Yet the deficit was still almost $500 billion.
Clearly, the government continues to spend too much. We should tax enough to fund the legitimate functions of government, like national defense, homeland security, public health and others, but no more.
The new record also shows us that, absent policy changes, the amount of revenue the government takes out of the private sector keeps getting bigger. Tax revenue grows as income grows, no matter what kind of tax system is in place. A progressive system like ours, with higher rates on higher levels of income, results in a bigger increase in revenue during economic expansions than a flat rate system would. Alternatively, when the economy enters a recession, a progressive system reduces revenue intake at a faster clip.
Tax revenues are rising even faster than the sluggish economic should yield. Tax revenue increase nearly $247 billion in fiscal year 2014 from fiscal year 2013. Contributing to that growth were two large tax increases passed during President Obama’s tenure, namely the tax hikes in Obamacare and the fiscal cliff tax increases in 2013 which allowed the expiration of certain Bush-era tax cuts.