What Made Receipts Boom and When Will They Go Bust

Federal revenues surged in the past three fiscal years, with receipts growing much faster than the economy and nearly all of the growth in the revenue due to individual income tax receipts. The 1994-7 increase in personal income tax liabilities relative to gross domestic product (GDP) resulted from taxable incomes growing faster than GDP and a significant increase in the effective tax rate on taxable income, each accounting for about half of the increase in liabilities relative to GDP. Over the next ten years, offsetting effects from these phenomena should prevent liabilities from growing further as a percent of GDP.