WASHINGTON – The federal government’s tax revenue is on track to drop 18 percent this year, the biggest annual decline since the depths of the Great Depression, according to an analysis by The Associated Press.
Individual income tax revenue is down 22 percent and corporate income tax receipts have fallen 57 percent compared with 2008, according to the AP. Social Security tax revenue might have only its second year-over-year decline since 1940, and Medicare tax receipts could fall for only the third time since they started being collected in the 1960s.
Meanwhile, the federal deficit is projected to reach a record $1.8 trillion this year, as the national debt tops $11 trillion, the AP said.
Despite the eye-popping numbers, however, the nation can dig itself out of its fiscal hole if appropriate action is taken, according to William Gale, co-director of the Tax Policy Center at the Brookings Institution in Washington.
“The numbers for 2009 are striking, head-snapping,” Gale told the AP. “But what really matters is what happens next.”
“If it’s just one year, then it’s a remarkable thing, but it’s totally manageable,” he continued. But “if the economy doesn’t recover soon, it doesn’t matter what your social, economic and political agenda is. There’s not going to be any revenue to pay for it.”
Separately, the Treasury Department said yesterday it now expects to borrow an estimated $406 billion in the third quarter, $109 billion less than it had originally estimated, after an influx of money from banks repaying government aid from the Troubled Asset Relief Program, The Wall Street Journal reported.
In addition, the Treasury borrowed $343 billion in the second quarter, less than its earlier estimate of $361 billion.