Surging Tax Receipts Bode Well for Government Budgets in Coming Years

Recent tax receipts in the U.S. have been below the historic trend of 18% of GDP, as shown in this chart at the Heritage Foundation site. Projections show tax revenues rebounding from a recent low below 14.9% to above 19% of GDP by 2015.

Confirming this predicated trend, Conor Dougherty reported in the Wall Street Journal on 10/27/11 that state tax revenues jumped 10.8% in the second quarter this year, a remarkable rebound. Among the largest increases were taxes paid by corporations to the states, which rose 19.1% in the second quarter.

Dougherty's article cites a number of sources who downplay the gain in tax receipts as unsustainable, citing various special levies that will soon expire. Certainly, there is no reason to expect such year-over-year gains to be sustained indefinitely, but these numbers indicate a much greater probability of a snapback to normalcy than has been expected during the recent market correction.