Tax Receipts and Unemployment Both Down
June 08, 2017
Many wealthy Americans are deferring tax expenses to 2018 in anticipation of lower taxes following tax reform this year. This may cause the U.S. to hit the debt ceiling earlier. Unemployment is also down, with the U.S. economy seeing very low jobless claims. Further, the ECB is expected to stop cutting rates, with the economy in Europe improving the most since the recession in 2008.
- Tax receipts fall more than expected. Wealthy Americans are deferring more taxes than expected in anticipation of lower taxes in 2018. The CBO’s estimates underestimated the effect that the potential for tax reform would impact the Treasury’s bottom line. This slowdown in revenue means that the U.S. may hit its debt ceiling faster than expected. The ceiling is currently at $19.8 trillion and requires an act of Congress to be raised. Treasury Secretary Steven Mnuchin would like Congress to do so before the August recess, to ensure that the U.S. maintains its strong triple-A credit rating, but a push by the House Freedom Caucus for spending cuts may endanger that request. [Reuters]
Economic Indicators & News
- Unemployment filings fall by 10,000. The seasonally adjusted average stands at 245,000 for last week, staying below 300,000 for the past 118 weeks. Anything below 300,000 is considered to be a sign of a healthy economy. Pairing this data with the fact that unemployment is extremely low at 4.3%, most analysts are predicting that the Federal Reserve will decide to raise rates this month. The jobless claims report also found that the number of individuals asking for a continuation of unemployment support stayed below 2 million, where it’s been for the past 8 weeks. [Reuters]
- ECB ends rate cuts as European economy begins to recover. The central bank has been easing rates since the recession 9 years ago, but after its best economic growth since then, the bank is shifting towards a holding pattern. The ECB, under President Mario Draghi, did revise down expectations for inflation, a metric that has worried the bank recently. Despite this, he announced small, positive revisions to growth forecasts. [Reuters]