Tax Collections From Wealthy Are Saving Government
Call it proof that the system is working—or proof that the system is broken—but taxes paid by the nation's top earners are putting government back in the black.
According to the Congressional Budget Office, income-tax collections for October to April were up 20 percent compared to last year, bringing in an extra $132 billion.
That's higher than most projected—and a big reason the deficit seems to be a shrinking problem (at least in the short term)— even as Congress and the President fight over solutions.
(Read More: April Surplus Up, Year-to-Date Deficity Down: CBO)
The CBO said part of the increase was due to withholding (about $99 billion) as well as the higher payroll tax. But since the top one percent of earners pay more than 35 percent of the nation's federal income taxes, much of the increase was driven by top earners, especially those who shifted income into 2012 to avoid the tax hike in 2013.
The CBO said that non-withheld receipts (i.e., payments not directly from payroll withholding) surged by 30 percent, or $80 billion—much of that from "high earners" income shifting into 2013, the CBO said.
The CBO said that this income shifting was "substantially greater" than it expected. (See here for my "I told-you-so" where I predicted that the income shift by the wealthy was being overlooked by government forecasters.)
It's not just the federal government that's benefiting. Higher tax receipts from the wealthy have eased budget pressures in California, New York, and other high-tax states. California is on track to collect $4.5 billion more in personal income taxes than it projected after its recent tax hike, according to the state's Legislative Analyst's Office.
(Read More: 5 Fiscal Secrets Buried in Obama's Budget)
Overall state tax revenue on individual income was at $280.4 billion for 2012, up 8.1 percent from 2011.
Why is there so much money coming in from the wealthy? Higher rates are part of the reason. Yet the main driver is the economy and stock markets. The wealthy are back in boom times—and that's helping to bail out governments from the recession.
—BY CNBC's Robert Frank. Follow him on Twitter: @robtfrank