Latest IRS Statistics Reveal Sharp Decline In Capital Gains Revenue

by Mike Godfrey, Tax-News.com, Washington

24 April 2003

In the Internal Revenue Service's (IRS) newly published Statistics of Income Bulletin, preliminary data for 2001 tax returns has shown a sharp decline in capital gains tax revenues, confirming analysts' expectations.

The statistics reveal that income from capital gains receipts was $326.42 billion in 2001, representing a 42.5% decrease on the previous year's $587.63 billion total. It is thought that this could be the largest year on year fall in revenues since 1987. The data also detailed a decline in the number of people reporting stock dividend income- which stood at 32.6 million in 2001- down by 4.4%, while actual dividend income shrank by 18.4% to $116.04 billion.

There was however, a slight increase in the number of tax returns filed in 2001 compared with the previous year. The IRS received 130.5 million individual returns last year, up 0.9%. Nevertheless, during this period, taxable income decreased by 5.2% to $4.3 trillion and total income tax decreased by 8.6% to $892.3 billion. Alternative minimum tax revenues fell 32.5% to $6.0 billion.

The figures reflect the worsening fiscal situation currently facing the federal government, and paint a picture of the amazing reversal of fortunes for the US Treasury, which has moved from budget surplus to a projected record deficit inside four years.

Government opponents attribute this fall in revenues to the 10 year $1.35 trillion tax cut enacted in 2001, and the newly published IRS figures are unlikely to prompt critics to accept President Bush's latest plan for a further $726 billion package of tax cuts. The federal government, however, prefers to cite the 2001 recession and escalating military spending as the reasons for the growing shortfall.

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