Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Uncle Sam Has a Bang-Up Tax Season


Tax rolls show corporations appear to be doing 7.6% better than last year.

The US government has had a blockbuster tax season. The numbers are stunning.

Withholding is collected throughout the year with no relation to the tax due date. So far for April, withheld taxes are running 5.7% of last April through the 18th. That suggests that things are going well for the US economy so far this month. Non-withheld, individual income taxes, which are affected by the due date, were up a whopping 55.6%. However, that's attributable to last year's conditions, not this year's, so let's not get too excited about that. Much of it was due to capital gains taxes, and we know how often they come along (cue Stevie Wonder).

On the other hand, corporate taxes collected in April are relevant to this year. The mid-April due date for corporate taxes is for estimated taxes for the first quarter of 2012. Corporate tax for the full year 2011 was due on March 15. Therefore, the April number is a clear indication that, so far this year, corporations appear to be doing 7.6% better than last year.

Excise taxes for the first quarter aren't due until April 30, but I suspect many businesses pay along with their quarterly estimated taxes, so this may be a decent early indicator for these taxes for Q1. Excise taxes are collected on:
  • Environmental products, such as domestic petroleum oil spills and ozone-depleting chemicals
  • Communications and air transportation taxes
  • Fuels used in business
  • Purchase of trucks, trailers, semi-trailers (at a percentage of the sales price)
  • Ship passenger tax (per passenger)
  • Manufacturers Taxes on coal, taxable tires, gas guzzlers, etc.
  • Foreign insurance taxes
  • Sport fishing equipment, fishing rods, poles, outboard motors, etc.
  • Floor stocks tax on ozone-depleting chemicals
These taxes would also appear to be an indicator of the direction of business conditions for the first quarter, although not the degree. So far, they're up 10.2% in April.

Refunds are tied to last year, and they're down versus 2010, suggesting that taxpayers owed more last year than in 2010 as the economy did better. No surprise there.

Interestingly, Uncle Sam has spent much less so far this month than last April to this point. The lower outlays and increased tax collections have sharply reduced the deficit for the month so far. I'm sure the government will make up that difference in outlays toward the end of the month.

There's no reason to expect material reductions in outlays yet. But just wait until the sequesters hit next year, if there's no budget compromise. In that case, the austerity, and the impact on the economy, will be ugly. Any reduction in government spending and/or increase in taxes will directly reduce economic activity. As the election draws closer, it will be a game of chicken. Should be interesting.

Finally, the Treasury is flush with cash. That, and the strong tax collections should keep Treasury supply at or below expected levels at least for the next few weeks. There are hints, however, that recent economic momentum may be slowing, and that will impact the budget.

Editor's Note: Lee Adler is a financial markets analyst based in Florida. This article originally appeared on his website, The Wall Street Examiner.

Twitter: @Lee_Adler
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos