Three trillion dollars is a lot of money. Just imagine what you could do with $3 trillion. The possibilities are practically limitless. Of course no one is worth $3 trillion, individually. However, the United States Federal Government recently reported that for the 2014 fiscal year it collected more than $3 trillion in tax revenue, for the first time ever.
Good and Bad
The good news is that intake helped actually drop the federal deficit to its lowest point ever under President Obama. The bad news is everyone, especially corporate America, is paying higher taxes. With more income earned in the recovering economy, there was more money for Washington. According to reports, the greatest reason for the influx is that corporate taxes increased 17 percent in Fiscal 2014, while individual taxes ticked up by 6 percent during the same time period.
Still in the Hole
The other bit of bad news is that even though the Federal Reserve took in that record haul of $3.020 trillion, it still spent more than it had, with total expenditures reaching #3.504 trillion. That means our country is still $483 billion in the hole. Although the U.S. Treasury Secretary touted the news and praised President Obama for his policies, not everyone is smiling about that number. As one tax expert pointed out, that money isn’t free. It comes from the private sector and from consumers’ pockets.
In any case, reaching the $3 trillion milestone is significant for the country. Just five years ago, in 2009 total revenue was $2.1 trillion. That’s an increase of $900 billion in just five years. Some would argue that it signifies that corporate America is doing very well and that companies are adding significant amounts of money to their overall wealth. However, the debate rages on over corporate tax rates in the United States, which are some of the highest among the major economies in the world.
A Closer Look
Meantime, taking a closer look at the numbers, it’s clear that two major tax hikes had a lot to do with the increased revenue: Obamacare and the fiscal cliff tax increases that permitted several Bush tax cuts to expire after 2013. Those two increases were responsible for raising revenue by about $74 billion in 2014. Without them, the total receipts most likely would not have reached $3 trillion. Plus, even with a record intake why is the government still in the red? The answer is simple: government expenditures remained basically flat at about $3.5 trillion.
One other notable factor to consider is that without changes in our country’s tax policies the amount of revenue the federal government will continue to take from the private sector will only grow higher. That’s because when income increases, tax revenue increases. So with our country’s progressive tax system higher tax rates for higher income levels will result in increased revenue when the economy expands. However, when our country’s economy takes a downturn our progressive system serves to reduce intake revenues much faster.
Enough is Enough
As the federal government continues to blow its horn over its record revenue it could lead to calls from the Obama administration for even higher taxes. However, it makes a lot more sense for Washington to better spend the money it already has, instead of continuously trying to siphon even more from wealthy individuals and corporations.
The post Federal Government Takes in Record Tax Haul in 2014 first appeared on Advisors to the Ultra-Affluent – Groco.