tax policy center

Tax Topics

2009 Tax Stimulus
2012 Election Tax Plans
2015 Budget
Alternative Minimum Tax (AMT)
American Jobs Act of 2011
Brief Description of the Model 2015
Camp Tax Reform Plan
Current-Law Distribution of Taxes
Deficit Reduction Proposals
Distribution of the 2001 - 2008 Tax Cuts
Dynamic Scoring
Earned Income Tax Credit
Economic Stimulus
Education Tax Incentives
Estate and Gift Taxes
Expiration of the Bush Tax Cuts
Explanation of Income Measures 2013
Federal Budget
Fiscal Cliff
Fiscal Crisis
Guide to TPC Tables
Health Insurance Tax Incentives
How to Interpret Distribution Tables 2013
Marriage Penalties
Model FAQ 2013
Model Related Resources and FAQs
Payroll Taxes
Presidential Transition - 2009
Recent Tax Stimulus Legislation
Retirement Saving
Tax Encyclopedia Index
Tax Expenditures
Tax Reform Proposals
TPC’s Methodology for “Off-Model” Revenue Estimates
Value-Added Tax (VAT)
Who Doesn't Pay Federal Taxes?
Working Families

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tax topics
The Federal Budget
  • Over the past 15 years, the federal budget has swung from deficit to surplus and back to deficit again.
  • In the late 1990s, Congress obeyed self-imposed budget constraints and a buoyant economy generated rapidly rising revenues, resulting in budget surpluses. A brief recession, tax cuts, two wars, and the expiration of budget rules after 2000 led to falling revenues and rising spending and pushed the budget back into a deficit.
  • More recently, federal revenues have rebounded, reducing but not eliminating the deficit. Congress reimposed budgetary constraints on itself in 2007 but failed to obey them, although their mere existence may nonetheless have restrained spending.
  • The President's FY2009 Budget proposes to spend $3.1 trillion, supported by revenues totaling $2.7 trillion. That would leave a deficit of $407 billion, roughly a third larger than what is currently predicted for FY2008. Over the subsequent three years, the administration projects that spending will rise just 3.7 percent, less than a fifth of the 21 percent growth of revenues, and that the FY2012 budget will show a $48 billion surplus. The recent softening of the economy has led to a decline in revenues in FY2008, particularly from the corporate income tax. If that trend continues, the projected FY2012 surplus would likely not occur.

federal outlays and revenues

Underlying data: download

  • CBO's latest baseline assumes per capita discretionary spending will decline in real terms (after adjusting for inflation), the 2001 and 2003 tax cuts will expire as scheduled in 2011, the alternative minimum tax is not fixed, and entitlement spending grows slower than its historical trend. Relaxing those unrealistic assumptions creates a bleak budget picture with a growing budget deficit over time (see graph).
  • cbo budget baseline

    Underlying data: download

  • Over the long run, the situation is even worse. Rapid growth in spending on entitlements, particularly Medicare and Medicaid, appear destined to overwhelm any growth in revenues. And extending the Bush tax cuts beyond 2010 and fixing the AMT would only make matters worse.

Learn More:

Other Resources

Spending Proposals

Projected budget outlays and revenues

Underlying data: download


Revenue Proposals

The administration repeats many of the revenue proposals offered in its FY2008 budget. Again, the major proposals include:

  • Make 2001 and 2003 tax cuts permanent
    TPC estimates that more than two-thirds of the extended tax cuts would go to the fifth of the population with the highest incomes in 2011 and more than a third would go to the top 1 percent of the income distribution. After-tax income of the highest income one-tenth of one percent would be nearly 8 percent higher than if the tax cuts were allowed to>
  • Provide a new standard deduction for health insurance (SDHI) ($15,000 for family coverage and $7,500 for single coverage)
    A TPC analysis of the proposal concludes that although the change would equalize the tax treatment of health insurance obtained through an employer and that purchased in the private non-group market, various features of the proposal could have adverse effects, particularly for low-income and less healthy people. (See all TPC work on health insurance.)
  • Provide relief from the alternative minimum tax (AMT) for 2008
    (See TPC analysis of the AMT.)

Budget Documents

Underlying Data for Outlays and Revenues