UNCLE SAM IS ADDICTED TO OVERSPENDING
Tax revenue in 2013 will be lower (despite the just passed tax increase), and government spending will be higher than forecast. It's an easy prediction -- and this is why.
The capital gains tax rate and the tax on dividends is being raised from 15 percent to 23.5 percent for higher-income people. There are many studies, including those made by the U.S. Treasury, showing that the revenue-maximizing rate on capital gains is less than 15 percent.
Taking a capital gain is often a discretionary event, and it is well documented that capital gains realizations fall as the rate is increased. Thus, this rate increase will be a net revenue loser for the government.
Expenditures will also be far higher than forecast. The simple fact is the Obama administration and Congress, particularly the Democrats, are unable to resist the urge to spend more.