IRS Will Take In Above-Average Tax Revenue For the Foreseeable Future

Posted: Feb 25, 2014 3:45 PM

The economic collapse of 2008 and the resulting policy response - President Bush and President Obama's stimulus packages, for example, contained some temporary tax cuts - took a large chunk out of federal tax revenues. As the economy recovers, and as President Obama's tax increases go into effect, the IRS will start to take in above-average tax revenue as a share of the economy.

A new release from the Congressional Budget Office finds that tax revenue will be about at the historical average in 2014 and will rise to 18.2% of GDP in 2015. After that, the amount of taxes collected from Americans will be above our historical average, well, forever:


One thing to be heartened by is that, as tax revenues tend to rise significantly above historical averages, politicians realize that a tax cut would be affordable. Tax cuts in the 1980s and early-2000s brought IRS collections much closer to average. Of course, recessions also tend to have the same effect - see the big dip in 2008.

What is important to note is that we're not operating in some kind of abnormally low-tax environment in the coming years, when debt is projected to skyrocket. (Indeed, the CBO projects that the fastest-growing component of the federal budget in coming years will be servicing our debt.) We'll be operating in a world where taxes are above historical averages - and we'll watch our debt continue to grow.

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