August 16, 2005

Non-Recurring Revenue

The Congressional Budget Office just came out with its new budget numbers - some good news and some bad news.

The good news, revenues are up. The bad news, these new revenues are temporary, or non-recurring, and don't change the overall, long-term federal deficit picture. So really, there's no good news.

The Director of the CBO, Douglas J. Holtz-Eakin states to the New York Times:

... corporate income tax payments were growing more than would have been indicated by the growth of corporate profits, and that he did not know why. The agency assumes that three-fourths of this year's increase in corporate tax payments is temporary.
The Center on Budget and Policy Priorities concurs, stating that:

The unanticipated increase in revenues this year is largely the result of temporary factors, such as an increase in corporate book profits relative to the size of the economy, and revenues over the next 10 years are not expected to be significantly higher than CBO estimated last March
Those touting that the President's tax cuts are "working" because of this higher than expected revenue gain are wrong. These new unexpected revenues are nothing more than a one shot non-recurring revenue gain and don't reflect an overall positive shift in the economy.