2004 February 24 Tuesday
Tax Receipts Not Keeping Up With Economic Growth

Dana Milbank of the Washington Post examines why the Bush Admnistration has repeatedly overestimated both jobs growth and government tax collection revenue.

Figures released by the White House show that its overestimate of job creation in 2003 was the largest forecast error made in at least 15 years, and its 2002 underestimate of the deficit was the largest in at least 21 years. But the statistics show that forecast errors began to increase considerably around 1997, under the Clinton administration. By contrast, the Bush administration's GDP forecasts have been relatively accurate, indicating job growth and tax receipts have shed their historical correlation to GDP growth.

If the economists she is quoting are correct then many people and/or companies are finding new ways to shelter their income from the tax man. I haven't seen this written about anywhere. Does anyone have any idea how and why this is happening? Are more people self-employed and hence in a position to write off more expenses against taxes? Or is a larger fraction of all stock and other assets being held in tax free retirement accounts and hence out of the reach of the tax man?

If anyone can find some relevant links please post them in the comments.

Share |      By Randall Parker at 2004 February 24 01:43 PM  Economics Political

Mark S. said at February 24, 2004 6:17 PM:

How about this:

Company X in the U.S. hires Person A in India to produce software product PDQ. Company X pays person X $1. Company X then imports product PDQ into the U.S. and sells it for $10.

GDP: $10
Personal Income Tax Collected: $0
Corporate Income Tax Collected: Undetermined

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