Lewis Morris / June 9, 2022

Record Tax Revenue Mystifies the ‘Experts’

Democrats seem reflexively unable to acknowledge the main reason for our nation’s recent windfall.

The federal government is awash in record tax revenue, and the “experts” can’t seem to figure out why.

Individual income tax collection is on target to reach $2.6 trillion by the September 30 end of the fiscal year. That represents 10.6% of the economy, up 9.1% over 2021, and an all-time record for the graduated income tax amendment passed in 1913. Total tax revenue, including corporate and property taxes and other sources levied outside of income, will total $4.4 trillion.

If only those sows crowding around the federal trough could exercise a bit of spending discipline — even a little bit — we could finally reduce that gargantuan $30 trillion national debt instead of continuing to grow it.

The Congressional Budget Office has speculated on the reasons for the bump in tax revenue: a larger share of capital gains having been taxed at short-term rates up to 40.8% instead of 23.8%; income having grown faster than forecast in the higher tax brackets; and high earners having shifted their income to other areas in anticipation of the steep Build Back Better tax hikes that never — thankfully — materialized.

Joe Biden’s $1.9 trillion American Rescue Plan did pass, however, and it mucked up the works. Consumers put their tax-free stimulus money back into the economy through purchasing goods and services, while states injected their share into workers and the pandemic response. “We may have just taxed the borrowing the federal government did,” said Douglas Holtz-Eakin of the American Action Forum to The Wall Street Journal.

This tax revenue bubble may be a one-time event considering these factors, but many politicians don’t want to address the elephant in the fiscal room, which is the main reason for higher tax revenue: the Tax Cuts and Jobs Act of 2017, a.k.a. the Trump tax cuts.

Democrats fought tooth and nail against those tax cuts, both in the media and in Congress. House Speaker Nancy Pelosi called it a “GOP tax scam,” while Joe “Deficit Hawk” Biden claimed the tax cuts would add $2 trillion to our deficits over a decade.

Naturally, they’re wrong. Not only did the Trump tax cuts lower taxes and raise tax revenue, they exceeded all expectations.

Before the 2017 tax cuts, the CBO projected $40.7 trillion in total tax revenue between 2018 and 2027. Shortly after their passage, the CBO projected a $900 billion loss in tax revenue over the same period. But now in 2022, total tax revenue is expected to be $41.3 trillion, $570 billion higher than predicted. And that’s despite a two-year pandemic.

After the Trump tax cuts went into effect, the economy took off. Business investment was up 9.4%, real corporate investment rose 14.2%, and median household income rose more than $5,000 in 2018 and 2019. Then COVID hit. But even the chaos wrought by an epic string of poor government decisions hasn’t completely wiped out the positive results of the tax cuts. Imagine where we’d be now if they hadn’t passed.

Democrats are thus willfully blind to the reasons behind the current sharp rise in tax revenue. They are viscerally opposed to tax cuts, and all they know is that they want to spend more of your money. Thus, they’re already pivoting to use this windfall as an excuse to raise taxes and spend even more — which is what we’d expect from a party that has no idea how the economy works.

Apparently, the exodus of workers from high-tax states to low- and no-tax states is a mere coincidence, an occurrence devoid of meaning to these leftist spendthrifts. In fact, the American people are voting with their feet. They’re flocking to places like Florida, Texas, and Tennessee in record numbers after fleeing California, New York, and Illinois.

That’s because they know that the formula for a robust economy is lower taxes and less government spending — and it always has been.

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