On Tuesday, Just the News posted the following headline:
Federal revenue falls $416 billion from this time last year despite passage of IRA
This is the Laffer Curve:
What is illustrates is the fact that after the government raises taxes past a certain amount, tax revenues fall. That is because the people whose taxes have been increased have more incentive to find ways to move their income to places that are taxed less.
For example, 93.1FMWIBC reported the following in April 2021:
Mr. Biden and his wife, Dr. Jill Biden, routed their book and speech income through S corporations, according to tax returns the couple released this week. They paid income taxes on those profits, but the strategy let the couple avoid the 3.8% self-employment tax they would have paid had they been compensated directly instead of through the S corporations.
Questionable, but probably legal.
Just the News reports:
Scott Hodge, president of the Tax Foundation, told Just the News that some of the tax credits in the IRA, like the clean vehicle credit and solar tax credit, are in effect right now and will cost billions. “In the short term, the IRA is generating little new revenue because of the delays in implementing the 15% minimum tax so the green energy credits are costing taxpayers billions,” he said.
Hodge pointed out that the IRS enforcement plans were delayed because of the debt ceiling deal reached by President Biden and House Speaker Kevin McCarthy, adding that the IRS hasn’t fully implemented the 15% minimum corporate tax until the agency finalizes the enforcement rules.
“If we look at Treasury’s monthly report, the drop in individual income tax receipts is the biggest factor for the overall decline in federal receipts. They are down by $438 billion alone,” Hodge told Just the News.
“My guess is that much of that may be due to the slower economy and lower capital gains tax collections because of the slumping stock market. Corporate income taxes are higher than last year as are payroll taxes such as Social Security, so those are not a factor,” he added.
There is a tipping point. When corporate taxes get too high in America, corporations go elsewhere.