More evidence that every prediction you hear about taxes is intended solely to confuse you, nothing more. This, from the New York Times (free for now...)

An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.

Unexpectedly steep rise in tax revenues from the wealthy? But I thought W's sinister tax cuts were just fancy ways of cutting taxes for his rich cronies while taxing the lower middle class into poverty? I guess not...

The rest of the article quotes various partisans that bicker back and forth with the numbers: numbers are up, but haven't reached the 2000 levels yet (right - 2000 was the peak of the largest peacetime expansion ever), numbers are up, but not as a percentage of GDP (why would you measure taxes against production? We tax income, not production, right?), etc., etc.

Here's the key quote as regards taxes:

One reason for the increased volatility may be that, contrary to a popular assumption, a disproportionate share of income taxes is paid by wealthy households, and their incomes are based much more on the swings of the stock market than on wages and salaries. About one-third of all income taxes are paid by households in the top 1 percent of income earners, who make more than about $300,000 a year. Because those households also earn the overwhelming share of taxable investment income and executive bonuses, both their incomes and their tax liabilities swing sharply in bull and bear markets.

That's mostly right, except for the bull & bear markets part. You pay capital gain taxes when you sell a stock. There's more selling in a bear market, but in a bull market, sales occur at higher prices - causing larger capital gains & higher tax revenue, even though the tax rate is the same. You also pay taxes on dividends (one of the rates the Bush plan cut). Dividends come in bull and bear markets, although corporations tend to raise their dividends when things are going well, so bull markets will see higher taxes, but it's very rare that a company lowers its dividend once it's been raised, so I don't expect this number declines much in a bear market.

Bottom line: both parties are obfuscating here.

The Democrats spent years telling us that Bush's tax cuts were only for the rich, quoting us bogus statistics about how someone making over $200,000 per year would receive tens of thousands in tax cuts, while someone making $75,000 per year would receive a few hundred bucks. Now that it turns out the rich are paying significantly more in taxes, their gripe is that it's not growing fast enough. I assume they'd be against further "cuts for the rich" to make it grower faster, though, huh?

The Republicans are spinning this good news into a claim that the deficit will be smaller than originally predicted. Someone needs to slap them in the face and tell them that increased revenue is not a valid excuse for unbelievable excesses in spending, and that faster than expected revenue increases are a golden opportunity to run budget surpluses, as opposed to smaller-than-expected deficits (cf. Bill Clinton's last two years in office). While they are correctly touting this as a reason to make the tax cuts permanent, they are also using it as a matador's cape to distract us from the runaway spending problem they've created.

Spinners, one and all. But, the policy itself seems to have been sound, so it's good to know that at least it could have been worse...