United States on Track for Record Tax Revenues

The nation is on track for record-high tax revenue at a time when Democrats say the solution to high deficit levels must include even more taxes.

The Congressional Budget Office (CBO) forecasts federal tax revenues are set to hit a record $2.7 trillion this year, going past the previous record of $2.6 trillion that was set in fiscal year 2007, before the recession began.

However, the current sequester has been caused by the political parties being in a deadlock. While Democrats argue that more tax revenues are the solution to the nation's fiscal woes, Republicans say the deficit problems are caused by too much spending, The Christian Science Monitor reports.

According to the CBO, tax revenue will total 16.9 percent of the gross domestic product this year, compared with 18.5 percent in 2007. The tax revenues will likely return to 18 percent of the GDP next year, returning to what has been the average level since 1973.

However, simply cutting either taxes or spending may not result in the right level of tax increases, and as programs including Medicare, Medicaid, and Social Security are resulting in even more federal spending.

CBO Director Douglas Elmendorf told private-sector economists Monday the nation will either need to increase taxes or cut government benefits. A third way to solve the problem, he said, would be to combine both, a difficult choice for politicians and their constituents.

Sequester spending cuts are coming from the discretionary side of the budget, which funds items such as national defense and scientific research. However, the spending arguments over discretionary cuts are likely just part of a bigger debate about entitlement spending and tax increases.