President Joe Biden has claimed that the new Inflation Reduction Act, which now has nothing to do with controlling runaway inflation as Democrats make clear, would bring “fairness” to the tax system.
It does so by punishing high earners and corporations, and pledges to unleash 87,000 new IRS agents on the American people, striking fear in those with even the most modest incomes.
The irony of Biden’s argument for this woefully misnamed law is that it’s completely unnecessary.
That’s because tax revenues are already flowing into Washington at an unprecedented pace, one analyst claims.
Writing on Friday in the New York Post, Brian Riedl of the conservative Manhattan Institute notes that America’s deficit is soaring because of an inability to control spending, not because revenues have declined.
“This year, Washington will collect $4.8 trillion in tax revenues — $1 trillion more than it collected in 2019,” Riedl wrote. “In fact, Washington has almost never been so awash in taxes.”
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Since 1960, he noted, federal tax revenues have hovered on average of about 17.4 percent of the economy. This year, that’s expected to rise to 19.6 percent — the second-highest level since World War II.
Looking out over the next decade, Riedl added, tax revenues are projected to average 18.1 percent of the economy — just below the highest 10-year period in American history.
That is happening, by the way, even with the tax cuts enacted by former President Donald Trump still in place. Riedl maintained Trump’s cuts, if extended, will have no adverse effect on revenues.
“Today’s income taxes already exceed levels that in the past had induced tax revolts,” said Riedl.
He noted that over the last 50 years, the federal income tax reaped about 8 percent of the economy on average. Tax cuts enacted by President Ronald Reagan were a response to income tax revenues going from 7.4 percent of the economy to 9i.1 percent.
“This year,” Riedl added, “Washington will collect a record 10.6% of the economy in income taxes, and a projected 9.8% of the economy for the next decade. This is a nearly unprecedented level of federal taxation.”
Riedl destroyed another liberal trope by pointing out the wealthy still bear most of America’s tax burden. The top one-fifth of earners will make 60 percent of the income this year, but they will also pay 76 percent of all federal taxes, including 93 percent of all income taxes.
The “much-maligned” 1-percenters, he added, will make 19 percent of the income, but dole out 29 percent of all federal taxes, and 43 percent of all income taxes.
“And yet, the Inflation Reduction Act adds even more taxes and audits to pay for more spending,” Riedl wrote.
Meanwhile, Biden and the Democrats have blown up their own rhetoric about the IRS and that $80 billion and those 87,000 agents it gets in the new bill.
Just 10 percent of that funding will target investments to make the IRS more modern and efficient, Riedl noted. “The majority of the massive $80 billion appropriation will instead go toward enforcement and audits,” he added.
Riedl quoted John Koskinen, who led the IRS under Presidents Barack Obama and Trump, who noted that $80 billion triples what the IRS actually needs to reclaim adequate auditing capabilities. “I’m not sure you’d be able to efficiently use that much money,” Koskinen said. “That’s a lot of money.”
“The IRS does not need tens of thousands of new agents simply to audit America’s 800 billionaires, or even its millionaires,” Riedl wrote. “Despite promises to the contrary, audits are likely to rise across-the-board. Yes, tax enforcement matters, and the IRS must be able to sufficiently enforce the tax code. However, the IRS history of heavy-handed audits of innocent taxpayers, and the political targeting of conservative organizations, do not inspire confidence.”
“Perhaps instead of squeezing taxpayers with rising taxes, lawmakers could address the soaring spending driving deficits,” he argued.
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Even with the pandemic “spending spree,” Washington is expected to spend a peacetime-record 23 percent of the economy over the next decade. And depute the new revenue promised in the Biden bill, the nation can expect $16 trillion in new deficits.
America’s payment to cover the interest costs on the federal debt will reach a record 3.3% of the economy, which is more than the entire Defense Department, Riedl observed.
“President Biden brags that the Inflation Reduction Act will reduce deficits. Yet its modest deficit reduction would not begin until several years down the road, and depends in part on new spending expiring in three years (fat chance),” he continued.
“In the meantime, Congress has also recently passed a semiconductor bill that could cost $280 billion, and a veterans’ bill that could end up costing more than $600 billion over the decade due to scoring gimmicks. In other words, Congress is seeking more taxes to finance more spending, even at a time of surging debt.”
“Taxpayers better hold on to their wallets.”
The views and opinions expressed in this commentary are those of the author and do not necessarily reflect the opinion of The Free Press.