Government
Despite Federal Tax Hikes, Revenues Are Way Down – Here Are 5 Reasons Why
Despite Federal Tax Hikes, Revenues Are Way Down – Here Are 5 Reasons Why
Authored by Preston Brashers via The Epoch Times,
Just because…
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Authored by Preston Brashers via The Epoch Times,
Just because the government raises taxes, doesn’t necessarily mean it will raise more revenues. The Biden administration is discovering that the hard way.
In August 2022, President Joe Biden signed the misnamed Inflation Reduction Act into law, which included a new tax on companies’ financial statement income, new IRS funding to increase audits, an excise tax on stock buybacks, and more taxes on natural gas, oil, and coal. To top it off, certain Trump administration business tax cuts simultaneously have been phasing out.
On paper, that adds up to more than $60 billion in tax hikes in 2023.
Yet, as of July 31, tax revenues are down almost $400 billion from the same time last year, representing a 13 percent drop in tax receipts—even larger after accounting for inflation.
It’s unusual for tax revenues to drop from one year to the next, as it’s happened only eight times since 1960. And only once in that 63-year period—from 2008 to 2009—did revenues fall by more than 7 percent.
It’s too early to fully account for why tax revenues are down in 2023. However, there are some factors that are clearly at work, even if it’s unclear how much of the drop in tax receipts each factor explains.
The following are five such factors.
1) Slow Economic Growth
Economic growth has cooled substantially over the past year and a half, leading to stagnant real incomes, which in turn have diminished income-tax and payroll-tax receipts.
Reduced capital gains taxes may especially be dragging down revenue collection. Stocks fell in 2022, and while most market indices recovered in 2023, dividend payouts and stock buybacks have dropped. Existing home sales have also tanked in 2023.
The slowdown in the U.S. economy can’t explain the full drop in tax receipts, though. At the start of the year, the Congressional Budget Office forecasted slow economic growth for 2023, but it only modeled a very slight decline in tax revenues compared with last year.
2) Explosion of Green Tax Credits
The Inflation Reduction Act carved a large hole out of the tax base for the crony green economy. While green companies have long enjoyed generous tax treatment, the 2022 law took things to another level.
Not only can companies in politically favored fields now avoid federal tax liability through nearly two dozen generous green tax credits, they can also sell many of the tax credits they accrue to other companies, giving many green companies negative effective tax rates.
When the legislation was debated and passed, official estimates suggested that the bill’s tax hikes would more than offset these green carve-outs. There was reason to be skeptical even then. And sure enough, more recent estimates show that the green tax credits will ultimately cost two to four times what government forecasters led the public to believe, possibly carrying a price tag of a trillion dollars or more over a decade.
3) IRS Regulatory Activism
Part of the explosion of green tax credits was predictable. Some companies will chase government subsidies like children going after candy thrown at a parade.
But the IRS and the Biden administration have also been playing fast and loose with regulatory interpretations of the new tax provisions. By devising expansive definitions for certain terms written in the statute, the IRS has greatly expanded the size of some of the green tax credits.
In one of numerous egregious examples, the IRS wrote regulations that allow foreign vehicles to circumvent strict domestic-production and battery-content requirements by defining “commercial vehicles” to include any vehicles that are leased, including to consumers.
Because of this regulatory workaround, leases now account for a nearly 500 percent larger share of electric vehicle sales than they did last year, despite the recent spike in interest rates.
4) COVID-19-Era Employee Retention Credits
If you’ve listened to the radio, watched television, browsed the internet, or answered a call from an unknown telephone number in the past year or two, chances are you’ve come across marketing for the employee retention credit (ERC).
The ERC is a refundable federal tax credit that was created in March 2020. It was designed to pay certain employers whose businesses were disrupted by government shutdowns if they kept employees on payroll.
While it may have been well-intended, implementation of the ERC has proven disastrous, delivering more fraud and abuse than the pandemic relief it was meant to provide.
Despite paying out as much as $20,000 per employee, the initial take-up of the ERC was light in 2020—the time when businesses were most impacted by onerous government shutdowns. Then in 2021, Congress made the ERC more generous, paying up to $26,000 per employee while expanding eligibility.
Meanwhile, across the country, a cottage industry of ERC mills formed, companies created solely to market and churn out ERC claims. In many cases, these companies fraudulently persuade small businesses they qualify for the credit, setting them up for IRS disputes down the road.
Even though the ERC expired after 2021, claims have since skyrocketed, with ERC companies pushing businesses to file forms to retroactively change prior tax filings.
The IRS paid out about $10.9 billion on about 120,000 ERC claims through 2020, the period during which it was originally intended to provide relief. But through July of this year, it had processed well over 1 million claims, paying out an estimated $220 billion so far, with an additional half-million unprocessed claims in the backlog.
More ERC claims continue to pour in even now, long after the pandemic.
Instead of a lifeline to help businesses survive the shutdowns, the ERC increasingly looks like a bungled and belated giveaway to the businesses the government didn’t kill.
5) Flaws in Budget-Scoring Process
The Joint Committee on Taxation and the Congressional Budget Office produce budget scores of significant tax and spending legislation. In theory, these agencies’ analyses should be tools that help lawmakers write fiscally responsible laws.
But the budget models are far from perfect. Because they don’t account for economic growth, they’re biased against legislation that would grow the economy and in favor of spending bills that pay people not to work.
Meanwhile, lawmakers game the system, using gimmicks to claim artificial deficit reduction on bills that clearly do the opposite.
How do they do this? By not spending money they were never actually going to spend.
Next, they can use the buy-now-pay-later method: Front-load government handouts in the years when they’re expecting to be in office and back-loading the spending cuts and tax increases for future lawmakers to deal with.
This is how the White House and members of Congress can claim credit for a quarter of a trillion dollars of “deficit reduction” from the Inflation Reduction Act and $1.5 trillion from the recently passed Fiscal Responsibility Act, even as the deficit has doubled since last year.
A Sea of Debt
Congress and the White House are spending at a breakneck pace, and now tax revenues have fallen significantly as generous tax credits and a slowing economy outweigh the revenues from Biden’s economically harmful new taxes.
The net result is that Washington is burying Americans under a sea of debt.
In four short years, lawmakers have managed to add $80,000 of debt per U.S. household, and the budget picture looks much, much darker ahead.
Politicians’ gimmicks won’t change the fact that the American middle class will be the ones left to pay history’s largest tab, run up by D.C. lawmakers on your behalf.
Reprinted by permission from The Daily Signal, a publication of The Heritage Foundation.
Government
Low Iron Levels In Blood Could Trigger Long COVID: Study
Low Iron Levels In Blood Could Trigger Long COVID: Study
Authored by Amie Dahnke via The Epoch Times (emphasis ours),
People with inadequate…
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Authored by Amie Dahnke via The Epoch Times (emphasis ours),
People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.
A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.
Long COVID Patients Have Low Iron Levels
Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.
In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.
According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.
But it can jeopardize a person’s recovery.
“When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”
The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.
“It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”
The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.
1 in 5 Still Affected by Long COVID
COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.
Government
Walmart joins Costco in sharing key pricing news
The massive retailers have both shared information that some retailers keep very close to the vest.
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As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters.
The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.
The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.
Related: Popular mall retailer shuts down abruptly after bankruptcy filing
It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.
You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.
Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.
However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.
Image source: Joe Raedle/Getty Images
Walmart sees lower prices
McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.
During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.
"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.
He was specific about where the chain has seen prices go down.
"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."
McMillon said that in other areas prices were still up but have been falling.
"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.
Costco sees almost no inflation impact
McMillon avoided the word inflation in his comments. Costco (COST) Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.
The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.
"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.
Galanti made clear that inflation (and even deflation) varied by category.
"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.
bankruptcy pandemic trumpGovernment
Walmart has really good news for shoppers (and Joe Biden)
The giant retailer joins Costco in making a statement that has political overtones, even if that’s not the intent.
Share this:
As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters.
The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.
The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.
Related: Popular mall retailer shuts down abruptly after bankruptcy filing
It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.
You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.
Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.
However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.
Image source: Joe Raedle/Getty Images
Walmart sees lower prices
McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.
During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.
"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.
He was specific about where the chain has seen prices go down.
"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."
McMillon said that in other areas prices were still up but have been falling.
"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.
Costco sees almost no inflation impact
McMillon avoided the word inflation in his comments. Costco (COST) Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.
The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.
"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.
Galanti made clear that inflation (and even deflation) varied by category.
"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.
bankruptcy pandemic trump
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Students lose out as cities and states give billions in property tax breaks to businesses − draining school budgets and especially hurting the poorest students
Is the United States overestimating China’s power?
GBPINR: Analysis and Projections for 2024
Low Iron Levels In Blood Could Trigger Long COVID: Study
Biden to call for first-time homebuyer tax credit, construction of 2 million homes
Housing Is Unaffordable. Dems Want To Make It Worse.
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