Data from the final report for 2005 from the Bureau of Economic Analysis (BEA) show taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. revenues rising across the board last year. The following is a brief overview of government finances for 2005 at both the federal and state/local level.
Federal Government Federal government receipts (current receipts) rose by 12 percent ($1.974 trillion to $2.225 trillion) with most of the increase coming from personal current taxes, which increased by 16.6 percent.
Federal excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. es only rose by a mere 1.7 percent, which is largely due to the fact that high gas prices led to lower-than-average growth in gasoline consumption.
Federal tax receipts on corporate income, which is typically the most volatile variable took the biggest jump of any category as they rose by over 40 percent last year.
On the spending side, government expenditures rose by about 7.0 percent, which is less than the revenue growth rate, but because we have had a deficit last year, the fact that receipt growth exceeded expenditure growth merely implies that the deficit is lower this year than last year. We still had a deficit in 2005 of about $323 billion. (This is negative government savings, which comes from current receipts. Total receipts and total expenditures, which add in other variables like capital transfer payments/receipts, means that the federal government was forced to borrow $376.4 billion last year.)
State/Local GovernmentsAt the state and local level, overall government current receipts increased by 6.8 percent. There was an 8.7 percent increase in tax receipts, including an 11.1 percent growth in personal current tax receipts, which are predominantly state/local income taxes. Note that state/local income taxes make up a relatively small percentage of total state/local revenue (about 15 percent) compared to the federal government where income tax revenue is the main source.
Sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. es and property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es grew at rates of 5.9 percent and 5.8 percent, respectively.
And although they make up a relatively small fraction of state/local government revenues, corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. revenue rose by 41 percent at the state/local level, which is similar to the large increase that we saw at the federal level.
Overall In summary, fueled by rising tax revenue from corporate income and personal taxes, government current revenues in the United States rose by nearly 11 percent in 2005, while government current expenditures rose by about 6.5 percent, leading to smaller deficits (yet still growing debts) in overall government finances.
(Data from BEA NIPA Tables 3.1, 3.2, and 3.3.)
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