Jahncke writes in The Wall Street Journal.

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"Neither should the dramatic drop that is likely to follow, though policy makers will be tempted to behave as if the revenue flood will continue."

Much of the increase represents final payments from those rushing to take advantage of the 15 percent capital gains tax rate that prevailed last year, Jahncke says. The rate has risen to 23.8 percent for high-income tax payers under the tax law that took effect Jan. 1.

This is reminiscent of 1986, he says, when tax receipts soared ahead of a capital gains tax increase in 1987. But receipts then dropped in '87.

Still, the 32 percent shrinkage in the budget deficit in the first seven months of fiscal 2013 – October 2012 through April – from the same period a year earlier will make it difficult for Congress to agree to spending cuts or tax increases, some experts say.

“It does take the air out of the balloon,” Tony Fratto, deputy White House press secretary under President George W. Bush, told Bloomberg. “It takes away the ferocity behind these two views.”

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Commentators may have been jumping for joy onFriday's news of increasing government revenue, but the happiness willalmost certainly prove short-lived, says Red Jahncke, president of theTownsend Group, a management consulting firm.
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Tuesday, 14 May 2013 09:11 PM
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