Friday, October 13, 2006

Corporations' profits help Bush's budget deficit

Federal deficit falls to lowest level in four
The federal deficit fell to a four-year low in the budget year that just ended, a result President George W. Bush pointed to Wednesday in claiming Republicans are better stewards of the economy than are Democrats.

The administration said the deficit dropped to $247.7 billion (€197.5 billion) — welcome news for Republicans struggling to keep control of Congress. Bush boasted he had made good on a 2004 campaign promise to cut the deficit in half over five years.

"These budget numbers are proof that pro-growth economic policies work," Bush said.

The budget numbers clearly prove that the policies benefit corporations, but whether they benefit the average voting worker is more debatable.

The single largest component of revenue increase over budget was from corporation income taxes, underlining the monumental growth in corporation profits in recent times. Of course, corporations, unlike individuals, pay tax only on their net income and also benefit from a lower tax rate than individuals.

Indeed, mid-session individual tax takes were down remarkably from the mid-session budget estimates. If individuals are paying less taxes, it reflects they are earning less income. Corporations are earning more income over and above their expenses, and keeping more of these after-tax profits thanks to the Bush taxes. Individuals are taxed on their pre-expense, gross income, and are seeing less of it after tax.

The figures underline this disparity when off-budget items are included. Amounts paid towards social security, unemployment and retirement, which should be robust as corporations if individuals were lifting their incomes as well as corporations are lifting profits, actually fell against budget.

In short, the FY 2006 budget news is a welcome improvement largely due to an unexpected increase in on-budget receipts....

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