Collapsing tax revenues

The suits can go on CNBC and C-SPAN and tell whatever lies they want, finagle the unemployment numbers or claim ridiculous corporate earnings figures. But in the end we can see what is happening by looking at tax revenues. The government manages to get a cut of virtually all economic activity, so if their "cut" is shrinking rapidly then you know the GDP is too. Never mind what lunatic estimates they pull out of their hat. Follow the money, look at the taxes.

Zero Hedge informs us, in Collapse in Tax Withholdings Refutes Improvements in Either Unemployment or Corporate Profitability, that withholdings from employees' wages were down almost 8% last month as compared with the same month a year ago. These are the Social Security and Medicare withholdings, mostly SS. And the SS tax applies only to the first $107,000 a person earns per year. So if the rich bankers have lesser bonuses this year (ha! not likely!) it wouldn't show up in this (much). This is mostly the middle and working class who are seeing a decline in total wages.

Furthermore, corporations must withhold a portion of their earnings to be paid in taxes, and these withholdings are down (get this) 64% compared to last year. Holy cow!! Remind me why the stock market has rallied massively since March?

Moreover, Mish has been watching state tax revenues fall. State and county sales tax revenues in New York were down over 8 percent. In Georgia they were down 16%; in Texas, 12.5%. Iowa's tax revenues missed their government's predictions by over 7%, while in California they missed by over 5%. Revenues in Kentucky were down almost 10% and in Indiana they were off 14%. You get the idea.

Many states have laws saying they must balance the budget. With plunging revenues this must mean they lay off workers. Incidentally, education was one of the only job sectors to show growth in the last B(L)S employment report. If that was ever true -- which is doubtful -- it certainly is not a sustainable trend, since state and local taxes pay teacher's salaries.

In Illinois some state colleges are not receiving promised payments from the state government:

"We have run our entire system for nearly a half a year with no payments from the state," Poshard said. But if the state doesn't kick in with its payments -- which comprise approximately 60 percent of university budgets -- the university will run out of money to make its payroll by December.

In New Jersey, payrolls are also in jeopardy:

"Things are probably worse than most people believe," state Sen. Mike Doherty told me the other day. "It’s questionable if we’ll even be able to meet payroll in a few weeks."

Zero Hedge summarizes it this way:

Hopefully the administration by now has realized that unless it wants uprisings (either metaphoric or literal ones) it has to tackle the state situation. As today's Census Bureau update points out... total state revenues dropped by 16% to $1.678 trillion, even as total expenses increased by 6.2% to $1.736 trillion.

On the plus side, lottery and liquor sale revenues are up.