Put corporate tax receipts on the stack of indicators flashing yellow for the economy. From Tyler Durden at zerohedge.com:
After flatlining for the past year, US income tax receipts – both at the federal government and on a state and local level – have been disappointing, and have posted a sharp drop since the start of the year, which is “sounding an alarm about the health of the US economy” in BofA’s words (in addition to the countless other alarms about the health of the economy, which however are ignored due to the record stock market).
As Bank of America highlights something we warned about last September, according to the Rockefeller Institute and CBO, US federal income tax receipts have come in about 3% below expectations this year.
Digging deeper, the disappointment was largely in personal current tax receipts, with withheld tax receipts showing little growth over the prior two quarters. The story is a bit different for state and local governments where personal tax receipts were fairly stable, but there was a significant decline in tax receipts for corporate income.
In fact, corporate income tax receipts fell a sharp $7bn in 1Q, the biggest drop since the recession. Since corporate income tax receipts only make up about 14% of the total, there was still a modest gain in overall state and local tax receipts. While there has been particular weakness of late, the trend through last year was weak; according to the Rockefeller Institute, total state tax collections grew only 1.2% in FY16 (declined in real terms), the weakest performance since 2010.
In an attempt to explain away this otherwise troubling development, the CBO has proposed that the weakness in tax receipts may reflect the shift of taxpayer income into later years on the anticipation of legislation to reduce tax rates, which however is looking increasingly unlikely. Presumably this would have the biggest effect on high income and high net-worth individuals. And this will matter for the aggregate figures as the top 1% of earners account for almost 40% of federal personal income tax receipts.
To continue reading: State Corporate Tax Receipts Just Crashed The Most Since The Recession