Tax receipts & the Economy

Among the most widely neglected indicators of the economy are the tax revenues data series published in the Monthly Treasury Statements of Receipts and Outlays. We track the data and believe they provide useful insights into the economy in general and into consumers and profits in particular. What we are seeing in the latest data through August is surprising strength in the growth of individual income tax receipts and significantly weakening growth in corporate profits receipts. To smooth out seasonal volatility, we track the 12-month moving sums. Let’s review:

(1) There is certainly no soft patch or double dip in individual personal income tax receipts. The 12-month sum rose to $1,084.4 billion during August. That’s up 21.3% y/y, which is the highest growth rate since the summer of 1979. This series is highly correlated with the yearly percent change in nominal wages and salaries in personal income.  

(2) On the other hand, the growth in corporate profits tax receipts is slowing significantly. Over the past 12 months through August, these receipts totaled $191.2 billion, and are up 11.7% y/y. That’s down sharply from the most recent cyclical peak growth rate of 60.9% during January. The growth rate of the 3-month sum of these receipts was down 7.0% on a y/y basis.