Economists Cut U.S. Growth Forecast Again

From Reuters.com:

Projected U.S. economic growth for the rest of this year and next was revised down for a third month in a row by a panel of about 50 economists.

The latest Blue Chip Economic Indicators report on Thursday said the weaker outlook for second-half 2010 growth stemmed from lower expectations for consumer spending, business investment and private construction.

"Growth in the current quarter now is expected to be little better than the disappointingly soft advance registered last quarter," the survey said. Gross domestic product grew at a meager 1.6 percent annual rate in the second quarter, less than half the first quarter's 3.7 percent rate.

But the economists' group said that, after the mid-year soft patch, it saw a gradual improving trend setting in with growth slightly surpassing trend rate in the second half of 2011.

Blue Chip defines GDP trend growth at about 2-3/4 percent a year.

"For all of 2010, real GDP now is forecast to increase 2.7 percent on a year-to-year basis, 0.2 of a percentage point less than a month ago and 0.6 of a point less than predicted in June," the survey said.

U.S. Incomes Tumbled in 2009

From the Wall Street Journal:

Personal income took a hit in most of the U.S. last year with the only gains coming from government support, according to new data from the Commerce Department.

Income declined in 223 metro areas last year, increased in 134 and was unchanged in nine regions. Even though prices declined last year — down 0.2% from a year earlier as measured by the national price index for personal consumption expenditures — incomes fell even more. On average, personal income dropped 1.8% in 2009, following a 2.7% increase in 2007.

In areas that saw gains, most of the increases came from the government in one way or another. In 77 of the 134 regions that saw incomes increase, the growth came from transfer receipts such as unemployment benefits or Social Security payments. In most of the remaining 57 metro areas, the gains were concentrated in the government sector, the Commerce Department said, including strong growth in military earnings.

Hawaii's Tax Revenue Slips In Recent Fiscal Year

Despite hopes that this would be a year of recovery, the state of Hawaii saw a drop in tax revenue this past fiscal year. Some officials believe this may be an inaccurate calculation, because some tax returns were withheld until the new fiscal year, so not all data has been collected.

According to the Associated Press individual income tax collections rose 14.5 percent in the fiscal year that ended June 30, compared with the same period a year earlier. Similarly, corporate income levy receipts increased 10.2 percent.

Moreover, the state's hotel tax collections rose 6.4 percent in fiscal year 2010.

At the same time, however, general excise tax receipts fell 4.4 percent, an indicator that consumer spending is still lagging.

Collectively, the state's general fund revenue dropped 0.5 percent for the fiscal year, the tax department reported.

The agency cautioned, though, that some tax refunds that normally would have been paid by June 30 were held back until the start of the new fiscal year, a moneysaving move instituted by Gov. Linda Lingle.

Consumer Prices Dip For Second Straight Month

For the second month in a row, American consumers are seeing lower prices on goods, energy bills, and other services. According to Forbes.com, earlier today the Labor Department reported that the Consumer Price Index dropped 0.2% in May, following a 0.1% decrease last month.

It marked the biggest decline since consumer prices plunged 0.7 percent in December 2008. That was a period when the worst recession since the 1930s stoked fears of deflation. The country didn't get stuck in a deflationary spiral then, and probably won't now, economists say.

Deflation is dangerous. It's a widespread and prolonged drop not only in the prices of goods at stores but also real estate, stocks and wages. America's last serious case of deflation was during the Great Depression of the 1930s.

Meanwhile, "core" consumer prices, which strip out volatile energy and food, edged up 0.1 percent in May, after being flat in April. That meant core prices are up only 0.9 percent over the past year - below the Fed's inflation target.

Why 47% of Americans Paid No Income Tax in 2009

One specific statistic got a lot of media attention this last tax season: approximately 47% of Americans would pay no federal income tax in 2009. The Tax Policy Center recently published a report explaining why so many people would be tax-free.

The first factor in so many people not having to pay income taxes is the recession. Many people lost their jobs, or had their pay cut as a result of the economic downturn. The lower your income, the less you pay in taxes. If your income gets low enough, you will not be subject to federal income taxes.

The biggest factor in the high number of people who didn’t have to pay income tax: tax credits and deductions. The increase in deductions, credits and dependent exemptions has lowered tax liabilities almost across the board, often low enough to remove all tax liability.

So, is this a good thing? A bad thing? It’s up for debate. Yes, our country is neck-deep in budget deficits, and more tax revenue would certainly help solve that issue. On the other hand, nearly every family has suffered some economic losses in the last few years, and that extra cash in their pockets goes a long way in helping stay afloat. Either way, I will be keeping an eye on this trend over the coming years to see how it all plays out.

You can read the Tax Policy Center’s full report here.

Without Tax Credit, US Home Demand Keeps Slumping

For the fifth week in a row home loan applications have declined in the US, showing signs of the effect the federal tax credit had on the housing market. According to this story from Reuters.com loan applications dropped to the lowest levels since 1997.

Demand for loans to purchase houses fell 5.7 percent in the week ended June 4 to the lowest level since February 1997, even after adjusting to account for the Memorial Day holiday.

Home buyers have been on hiatus since many rushed to sign purchase contracts ahead of the April 30 deadline for up to $8,000 in federal tax credits.

"It's very worrying," said Paul Dales, U.S. economist at Capital Economics in Toronto, said of the degree of payback from more than a year of federal buyer tax incentives.

"We have to face the unfortunate fact that the housing market really isn't out of the woods yet," he added. "At a time when the economic recovery is still looking fairly fragile it won't be a good thing if people are moving less and spending less on buying new durable goods like fridges and sofas."

Tax Bills In 2009 At Lowest Level Since 1950

According to a new analysis of federal data, the average U.S. taxpayers paid less tax last year then they have since 1950. Federal, state, and local taxes, consumed about 9.2% of personal income in 2009, which is much lower then the 12% average we have seen for the past few decades.

The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.

"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress. The real problem is spending,counters Adam Brandon of FreedomWorks, which organizes Tea Party groups. "The money we borrow is going to be paid back through taxation in the future," he says.

Individual tax rates vary widely based on how much a taxpayer earns, where the person lives and other factors. On average, though, the tax rate paid by all Americans — rich and poor, combined — has fallen 26% since the recession began in 2007. That means a $3,400 annual tax savings for a household paying the average national rate and earning the average national household income of $102,000.

Continue reading at USA Today.com…

Passenger Tax in Alaska Could Drop More than 50%

From USA Today:

Alaska's cruise passenger head tax could end up falling from to $46 to $19.50 on most inside passage itineraries, according to the final bill Alaska Gov. Sean Parnell submitted late last week.

The 59% reduction would more than double the 25% cut that Parnell proposed less than two weeks ago, because the new bill contains a provision to offset local head taxes in Juneau and Ketchikan, of $8 and $7, respectively.

After submitting the new proposal to Alaska's legislature last week, Parnell said in a statement on his website that, "Alaska's tourism head tax structure must be modified to grow our Alaska businesses... Declining visitor numbers and dollars have been felt throughout the state. We must do more to make Alaska a more affordable destination for travelers and create jobs for Alaskans."

Alaska's Legislature has until April 18 to decide on the reduction.

Most major lines operating in Alaska including Princess , Royal Caribbean and Norwegian Cruise Line have reduced capacity to Alaska significantly this year, citing the state's high taxes and fees.

Cruise line executives agreed that if Alaska were to cut the head tax, it would drop a federal lawsuit against the state to repeal the tax, and would increase ship capacity to the state.

Carnival Corp. Chairman and CEO Micky Arison said during a conference call last week to discuss first quarter earnings, that the proposal to cut the passenger head tax was "a good first step," but warned that a buildup of capacity would take years.