Taxes and Spending Still Up
by Brian Riedl

The Highlights of the Office of Management and Budget Mid-Session 2007 review include:

• After increases of 15 percent and 12 percent the past two years, tax revenues are projected to increase an additional 7 percent in 2007.
  
• By historical standards, Americans are now overtaxed. Total 2007 tax revenues (18.8 percent of GDP) and individual income tax revenues (8.5 percent of GDP) are well above their historical averages, and even above their averages in the 1990s.
  
• The inflation-adjusted 2004-2007 revenue surge of 25 percent represents the largest three-year tax revenue surge since 1966-1969.
  
• Total 2007 federal spending is estimated to be 20.2 percent of GDP, up from 18.5 percent when President Bush took office. Had spending remained at 18.5 percent of GDP, this year's budget would show a $35 billion surplus. The tax cuts did not create the 2007 budget deficit; rather, an enormous increase in spending created the deficit.
  
• Health care spending is skyrocketing. The MSR projects that Medicare will grow 14 percent this year (on top of 12 percent growth last year) and that Medicaid and SCHIP will grow 9 percent. Combined Medicare and Medicaid spending now exceeds Social Security spending.

Brian Riedl is Grover M. Hermann Fellow for Federal Budgetary Affairs at The Heritage Foundation. The full “Mid-Session Budget Review Shows Surging Tax Revenues” can be found at http://www.heritage.org/Research/budget/wm1549.cfm.