Over the last five years, top Democratic leaders have exclaimed from the rooftops that the Trump tax cuts of 2017 were nothing more than a “giveaway to the rich?” Data released by the Treasury Department over the last two years says something very different. The government has recorded record corporate tax receipts year-over-year since 2018. The question is if government tax income is so high, why is the deficit continuing to explode?
In 2017, Republicans, who controlled both chambers of Congress, passed the tax cuts on a partisan vote. They argued that America wasn’t competitive on the world stage because we had one of the highest corporate tax rates in the world at 35%. So, American companies invested in other countries. Five years later, empirical evidence showed that not only did the tax policy work after cutting the corporate rate to 25% and closing special interest loopholes, it fully paid for itself as businesses reinvested in America instead of overseas.
According to a report by the Congressional Budget Office (CBO), the Treasury Department collected $4.9 trillion in fiscal year 2022 (which ran from October 1, 2021, to September 30, 2022). That’s an increase of $1.5 trillion since before the law was enacted. Over the last five years, corporate tax revenues to the government increased by a whopping 40%. In addition, the data showed that the top 1% paid more in taxes as well.
Here are some other tidbits — From October 2021 to March 2022, corporate tax revenues rose 22% over the same period the previous year, which was also a record at that time. Keep in mind this occurred during the pandemic. While inflation also played a role in boosting corporate tax receipts, the data shows that as a share of GDP (which grows with inflation), corporate tax revenues were at their highest level since 2015, at 1.9% of GDP. That beats CBO’s projections for 2022 and the long-run average level of collections over the last 20 years, which was 1.7% of GDP.
In the big picture, the Trump tax cuts encouraged higher growth and corporate tax payments, and it did so with lower tax rates.
So, if the government is bringing in record corporate tax profits, why would the Biden administration want to reverse course and send corporate tax receipts to the Treasury crashing back to previous levels? Surely, they understand increasing the tax rate would de-incentivize business investment in America. It appears that the 30% or 35% tax rate doesn’t equate to more money for the government—just the opposite.
An increased tax rate is a smoke and mirror to satisfy the Left’s desire for impressions over results.
In addition, why is the government deficit running so high if the Treasury is flush with corporate tax revenues? The fact is, the government spent more money faster than we could ever imagine. Over the last two years, Democrats in Congress spent over $6 trillion. In the last year of Trump (2020), Congress and the president spent over $2 trillion more for pandemic bailouts and other pandemic spending. Since October 2021, the government said it had already spent $1.03 trillion.
Increased tax revenues aren’t a license to spend more money. On Sunday, January 22, Sen. Joe Manchin said Democrats should negotiate with House Republicans to rein in spending and said the government had not been fiscally responsible, resulting in a debt problem.
Since March 2020, the government has added $7 trillion to the deficit. It took 215 years for the government to total that much debt.
Where to cut is the debate that never ends. Here’s a broad breakdown of where the government spends its tax revenues:
- Major entitlements – 49%
- Medicare, Medicaid, and other health care – 28%
- Social Security – 21%
- Income Security – 16%
- National Defense – 13%
- Net interest on the national debt – 6%
- All other spending – 16%
The bottom line is the Trump corporate tax cuts did their part. They not only paid for themselves but added revenue to the government that would only have existed if Republicans had not passed the law.
America doesn’t have a corporate tax revenue problem.
It’s just the opposite. What it has is a spending addiction.
As the debt ceiling debate begins, we’re liable to hear all kinds of demagoguing from both sides. The bottom line is that America can’t raise enough money to eliminate its monetary mess. There is no lack of supplies for ideas to solve the problem.
What is lacking is the courage of too many lawmakers to lead America. If we don’t choose to solve the problem now, a painful crisis will solve it for us one day in the future.
Heaven help us all if that happens.
The Conservative Era, Copyright 2023
