Recessions Are Bad For Government, Too
Today’s Washington Times published an Associated Press story that reported the outlook for federal tax revenue is the “worst since 1932.” The story says:
“The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.
“Other figures in an Associated Press analysis underscore the recession's impact: Individual income-tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.
“The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression.”
The Tax Foundation’s Tax Policy Blog adds, “States are getting less revenue too. So far, combined state shortfalls are over $160 billion.” The chart below is from the AP story posted by Yahoo News. While recessions may be "bad" for government revenue, that's no justification for raising tax rates. Indeed, politicians should be cutting rates since that would enable the economy to grow and simultneously produce more revenue for government.