Federal Revenues Up - Deficit Down

Federal Revenues Up - Deficit Down
June 17, 2005

One of the bills I was excited to vote for early in my first Congressional term was the Jobs & Growth Tax Act of 2003. That legislation allowed Americans to take home more of their hard-earned salaries to spend or save as they choose. These tax cuts have benefited American families. Two years later the tax cuts passed in the Jobs & Growth Tax Act of 2003 have resulted in a growing economy evidenced by significant increases in federal revenues and a lower than projected U.S. deficit.

According to a CBO (Congressional Budget Office) report released last week, government revenues have risen by 15 percent compared with receipts in the same period last year. Federal outlays have increased by approximately seven percent thus far this fiscal year.

The combination of increased revenues and more restrained spending has helped reduce the deficit. CBO estimates indicate that the deficit in 2005 will be lower than 2004 and that the performance of the economy will result in a significantly lower deficit than originally projected for this year. It appears that Congress and the president have taken a positive first step toward fulfilling the president's promise of reducing the deficit in half by the end of the president's second term.

In the two years since the tax cuts, tax revenues have increased by 30 percent. This really isn't surprising because the pattern has proven true every time it has been tried in the United States. On three previous occasions tax rates were cut. First in the 1920s, when federal income tax rates were cut, revenues increased by over 60% between 1921 and 1928; then when President Kennedy pushed for across-the-board marginal tax rate reductions, revenues grew by 62% from 1961 through 1968; finally, the Reagan tax cuts increased federal revenues by 54% between 1983 and 1989.

Thus far in fiscal year 2005, federal tax revenues are up by $187 billion over the same period in 2004. The Jobs & Growth Tax Act of 2003 also led to 14 consecutive quarters of GDP growth and 24 consecutive months of job creation - during which over 3.5 million new jobs have been created. U.S. house sales are at record highs, the Dow is up 24% since May 2003, while the NASDQ is up 39%; higher corporate profits and increased tax receipts close the circle.

Economic performance varies from state-to-state and unfortunately, Ohio has not been among the states to benefit the most from the Jobs & Growth Tax Act of 2003. Recently, I invited the Chairman of the Small Business Committee, Rep. Don Manzullo (R-IL) to the area for our second annual Manufacturers and Jobs Forum. It was a constructive day of dialogue between area manufacturers, the Chairman and me. We heard about the pressures unfair global competition, such as China pegging its currency to the U.S. dollar, are placing on our manufacturers. Back in Washington, I will work with Chairman Manzullo and other congressional colleagues to address these concerns and help provide our manufacturers with a level playing field. For example, I cosponsored a bill by Rep. Phil English (R-PA), last year's Manufacturing and Jobs Forum guest that would impose additional tariffs on Chinese products, based on the rate of manipulation of their currency.

Ohio needs to take a significant look at our own economic development policies. A recent Wall Street Journal editorial laid out some of the problems our state's economy faces. The Journal quotes the Tax Foundation as crediting Ohio's state and local tax burden as the 4th lowest in the country back in 1970. Today our state and local tax burden is the 7th highest in the nation. The Journal points out that, "spending restraint has been a problem in Columbus for the better part of 30 years…since 1994, Ohio's expenditures have risen faster than any state in the union." The editorial points to a Buckeye Institute study that notes, "state spending increased by 63.4 percent between fiscal year 1994 and FY 2002, almost three times the rate of inflation."

The lessons of history have been repeated and the lower marginal tax rates provided in the 2003 Jobs & Growth Tax Act have resulted in strong increased tax revenues at both the federal and state level. The growing economy has also started to make possible the president's pledge to reduce the deficit by half in the end of his second term.

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