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October 12, 1999
 

Honorable John R. Kasich
Chairman
Committee on the Budget
U.S. House of Representatives
Washington, D.C. 20515

Dear Mr. Chairman:

Thank you for your letter of October 12, which asked about the level of current tax collections and how it compares, as a percentage of GDP, with collections in previous years. Your letter also asked how much revenues have grown over the past five years and how much they are expected to grow during the next five and 10 years.

Our preliminary estimate of receipts for fiscal year 1999 (as reported in CBO's October Monthly Budget Review) is $1,826.5 billion, or 20.6 percent of projected GDP for 1999. (Actual GDP for the final quarter of the fiscal year is not yet available.) Those receipts represent the highest percentage of GDP in four decades (see Table 1).

Over the past five years, revenues have increased by 45.1 percent, or 7.7 percent per year on average. Within that average, however, growth over the past five years has varied. Revenues grew by 6.1 percent in fiscal year 1999, down from the 8.1 percent average growth rate of the previous four years. In addition, the five-year figure begins with fiscal year 1994, a time when the economy had not fully recovered from the contraction of 1990 and 1991. CBO expects revenues to grow by 20.4 percent (3.8 percent per year) during the next five years and by 49.2 percent (4.1 percent per year) during the next decade. Those projections begin with economic activity high relative to its sustainable potential, leaving less room for economic growth. Nevertheless, as a percentage of GDP, revenues are expected to remain above 20 percent during the next decade.

Sincerely,

Dan L. Crippen
 

Enclosure