Political party

Why no political party should take credit for increased tax revenue

Yahoo Finance columnist Rick Newman joins Yahoo Finance Live to discuss how Republicans and Democrats are trying to take credit for rising personal tax revenues and why both sides are wrong.

Video transcript

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DAVE BRIGGS: Tax revenue is up this year and is expected to be nearly 20% of GDP in 2022. And as you’d expect, it’s become the latest political football. Our very own Rick Newman is here with taking credit. And Rick, most importantly, who deserves the credit for that?

RICK NEWMAN: No side. But that doesn’t stop Republicans and Democrats from saying, hey, there’s good news about all this tax revenue coming in and where we should get credit for it. So the quick backdrop here, Dave, federal tax revenue for 2022 is up 39% from the same point last year. Individual tax revenues are up 69%. It is enormous. And revenue from business tax is up 22%. It looks like they will both break new records this year.

So President Biden said it’s my pro-growth policies that are responsible for all this economic activity. And people work, earn money and pay taxes. And the Republicans are saying, no, it’s not. It’s the Trump Tax Cuts Act of 2017. We told you that trickle-down economics was going to work its magic, and it was going to produce that boom in economic activity and higher tax revenue down the road.

And by the way, nonpartisan experts on this issue say neither side is right. What’s happening here is we just have a booming economy thanks to the recovery. Inflation is a factor. So is all that stimulus spending, which has kept people on the payroll, kept businesses going, and given people plenty of money to spend. So it’s a good thing that’s happening. Both sides are trying to take credit, and neither is quite right.

RACHELLE AKUFFO: And of course no one to find when there’s ever blame to hand out, of course. I want to tell you about this “Wall Street Journal” survey, because obviously a lot of people don’t really feel like they’re doing well. 83% of Americans describe the economy as bad. Is it true? And can Biden even turn the tide in a midterm election year?

RICK NEWMAN: This is amazing. These confidence levels are basically at recessionary levels and deep recessionary levels. And we’re not in a recession right now. We have an unemployment rate that is near the lowest on record at 3.6%. But of course we have an inflation of 8.3%. And that is the deciding factor here. So we haven’t had such inflation for 40 years. I think we have forgotten what inflation can do to consumers’ psyches, especially when they are not used to it. And what I think that tells us is that inflation trumps everything.

People feel bad about the economy, even though most things in the economy are doing pretty well. So that’s by far Biden’s biggest problem. And I don’t see any miracle solution coming. I think gas prices are actually around $4.80, $4.85 right now, on average. I think they will go over $5 and could be in the middle $5.50 by summer on average. It will eventually get better, but not on Biden’s desired political timeline.

SEANA SMITH: Yeah, Rick, we just heard from Steven [INAUDIBLE] last hour, and he was saying we could get up to $5.50, $5.60 here this summer, so that’s definitely not a step in the right direction. When it comes to who voters blame, however, for higher prices, is President Biden most responsible? And then, of course, how much of a potential challenge does this represent for Democrats in the medium term? Because it seems at this point, at least, when you look at the polls, it’s huge.

RICK NEWMAN: It’s Biden. You know, actually, I don’t think Biden is responsible for most of the inflation that we’ve seen over the last year, but that doesn’t matter because he’s the one responsible. And when things go wrong, most of the time, voters blame the manager. It’s always like that, no exception here for Biden. So, of course, that leads to the midterm elections.

And I think it doesn’t help that Republicans don’t have anything resembling a unified message. I mean, if you ask a typical voter who is busy and doesn’t watch cable news all day, what do the Democrats stand for? Give us the top three things. I don’t think a lot of people would know that. And I think that’s because Democrats stand for a lot of different things. It is a disunited party. And that’s been a big deal for Biden. He therefore cannot say what we have done to improve inflation. And he can’t say what we will do to improve inflation in the future. So it looks ugly for Democrats in the fall.

DAVE BRIGGS: It may not matter, Rick, but what’s the Republican plan to bring inflation down? We had Kevin Brady, Congressman from Texas, who is retiring. And his best plan was… and that’s a direct quote. I don’t invent anything. He said, we’re not going to make it worse. Is there a plan on the Republican side to bring inflation down?

RICK NEWMAN: Republicans don’t really need to have a plan because I think… I mean, everything we talked about, voters are so pissed, enough is enough. This is the Republican plan. So let’s say the Republicans take one or both houses of Congress next year. It doesn’t matter what their plan is, because if it’s not something President Biden wants, he won’t sign it.

But if we had Republicans running all three branches again, I think one thing you would see is a much more favorable stance toward the fossil fuel industry. And there are certainly things that you could change, both through legislation and through regulation, that would, firstly, incentivize oil and gas companies to drill, but secondly, open up financing for those companies because that’s a big part of the story here, at least when it comes to energy.

People don’t want to invest in the oil and gas industry because they think the government is trying to downsize and ultimately get rid of that industry. So it doesn’t look like a great long-term investment. This is one thing that could change. But if that’s going to happen, it won’t be until 2025.