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**OCTOBER 15, 2021**

Kuttner on TAP

Why Did Tax Receipts Soar This Year?

Hint: It wasn't because of general prosperity or increases in wages.

Something odd and unexpected happened to federal revenue in the fiscal
year just ended September 30. Tax receipts increased by 18 percent
, or $627
billion, in a single year-far exceeding expectations. It was the
biggest one-year increase in tax revenue since 1977.

This happened in a year when the economy only emerged from recession in
the third quarter, and employment levels are still depressed relative to
pre-pandemic rates. According to CBO, the deficit for FY2021 was $2.8
trillion, or $362 billion less than the deficit for FY2020. The final
deficit number was approximately $230 billion below what CBO projected
as recently as July.

So what happened?

It would be nice to believe that the economy is in a broad, robust
recovery, except it isn't. It would also be comforting if the revenue
windfall were the result of higher worker wages. But payroll tax
receipts, precisely tracking wages, were the one major revenue category
that actually fell.

What did increase was the income of the very rich. (Even though the tax
code is riddled with loopholes, if you make enough money you do have to
pay some taxes.)

While ordinary people suffered, corporate profits soared during the
pandemic, and corporate income taxes rose by 75 percent over 2020, from
$158 billion to $370 billion.

The pandemic was also golden for individual billionaires. The collective
fortune of America's billionaires increased by $1.7 trillion during
the pandemic .

The combination of the Fed's policy of very low interest rates coupled
with lax financial regulation was a bonanza for the very rich.

So all of this windfall revenue came in-with no tax reform and with
better tax enforcement still on the horizon. If we had a fairer tax
code, we could both finance all of Build Back Better and stop obsessing
about the deficit.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

Robert Kuttner's latest book is
The Stakes: 2020 and the Survival of American Democracy
.

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