Leave it to the federal government to turn a pandemic that shuts down businesses and drives Americans into bankruptcy into a way to make money. The government earned record “profits,” (a.k.a. your tax dollars), during its most recent fiscal year (October 1, 2020 to September 30, 2021). The Wall Street Journal reports:
Washington has had an excellent pandemic. If you doubt it, look no further than the Congressional Budget Office’s summary for revenues and outlays for fiscal 2021, which ended on Sept. 30. The federal government has never had it so good—literally.
The budget gnomes estimate that federal receipts rolled in at a record $4.05 trillion for the year, the first time annual revenues have exceeded $4 trillion. This is not a record to be proud of—like breaking the four-minute mile. Receipts rose 18%, or a remarkable $627 billion, in one year.
Nearly every revenue stream chipped in more, except for payroll taxes, which were flat. Individual income taxes rose $443 billion, or 27.5%, to reach $2.05 trillion. That’s about 9% of the entire U.S. economy. As CBO’s monthly budget summary dryly observes, “that increase most likely reflects higher total wages and salaries, particularly among the relatively high-income workers who are subject to higher tax rates on earnings.”
Translation: The rich had a good year, but they also paid a huge fiscal dividend in taxes. Question for President Biden : Does $2 trillion qualify as a “fair share”?
Corporate income taxes also rolled in at an astonishing rate, rising by 75% for the year, or $158 billion to $370 billion. That reflects robust corporate profits, but keep in mind this revenue boom came with the current 21% top corporate tax rate that passed with the GOP tax reform in 2017. Mr. Biden and Democrats keep telling Americans that corporations aren’t paying enough, even as the corporate tax boom gives them more money to spend.
Even the Federal Reserve contributed to the Beltway boom, increasing its remittances to the Treasury by 22%, or $18 billion, to $82 billion. That’s the money the Fed earns from its vast bond holdings, which have soared during the pandemic and continue to increase despite the economy’s rapid growth of the last year. This is another reason the political class doesn’t want the Fed’s “emergency” policies to end.
For readers who still care about budget deficits—and we don’t mean anyone in Congress—the revenue boom was swamped by another record spending increase. Outlays rose 4% in the fiscal year, or $265 billion, to $6.82 trillion. That’s 30% of GDP in federal spending alone. Some of that will ebb as pandemic emergency payments expire—that is, unless Democrats succeed in making them permanent or adding new benefits as part of Mr. Biden’s $5 trillion entitlement plan.
All of this raises the question: With tax revenues coming in like a gusher, and the economy slowing from supply-side shortages, why raise taxes at all? In particular, why raise tax rates when the current rates seem to be capturing the profits of companies and the income of individuals well enough?
There’s no fiscal or economic logic to it, so the likely answer is simply to punish Americans who make more than what Mr. Biden thinks is “fair.”
Read more here.
