Says the federal government is earning more tax revenue now “than any other time.”
U.S. House Majority Whip Kevin McCarthy, R-Calif., during an interview Monday on Fox News
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There’s no need to raise taxes as part of reducing the nation’s deficit, House Majority Whip Kevin McCarthy says.
Broad, blunt spending cuts known as the sequester were to go into effect Friday unless Congress stepped in. Democrats would prefer to reduce the deficit partly by raising taxes.
But the California Republican told Fox News that any solution should cut spending only — there’s plenty of revenue, he said.
“There’s more money going in than any other time,” he told host Greta Van Susteren on Monday. “In the last four decades, on average, we brought in 17.9 percent of GDP. Now we’re going to bring in 19.1.”
Is the federal government collecting more than it ever has — more than it has on average the past 40 years?
Here’s what we found.
‘The last four decades’
McCarthy talked about “percent of GDP,” a common tool economists use to evaluate the impact of tax policies over time. They prefer to compare tax revenue as a percentage of the overall U.S. economy, the gross domestic product.
It’s fairly easy to see why — using raw numbers wouldn’t account for inflation or changes in population, for example.
Was McCarthy correct that the federal government used to collect, on average, 17.9 percent of the gross domestic product, and that the number will rise to 19.1 percent?
McCarthy’s office pointed us to reports from the nonpartisan Congressional Budget Office.
A recent CBO analysis says that, indeed, federal revenue is projected to rise with changes in the law, such as the recent end to Bush tax cuts on households making more than $450,000 a year.
“Revenues are projected to grow from 15.8 percent of GDP in 2012 to 19.1 percent of GDP in 2015 — compared with an average of 17.9 percent of GDP over the past 40 years,” the CBO’s analysts conclude.
So McCarthy accurately cites a reputable source when he says the federal government has collected an average of 17.9 percent of the nation’s gross domestic product over four decades and now is “going to bring in 19.1.”
(We should mention that even with higher revenue, the CBO projects that deficits will increase “because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt.”)
But what about McCarthy’s claim that “there’s more money going in than any other time”? That’s messier.
‘More money’
So, remember how percentage of GDP is a useful tool for comparing revenue over time?
The government will pull in 16.9 percent in 2013, lower than the average over the past 40 years, according to the Congressional Budget Office. That’s not more money than at “any other time,” as McCarthy said.
What about in 2015, when the government is projected to bring in 19.1 percent?
That’s still lower than revenue as a percentage of GDP in seven of the past 40 years — also not more money than at “any other time.”
Federal revenue as a percentage of gross domestic product
1981: 19.6 percent
1982: 19.2 percent
1997: 19.2 percent
1998: 19.9 percent
1999: 19.8 percent
2000: 20.6 percent
2001: 19.5 percent
Source: Congressional Budget Office
McCarthy’s office told PolitiFact that the CBO projects revenue in 2013 will be the highest ever in raw numbers, at $2.708 trillion, up from $2.568 trillion in 2007.
But that’s not the measure a listener would have assumed from McCarthy’s comments, which focused on revenue as a percentage of GDP — not raw numbers.
Nor are raw numbers a useful way to compare amounts of money over time.
The value of the dollar changes. Population changes. That means revenue in raw terms mostly climbs by default.
Tax policy experts we spoke with called comparisons based on raw numbers “lousy,” “never valid” and “silly.”
“Ignoring the increased value of the dollar and population growth both distort comparisons and make them meaningless,” said Roberton Williams of the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution.
Our ruling
McCarthy told Fox News: “There’s more money going in than any other time. In the last four decades, on average, we brought in 17.9 percent of GDP. Now we’re going to bring in 19.1.”
Starting in 2015, reputable projections show revenue rising to 19.1 percent of GDP, up from an average of 17.9 percent over the past four decades. But McCarthy’s wrong to say that there’s more money coming in than at any other time.
In fact, the nation collected more than 19.1 percent of GDP in seven of the past 40 years. To say that the nation will collect the most revenue in raw dollars in 2013, according to tax experts, is meaningless.
We rate McCarthy’s statement Mostly False.
