Tag Archives: tax revenues

Exactly Who Pays Our Taxes?

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On Monday, The Washington Examiner posted an article about the progressive tax code in America. Just for the record, we are already overtaxing the wealthy.

The article reports:

The ultra-wealthy are paying the highest average share of taxes, according to a new analysis from a nonpartisan congressional committee.

The Joint Committee on Taxation found that the top 1% of earners pay an average tax rate of around 30% in combined income, employment, and excise taxes, double or more than the share of taxes that the bottom 80% of the country pays. Additionally, the top 5% of earners in the United States make up a whopping 46% of the country’s tax base.

According to the Economics Help page:

The Laffer Curve states that if tax rates are increased above a certain level, then tax revenues can actually fall because higher tax rates discourage people from working.

This is a picture of the Laffer Curve:

The Reagan tax cuts increased federal revenue. Unfortunately, the Democrats who controlled the House of Representatives offset those increases with increased spending. The Trump tax cuts also increased federal revenue, but again the House of Representatives increased their spending. At some point we need to realize that we don’t need more taxes, we need less spending.

The Biden administration is currently pushing for a tax on unrealized capital gains. The talking point is that it would only impact a very small number of taxpayers. Just for the record, this was the argument used to justify the establishment of a federal income tax in 1913.

What Happened To The Revenue?

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On Tuesday, Issues & Insights posted an article about tax revenues under the Biden administration. The Laffer Curve is at work.

The article reports:

Friday afternoon, the Treasury Department reported that, despite a growing economy and low unemployment, the federal deficit shot up by $320 billion in fiscal year 2023. That’s unusual. But what’s really bizarre is why the deficit exploded.

According to the report, overall spending actually dropped by 2% compared with 2022 as the COVID-19 spending splurge abated.

What drove up the deficit this year was a sudden and completely unexpected 9% drop in tax revenues. Not only did revenues come up hundreds of billions lower than last year, but they were well below what everybody expected them to be.

At the start of the year, the Treasury Department and the Office of Management and Budget projected revenues for fiscal 2023 at around $4.7 trillion. The Congressional Budget Office figured it would be $4.8 trillion.

The actual amount: $4.4 trillion.

In other words, there’s between $300 billion and $400 billion worth of missing tax revenues.

…In a normal world, a better-than-expected economy would result in more revenues for the federal government, not less.

Keep in mind, too, that it’s exceedingly rare for tax revenues to drop from one year to the next. In fact, it’s happened only eight times since 1960 – always around an economic downturn – and the average decline was just 4.7%. Even when the COVID lockdowns caused a massive recession, revenues only dipped by 1.2% in 2020. (Revenues plunged nearly 17% during the financial crisis.)

It’s also worth noting that revenues continued to climb after the Kennedy, Reagan and Trump pro-growth tax cuts went into effect.

The article concludes:

But that’s not what happened this year. The federal government is still tremendously bloated – spending in 2023 will be 43% higher than it was the year before COVID-19. The national debt now tops $33 trillion. Social Security and Medicare are racing toward insolvency. Biden is pushing Congress for another $100 billion to finance the never-ending war in Ukraine and provide aid to Israel.

Did the Biden administration overcount revenues in the past two years to paper over the colossal spending increases? Is the White House goosing employment and other economic data today to make the economy look better than it is? Is Biden’s budget team just hopelessly incompetent?

Preston Bashers of the Heritage Foundation speculates that the shortfall could be the result of a sharp drop in capital gains tax revenues, the explosion in “green” tax credits, and other factors.

Somebody in the Biden administration should be made to explain what happened.

In the meantime, we’re now deeper in debt than ever. Way to go Brandon.

I am not sure, but I don’t believe there is anyone in the Biden administration who has actually run a business. We need to go back to the days of putting a businessman in the White House–not a politician.

The Question Of The Day

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On Wednesday, Issues & Insights posted an article asking the question, “If Biden’s Economic Plan Is ‘Working,’ Why Are Tax Revenues Plunging?” That is a very good question.

In 2018, Investors.com reported:

Taxes: Critics of the Trump tax cuts said they would blow a hole in the deficit. Yet individual income taxes climbed 6% in the just-ended fiscal year 2018, as the economy grew faster and created more jobs than expected.

The Treasury Department reported this week that individual income tax collections for FY 2018 totaled $1.7 trillion. That’s up $14 billion from fiscal 2017, and an all-time high. And that’s despite the fact that individual income tax rates got a significant cut this year as part of President Donald Trump’s tax reform plan.

Income Taxes After Trump Tax Cuts

True, the first three months of the fiscal year were before the tax cuts kicked in. But if you limit the accounting to this calendar year, individual income tax revenues are up by 5% through September.

Other major sources of revenue climbed as well, as the overall economy revived. FICA tax collections rose by more than 3%. Excise taxes jumped 13%.

As John Kennedy once said (as he lowered taxes), “A Rising Tide Lifts All Boats.”

The article at Issues & Insights reports:

President Joe Biden loves to brag about the masterful job he’s doing managing the nation’s economy, as he did on Tuesday when cheering the latest inflation news – which saw food prices up almost 7% from last year – and “our historic economic progress.”

The day before that, the Treasury Department released its monthly financial statement, which shows that the federal deficit for this fiscal year has already topped $1 trillion and that’s a big factor behind this is a sharp reduction in federal tax revenues from last year.

Wait, you say. If the economy is “strong” and “historic” as Biden claims, why are revenues cratering and deficits exploding?

Or, as the Washington Times put it: “Uncle Sam’s income has plummeted this year, sending the federal deficit spiraling deeper into the red than analysts had predicted and leaving officials grasping for answers.”

The article concludes:

…But what we can say for certain is that the only thing “historic” about the current economy is how delusional the president and the media are about what is actually going on.

You can only lie to people about how good the economy is for so long when they are feeling inflation every day in gas and supermarket prices.