In Pursuit of Revenues

Federal Income Tax Reform

Gregory L. Prescott, CPA, CGMA, CMA, CFM, and James R. Hardin, CPA, PhD

According to the U.S. Treasury Department, the federal budget reported surpluses averaging $140 billion annually between fiscal years 1998 and 2001. In the next seven years, the federal budget incurred deficits averaging just over $300 billion annually. The financial meltdown that began in late 2008 resulted in a budget deficit of $1.4 trillion in fiscal year 2009, followed by annual deficits in the $1.3 trillion range through fiscal year 2012. Most economists and the major credit rating agencies agree that the country cannot continue to sustain budget deficits that match the magnitude of recent years or those currently projected by the Congressional Budget Office (CBO) for the near future. In late February, Fitch Ratings announced that the United States “must make credible progress this year” on a long-term deficit-reduction strategy or it would risk losing its top AAA credit rating (Tim Mullaney, “Fitch Warns U.S. Risks Losing AAA Debt Rating,” USA Today, Feb. 27, 2013). Fitch Ratings further indicated that the key driver of the U.S. credit rating “is the future path of government deficits” and the level of public debt.