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Reviewing the SALT Parity Landscape

March 23, 2023|

Thanks to the efforts of S-Corp and our allies over the past five years, 31 states have adopted our SALT Parity reforms to date, with another half-dozen actively considering them. Those new laws have enabled pass-through businesses to save north of $10 billion each year, a figure that will only increase as more states and businesses embrace the approach.

As background, the 2017 Tax Cuts and Jobs Act subjected deductions on state and local taxes (SALT) on pass-through business income to the same $10,000 cap as other taxes by individuals. Taxes paid by the business entities, like C corporations, remained fully deductible.

The premise behind our SALT Parity approach is simple: If taxes paid by business entities remain deductible, then states should allow their pass-through businesses the option to pay their taxes at the entity level. Key components of a good SALT Parity bill include 1) an election to pay at the entity level; 2) a credit or income exclusion to protect owners from double taxation; and 3) recognition of the SALT taxes paid to other states. That’s it.

So the SALT Parity framework is pretty simple. The details, however, are not. Having worked directly with about two-dozen states on their reforms, our experience is that each state presents its own unique challenges and preferences. Which businesses can make the election? Do you use a credit or an exclusion? Do you recognize the SALT taxes paid to other states? What tax base should you use – a narrow, in-state income base or one that includes a businesses’ total income?  When does the company make the election? When does it take effect?

To help get a better understanding of how the states answered these and other questions, we put together the following table comparing the various SALT Parity bills currently in place:

The table raises some important considerations for lawmakers in those states remaining to take action. (Pennsylvania, we’re looking at you here!)

For starters, only one state (Connecticut) chose to force businesses into the entity tax regime – the other 30 acting states allowed an election. Elections are clearly the preferred approach, as the benefits of SALT Parity vary based on each firm’s individual circumstances. The businesses hurt most by Connecticut’s mandatory approach are those residing in Connecticut.

Defining which businesses are eligible to make the election is another question. Some states exclude corporate shareholders and tiered ownership structures while others, including Kentucky, limit eligibility to businesses owned by natural persons. This latter limitation prevents many family businesses from making the election, as they often have ownership held in trust. As we communicated to Kentucky and others, there’s no real purpose served by these limitations and they should be discarded.

A key selling point of our efforts is that SALT Parity cuts taxes on businesses without reducing revenues to the state. It’s a win-win. For some states, however, that wasn’t good enough. Massachusetts, for example, capped the value of the credit at 90 percent. Connecticut initially allowed for a full credit, but subsequently reduced its value to 87.5 percent. It’s hard to see these provisions as anything other than a cash grab. They also undermine the core objective of SALT Parity: to put pass-through businesses and C corporations on an equal footing. As the Governor of Massachusetts argued in his veto statement (later overridden):

This bill… to implement an optional pass-through entity excise in the amount of the personal income taxes owed on members’ flow-through income and an accompanying tax credit equal to 90% of each member’s portion of the excise. It mirrors an outside section I filed in my initial budget recommendation, with one exception; in my proposal, 100% of the optional excise would be returned to the taxpayer.

[I]t is my opinion that taxpayers should be allowed to reap the full benefit of this policy, especially where struggling businesses are still emerging from the pandemic and state revenues are strong. My view on the fair way to execute this policy remains unchanged. For this reason, I am returning House Bill No. 4009 unsigned.

Our SALT Parity efforts have run into other challenges, with recent developments in California serving as a cautionary tale. The state placed a $5 million limit on tax credits claimed in 2021, including those generated under CA’s pass-through entity tax law. Businesses with annual tax liabilities exceeding $5 million will have to carry forward the excess credit amounts until 2026, when the state’s SALT Parity statute expires. In essence, these companies are providing California with an interest-free loan for the next three years. Couple that dynamic with California’s narrow eligibility requirements and you’re left with a SALT Parity law that is needlessly complicated and unnecessarily hinders the ability of the state’s businesses to benefit.

Finally, while the majority of states opted for permanent PTET regimes, a handful of states chose to sunset them in 2026 (California, Virginia), or keep them in place only while the federal SALT cap is on the books (Colorado, Illinois, Massachusetts, Michigan, and Minnesota). The rationale is that if the federal SALT cap expires in 2026 or sooner, SALT Parity would no longer offer a benefit.

The problem with this argument is twofold. First, the SALT cap may not sunset as scheduled.  There’s bipartisan support to extend the caps, either at their current levels or at some increased level.  Second, it is just not true that the benefit expires with the cap. Lower-income business owners would continue to get both the federal standard deduction and the SALT deduction post-cap, while upper income business owners are more likely to get 100 percent of their SALT deducted as a business expense than as an itemized deduction on their individual taxes.  Permanence is always the preferred approach, especially given that the PTET is an election.

The point here is not to criticize states for their approach in implementing our SALT Parity reforms. After all, this was uncharted territory just a few years ago and states should be lauded for taking up measures that help their pass-through business community. Rather, our goal is to highlight what makes an effective PTET regime based on the experience of the acting states.

We hope this message reaches lawmakers in the states that have yet to enact SALT Parity. As always, we are ready to assist in any way we can. With billions of dollars at stake, there’s no reason for states like Pennsylvania, North Dakota, and Maine to remain on the sidelines.

State Wealth Taxes Target Family-Owned Businesses

March 20, 2023|

Shark Tank’s Kevin O’Leary went on CNN last week and made the case for how the policies in some states are making them “uninvestable.”  Not sure that’s a word, but he has a point. It’s worth watching.

What sort of policies is he talking about?  Wealth taxes, for one. The topic of wealth taxes at the state level has been top of mind since January when, as part of a coordinated effort, lawmakers in numerous states introduced a series of related bills, including:

  • California (A.B. 259): A 1.5 percent annual tax on worldwide net worth above $1 billion; starting in 2026 that threshold would drop to $50 million, taxed at 1 percent (with the $1 billion threshold and rate still applied);
  • New York (S.B. 1570): A new tax on unrealized gains for taxpayers with net assets over $1 billion;
  • Illinois (H.B. 3475): A 4.95 percent annual tax on unrealized gains held by taxpayers with net worth over $1 billion;
  • Washington (H.B. 1473): A 1 percent annual tax on the value of financial intangible assets (stocks, bonds, options, futures contracts) exceeding $250 million:
  • Arizona (S.B. 1353): A 1 percent annual tax on net worth over $50,000; and
  • Hawaii (S.B. 925): A 1 percent annual tax on net worth over $20 million;

Some of these bills are strictly messaging vehicles while others appear to be under active consideration. Either way, they signal that the effort to raise taxes on the wealth is gaining traction at both the state and federal levels and needs to be taken seriously.

And while state some lawmakers argue their bills were spurred by federal inaction, many instead see the effort as a superior alternative to a national law. That’s because, while the constitutionality of a wealth tax at the federal level faces serious questions, any limitation on the power of states to move beyond income to wealth taxes is much less clear and relies on the constitution of each state.

Focus on California

To explore these questions, Tax Notes hosted a webinar last week focused on California bill A.B. 259, a remarkably aggressive piece of legislation that would not only impose a new wealth tax on current California residents on the value of their worldwide holdings, but also extend the tax to former residents as well.  Can a state continue to tax wealthy individuals who no longer live there? Can it tax them on assets that reside outside the state?

Here’s Lee Sheppard, a Tax Notes Contributing Editor, commenting on the bill’s four-year clawback provision for former residents:

There are a whole bunch of take-it-or-leave-it mechanisms when you dig into this bill that say, pay the tax immediately or give us this lien here or take this formula here. If I as a taxpayer don’t have the option to get my own expert evaluation, or to dispute the state’s valuation, I have a due process problem.

…If you’ve got a hard-to-value, closely-held business and you take it out of the state, you are squarely into the Commerce Clause. Because the Commerce Clause is supposed to say, I can do business anywhere in the country without being held back by state orders, and without being discriminated against and taxed going in and out.

Jared Walczak, Vice President of State Projects at the Tax Foundation, added:

So now you have a temporary resident which is someone who isn’t there often enough in California to be a part-time resident, but still has what the state would term substantial nexus…those who now leave aren’t just being taxed on the wealth that was generated in California, but on wealth that continues to be generated out of that asset that they had in California.

So yeah, you do have some interstate commerce issues there, some some right to travel issues, I think due process as well.

Marginal Rates

The issue of marginal rates also came up. California has the highest marginal tax rates in the country. Upper income Californians pay a top rate of 13.3 percent. While the tax rates associated with wealth taxes appear small and relatively benign, they are anything but.  As Jared points out, a 1.5 percent wealth tax in California translates into a 16 percent marginal tax rate for an asset with reasonable rates of return:

We need to understand how big these taxes are. So, a 1.5 percent tax rate on wealth – it might seem small, but wealth and income are very different. Take, for example, an investment held for 10 years with a 10 percent annual rate of return. This is not particularly unusual. It would be worth 30 percent less with a wealth tax than without one. The effective tax rate, if we’re going to convert this into basically being an income tax, that’s a 16-percent rate.

So A.B. 259 would reduce the value of Jared’s fictional company by 30 percent by imposing an effective marginal rate hike of 16 percent on top – and this is the important point – of the 13.3 percent rate the state already imposes.  That’s 29.3 percent and it is added to existing federal taxes.  Add them all up and Jared’s business would pay effective rates of nearly 70 percent. That compares to a similar company located in Texas that pays half that amount. That’s the uninvestable part.

Sounds bad, but really it’s worse. The tax imposed under A.B. 259 applies when businesses lose money too.  In those cases, the business owners would need to dip into their savings or borrow against the value of the business, which has already been discounted due to the higher tax burden.  String together enough loss years and you can envision a nasty death spiral taking place. What used to be a thriving place of employment is now an abandoned hulk, with housing and labor advocates protesting the “irresponsible” owners.

Other Issues

Another criticism of any wealth tax regime is the lack of administrability. While publicly-traded assets are easy to value and easy to sell, how do you put an accurate price tag on private companies? Here’s Lee Sheppard again:

If the business grows in one year, and then bounces around – as these entrepreneurial kind of things do – I’m still going to hit the gains. So even when the taxpayer sells the whole thing and gets credits for wealth taxes along the way, [its valuation] is still going to bounce up and down…but you’re catching non-permanent upward valuations along the way. You’re basically making the government an equity owner in the business.

Recognizing the obvious challenge of producing an annual valuation of somebody’s worldwide holdings, A.B. 259 proposes a massive $300 million increase in the state’s tax enforcement budget.  Keep in mind, the bill is targeted at California resident’s worth more than $1 billion, so this new funding would to cover just a few hundred taxpayers.

It’s as if California lawmakers are intentionally trying to drive any remaining high-wealth taxpayers out of the state. As the Tax Foundation’s Jared Walczak points out:

We don’t have literature in this country on how much migration there’d be from a wealth tax because, thankfully, we have not had a wealth tax yet. But we’ve seen significant out-migration of high tax states in recent years, and we’ve seen significant migration into lower-tax states. We see States like New York, California, Illinois, and Oregon shrinking while Florida, Idaho, Texas, Montana, Arizona, North Carolina, and Utah; states like that are growing substantially.

IRS data shows the migration is particularly common among high earners. And we know from multiple studies that just a one percentage point increase in income tax decreases GDP by three percent over the next three years, while domestic investment falls by around 12 or 13 percent…People are going to vote with their feet, and these are the people who have the greatest ability to do so.

Proposals like the California bill raise privacy concerns as well.  A.B. 259 would require the state revenue department to collect and retain significant amounts of sensitive taxpayer information, much of it for assets held out-of-state and even out-of-country. Here’s Jared again:

Another aspect of this is that pretty much any business anywhere in the country – not just in California – that has an owner in California has to submit information to California. They have to submit net worth information about their business, asset information, ownership state percentages.  

You’re requiring all these businesses to submit all this information and then, unlike ordinary tax information that’s held highly confidentially, you’re not allowed to share this with the general public but employees of the University of California system can request this information with identifiable taxpayer information on it, and they can do things with it. And members of a wealth tax advisory commission can request this identifiable information. And yes, they’re not supposed to share the information but it’s easily leakable information.

Concerns about privacy are not theoretical. We’ve seen a number of high-profile leaks from the IRS and Treasury in recent years along with political activists consistently calling for the data collected under the Corporate Transparency Act – a database of information that has yet to be collected — to be made public.

Conclusion

If Kevin Leary is right and California is already “uninvestable,” exactly how would you describe it with A.B. 259 in place?  The bill would take hostility to investment and jobs to a whole new level.

We’ve written about the various problems associated with a federal wealth tax in the past, but Wednesday’s webinar provides a useful opportunity to rehash these points, particularly in the wake of increased action at the state level.

The bottom line for S-Corp members is that while these bills may not be going anywhere in the immediate future, there is clearly a growing movement that would directly harm family-owned businesses. As long as that threat remains we’ll be working to actively fight against it.

New Budget Continues the Assault on Main Street

March 10, 2023|

President Biden unveiled his budget proposal for the upcoming fiscal year yesterday and, as we predicted, it’s packed with tax hikes and other poorly-conceived policies that directly target the Main Street business community. The document calls for $4 trillion in tax hikes, nearly half of which would fall on the backs of small and family-owned businesses.

In response, S-Corp joined with 85 trade associations yesterday – including the American Farm Bureau Federation, Associated General Contractors, and the National Restaurant Association – to urge lawmakers to strongly oppose these provisions. The letter reads:

The President claims his budget will only go after “super-wealthy” tax cheats, but it targets over one million small and family-owned businesses. It would hurt their ability to hire new employees, offer better benefits, and invest in the equipment and technology necessary to sustain their businesses and help them grow. The President might claim his tax proposals close loopholes, but America’s small and family-owned businesses are not a loophole.

…the President’s budget would raise the top rates paid by pass-through businesses and corporations alike, increase the Net Investment Income Tax and expand it to cover the active business income of pass-through business owners, make permanent the harmful loss limitation rules, make it harder for family-owned businesses to survive from one generation to the next by gutting the existing grantor trust rules, nearly double the tax rate on capital gains, and impose a new minimum tax on larger family businesses that appears to redefine how income is measured. The combination of these policies would raise top tax rates on these businesses to close to 50 percent, both on their operating profits and on any gain when they sell the company.

It also points out that the proposed tax hikes are in addition to those resulting from the upcoming “fiscal cliff”:

Our members already face a massive tax increase when the small and family-owned business deduction, the lower individual rates, and other individual provisions expire beginning in 2026. The tax hikes proposed in today’s budget release would come on top of these pending tax increases, adding to the threat our members face.

Finally, the letter highlights a point we made last month – that individuals and pass-through businesses already “pay their fare share,” evidenced by record-high tax collections:

The huge deficits forecast in the President’s budget are not the result of a revenue shortage. The Congressional Budget Office reports that federal tax collections were nearly $5 trillion last year, a record high and a 47-percent increase from when the Tax Cuts and Jobs Act (TCJA) was enacted in 2017. Taxes paid by individuals and pass-through businesses reached a record $2.6 trillion last year and represented their largest share of total taxes paid in any year since the TCJA.

The good news is this budget is going nowhere in the Republican-controlled House.  The bad news is this week’s reprise of the harmful policies from the past two years, coupled with the continued rhetorical focus on tax cheats and loopholes, is further proof that no bad idea ever truly dies in Washington. We expect to continue the fight against these ill-conceived provisions for years to come.

Click here to download a full copy of the letter

An Anti-Main Street Budget

March 9, 2023|

The President is set to release his third budget later today and, as in the past, it’s sure to call for higher taxes on family-owned businesses.  The Administration already circulated a fact sheet on its Medicare plan which includes a $300 billion-plus tax hike on S corporations and partnerships (see below).  Meanwhile, the President has been talking for weeks about making “super-wealthy tax cheats” pay more in taxes. That’s code for raising taxes on private companies that already pay lots of taxes.

Here’s what S-Corp members should look for in today’s release, and what it all means for them and their businesses.

Not On Their Watch

Republicans underperformed in last fall’s elections, but they did succeed in taking the House. That means that Main Street can take a breath and know that whatever the President proposes today is not going anywhere in a Republican-controlled House.  While we can always expect lots of so-called “headline risk” – as in breathless articles highlighting the merits of these policies – there’s very little danger of the actual tax policies being enacted anytime soon.

No bad idea ever dies in Washington, however, so we will need to respond fully now because, like the Terminator, we know these proposals will be back.

Expanding the Expanded NIIT

Speaking of bad ideas, the Administration is back with its plan to expand the Net Investment Income Tax to include the active income of pass-through business owners. We’ve written about this many times  (here, here, and here), but it bears repeating – the original NIIT purposefully excluded the business income of active owners.  The Obama Administration didn’t want to be accused of raising taxes on small businesses.  Now President Biden wants to include that income so he calls it a “loophole.”  Simply not true.

New this year is the increase of the NIIT’s rate from 3.8 percent to 5 percent. That would raise the top rate paid on all S corporation income to 42 percent, or twice the current rate on large public companies. When rates go up in 2026, the top S corporation rate would rise to nearly 45 percent.  The JCT scored the NIIT expansion as raising $252 billion dollars over ten years.  With the rate hike, we’re looking at a tax increase on small businesses that exceeds $300 billion.

Record Revenues

Meanwhile, federal revenues are up substantially in recent years. Measured against national income, they reached their second highest level since World War II.  To argue that revenues are the problem now is just not credible.  As the Tax Foundation notes:

As a share of GDP, federal tax collections are at a multi-decade high of about 19.6 percent in FY 2022, up from 17.9 percent last fiscal year and approaching the last peak of 20 percent set during the dot-com bubble in FY 2000. There are only two other years in U.S. history when federal tax collections exceeded this year’s level, both during World War II….

We discussed this in a recent post, but neglected to highlight that most of this increase is coming from individuals and pass-through businesses.  As you can see from the table, individual tax receipts remained strong immediately following the TCJA and simply exploded in recent years.

Non-Cheating, Non-Billionaires

The Administration will sell its plan as an effort to undo the Trump tax cuts and the need to make “tax cheating billionaires” pay their fair share, but that’s all hooey. As the President noted the other day, there are only 1,000 or so billionaires while these tax hikes will apply to anyone making more than $400,000 a year. According to IRS data, there are more than 1 million small business owners who make that much. So 999,000 non-cheating, non-billionaires will pay higher taxes?

8 is the New 25

The President likes to say that billionaires don’t pay their fair share.  Here’s an example:

I’ve also called on Congress to pass my proposal for a billionaire minimum tax. We had — we — when we started this administration — about 720 billionaires. Now we have about a thousand. You know what their average tax they pay is? About 3 percent. Look, no billionaire should pay a lower tax than a schoolteacher or a firefighter.

The Administration later indicated the President misspoke and that he meant to say 8 percent, based on this study from his Council of Economic Advisors. But as Politifact noted, that study uses a definition of income that includes unrealized capital gains.  Unrealized gains are not income, so they rated the statement “false.”

But what about the million business owners who aren’t billionaires, but will still get hit with higher taxes?  How much do they already pay?  The latest CBO analysis shows that the top 20 percent of income earners – those making over $330,000 — pay average rates of about 25 percent, while middle income taxpayers paid rates under 15 percent.

This table strengthens the impression of just how progressive our tax code is. Over the last 40 years, the total tax burden on top earners has risen sharply so that today, the top 20-percent of earners pays nearly 70 percent of all federal taxes.  The tax code has become more progressive over time, despite what you might hear.

Another Reason to Dislike Inflation

Oh, and none of this is indexed for inflation. That might not have mattered much when inflation was consistently under 2 percent. But under President Biden, it has been in the 5- to 9-percent range. That means thousands of taxpayers will be pulled into these tax hikes every year, despite the fact that in real terms, they aren’t making any more income.

Think about it this way. A Main Street business owner with lots of employees and capital equipment makes $400,000 a year. As promised, her taxes are not supposed to go up under the Biden plan.  But her costs are going up – she’s paying higher wages and her supply chain costs are rising.  So she increases her prices just to stay even. In a 6-percent inflation environment, she’ll need to make $424,000 this year to equal her real income from last year.  Suddenly she is subject the higher NIIT and probably some other taxes hidden in the Biden Budget.  For the President’s promise about not taxing people making $400,000 or less to be real, they need to index these policies for inflation.

It’s the Spending

February 8, 2023|

Tonight’s State of the Union address will call for increased stock buyback taxes and a billionaire minimum tax, among other items.  Neither is going anywhere.

Business owners should focus instead on the pending debt limit debate, which has begun in earnest and has the potential to establish the tax and spending battlelines for the coming decade.

The simple fact is the federal government is entering into unprecedented territory when it comes to our deficits and debt, which should signal the end of the last decade’s laissez-faire approach to Federal deficits.  That in turn could force Congress to make big decisions about taxes and spending sooner rather than later. Here’s the background and some thoughts.

Debt Limit

The U.S. ran up against the debt limit on January 19th, at which point Treasury began taking what’s known as “extraordinary measures” to keep the Federal government running.  Those measures should be sufficient to keep things going until this summer, but an actual “drop dead” date for action is, as always, not really how it works.  Instead, once we reach this summer, the options are 1) for Congress to raise the limit, 2) we default on new debts coming due, or 3) for Treasury to take additional action of an increasingly legal grey area to stay under the limits.

So Treasury incurs all the pain, but it’s Congress that needs to act.  Not a great way to structure the rules.

As with the recent debt debates, this fight is starting early and at high volume.  The financial media are running daily stories highlighting the dangers of default.  Members of Congress are accusing each other of holding the country “hostage” over their demands.  And the President has announced he would not negotiate with terrorists…er, Republicans, just before meeting with Speaker McCarthy to discuss the debt limit.

This intensity is a good thing, actually, as our debt issues are historically significant and need to be addressed. The real threat to our future is not some technical government default, but rather that we continue to pile trillion-dollar deficits one upon the other, and that this will go on for the rest of our lives.  That’s the baseline and it needs to change.

Unprecedented Challenge

S-Corp friend Martin Sullivan has a great piece in Tax Notes this week outlining the fiscal challenge we face.  Net debt is now up over 100 percent of our national income and growing.  Here’s Marty’s chart:

So our debt levels are at unprecedented levels and rising.  That’s bad, but not the worst thing. Japan has functioned for decades with higher debt levels, after all, and nobody thinks the U.S. can’t shoulder this level of debt.

But the real challenge is that with rising interest rates, the service on our debt is going to reach record heights soon.  Here’s Marty’s write-up:

Figure 2 provides another view of U.S. debt burden. It shows net interest payments paid by the federal government as a percentage of GDP. Unlike the relatively dull story in Figure 1, Figure 2 provides drama. While the debt-to-GDP ratio could increase by only about 10 percent, the interest-to-GDP ratio will more than double — from 1.6 percent to 3.3 percent.

To put that in perspective, three percent of GDP is how much we spend on our national defense.  All of it. Here’s the graph Marty refers to:

Finally, time is not our friend on this. If we look further out, we see that net interest just keeps growing and taking an increasing share of our national income.

The big question here is at what point is it simply too much?

Spending or Taxes?

In simple terms, the debate over the debt limit is between those who want to raise taxes and those who want to cut spending.  Weighing in for team “Raise Taxes,” Senator Elizabeth Warren (D-MA) recently argued:

“If Republicans hadn’t spent nearly $2 trillion on the Trump tax cuts, and if they hadn’t made it easier for rich people to cheat on their taxes, the US wouldn’t need a debt ceiling increase this year. Or next year.”

Republicans, on the other hand, argue that spending increases in recent years have totally eclipsed the TCJA tax cuts, and that spending should be the focal point of any effort to reduce future deficits.

Republicans have a point.  According to the Covid Money Tracker, Congress has authorized $6 trillion in new spending to respond to the pandemic, of which $5.5 trillion has been spent.

So that’s $5.5 to $6 trillion in new spending spread over three years, compared to the TCJA’s $2 trillion in tax relief spread over 10 years, or $2 trillion/year compared to $200 billion/year, respectively.  New spending was literally 10 times the size of the TCJA in recent years.

We’re confident that if the Biden administration offered Speaker McCarthy a deficit reduction package weighted 10-to-1 in favor of spending cuts, he’d take it in an instant.  We’re not holding our breath.

Exploding Revenues

An additional reason that taxes are not the culprit here is that revenues have exploded in recent years.  Earlier this year, the JCT published a slide deck measuring how their estimates held up post-TCJA.  As you can see, revenues consistently under-preformed compared to the JCT estimates:

But that table excluded the last two years, so we added them in.  With 2021 and 2022 included, the story changes. Overall, revenues have outperformed estimates and have grown dramatically in the last two years, easily exceeding pre-TCJA predictions even after accounting for inflation:

The recent increase can be attributed to several factors.  Inflation certainly played a role, as did policies encouraging the recognition of revenues later rather than earlier in the pandemic. Business collections are up too as businesses returned to profitability after two years of shutdowns and supply chain disruptions.

Nonetheless, when revenues are up 43 percent in just two years, approach $5 trillion in total collections, and represent a near-record 19.6 percent of the economy, it’s hard to argue they are to blame for the massive deficits we’re running.

You’d have to look at spending for that.

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