Biden Raised Taxes, but Tax Revenues Are Way Down This Year. Here Are 5 Reasons Why.

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% drop in tax receipts—even larger after accounting for inflation.

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

2) Explosion of Green Tax Credits

3) IRS Regulatory Activism

4) COVID-19-Era Employee Retention Credits

5) Flaws in Budget-Scoring Process

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