49 Billion Dollar Surplus For U.S. Government In January


Steven Mnuchin

In January 2018, the United States Treasury reported a 49 billion dollar surplus. Even though the January 2017 surplus was slightly larger at $51 billion, this is significant because of the recent tax legislation. January of 2018 was the first month for the lower taxes to take effect, and though it is still too early to determine the cuts’ true effects, it looks as though the economy is on-track for growth and productivity.

While critics of lowering federal taxes on individuals, families and corporations were worried about a decrease in revenue for social benefits programs and infrastructure, it actually seems like not much has changed. The government collected tens of billions of tax dollars more than it spent just like last year, and tax revenue is actually at an all-time high.

At least for now, it appears that the increase in consumer confidence, spending and sales have generated enough money in the US economy to offset the lower corporate tax percentage. Though companies are paying a smaller share, their increase in revenue is bigger.

According to The Balance, “consumer spending that drives almost 70 percent of economic growth.” When consumers have more money to spend, such as by the wage increases, tax cuts, and pay bonuses as the result of the 2017 tax reform, the economy is very likely to grow. And the idea here is that there is a sweet spot for maximum government revenue in terms of a tax rate, if the tax rate is too high there is not enough productivity for the high percentage to make up for the loss, and if the tax rate is too low then revenue drops off as well due to it being such a small portion. The empirical evidence suggests that the corporate tax rate was far too high since even a dramatic decrease resulted in an immediate record high revenue intake.

Even with this news, there still remains the issue of national debt and deficit. The tax cuts alone are predicted to add one and a half trillion dollars to the debt over 10 years, and the US Congress has also just passed another spending agreement to take even more money in the name of infrastructure, military and welfare. The proposal’s expenses were so high, Congress also voted to increase the borrowing limit in preparation to take on more debt.

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