Fact Check: Biden Falsely Credits Tax Enacted in 2023 for Deficit Reduction in 2021 and 2022


President Joe Biden falsely said Wednesday that his new minimum corporate tax is the reason the federal budget deficit has been reduced in 2021 and 2022. In fact, that tax didn’t even take effect until early 2023.

Biden has repeatedly taken credit for reducing the deficit in 2021 and 2022, even though experts said the vast majority of that reduction came simply because emergency spending for the Covid-19 pandemic from 2020 ended as planned – and that Biden’s initiatives made deficits higher than they otherwise would have been.

We’ve described Biden’s previous deficit boasts as misleading or missing basic context. But he went further in his speech Wednesday in Las Vegas about lowering prescription drug costs, presenting a side of the story that simply isn’t true.

Biden said: “And by the way, you know everybody said, well, how was I able to have these new programs and reduce the deficit by $1.7 trillion over the last two years? Well, it’s beautiful – simple enough. There were 550 Fortune 500 companies making $40 billion that didn’t pay a dime – zero, nothing – in taxes. That’s how I said it – you know, outrageous. And we got votes for it. I said they should pay at least 15%. Fifteen percent. It’s less than what you all pay. And guess what? It allowed me to reduce the deficit.”

First facts: Biden’s “fairly simple” story about reducing the deficit over the past two years is false. Although the 15% minimum corporate tax Biden signed into law in the August 2022 Inflation Reduction Act expected to reduce deficits in 2023 and beyond, the tax only entered into force on 1 January 2023so it didn’t reduce the deficit in 2021 or 2022. Again, experts say the deficit was reduced in 2021 and 2022 mostly because of the pandemic spending that ended, not Biden’s own policies, which had the net effect of worsening of the deficit.

Maya MacGuineas, chairwoman of the Committee for a Responsible Federal Budget, a group that advocates for deficit reduction, noted in an email Thursday that “corporations won’t start paying the minimum tax until this year.” He said the fact that Biden “continues to take credit for reducing the deficit between 2021 and 2022 — which happened entirely because of the expiration of the temporary COVID measures — is troubling.”

Biden also got a key number wrong in this section of his Las Vegas speech. As he has correctly said on several previous occasions, it was 55 large companies, not 550 as he said this time, that paid no federal income tax last fiscal year, according to an analysis published in 2021 by the Institute. on Taxation and Economic Policy, a liberal think tank.

A White House spokesman declined to comment for this article.

The 15% minimum corporate tax only applies to companies with average annual financial statement income of $1 billion or more – there are many nuances involved. you can read more details here – so it won’t immediately hit all 55 companies on the Institute on Taxation and Economic Policy’s 2021 list.

It would be fair for Biden to tout the minimum tax as an asset in fighting the deficit this year and into the future. Matthew Gardner, a senior fellow at the institute, pointed out in an email Thursday that the administration’s nonpartisan Joint Committee on Taxation has estimated that the tax would reduce the deficit by about $34.7 billion in fiscal year 2023 (and a total of about 222.2 billion dollars by fiscal year 2031). Gardner said that since the minimum tax is the largest tax increase in the Inflation Reduction Act, “it makes sense that this is the first specific policy that the President would point to in explaining the administration’s successes in reducing the deficit.”

Gardner said, however, that “the first fiscal year in which we will see an immediate revenue boost from the new minimum tax is fiscal year 2023” and that the tax “should have absolutely no effect in fiscal year 2022. ”

Reuven Avi-Yonah, a University of Michigan law professor and business tax expert who has supported a minimum tax, said in an email that Biden likely meant the tax would significantly reduce the deficit in the future. “Of course it’s true that there won’t be any real revenue until 2023,” Avi-Yonah said, but the tax “helps reduce the deficit over the 10-year budget period” the federal government uses, which runs from 2022. to 2031.

But the president specifically said in a prepared speech, emphatically, that the minimum tax was the reason he was able to reduce the deficit by $1.7 trillion. previous two years. This is inaccurate.

“It would take a time machine for a policy implemented in 2023 to reduce deficits in 2021 and 2022,” said Brian Riedl, a senior fellow at the Manhattan Institute, a conservative think tank.

The main reason for the $1.7 trillion drop in the deficit under Biden was that the deficit had soared to a record high of about $3.1 trillion in fiscal 2020 during the early stages of the pandemic under then-President Donald Trump. The increase was largely due to temporary, bipartisan pandemic spending. After much of the temporary spending ended on schedule, the deficit was reduced to about $1.4 trillion in fiscal 2022 under Biden.

Biden can rightly take credit for spurring the U.S. economic recovery, which pushed the deficit down by boosting tax revenues in fiscal 2021 and fiscal 2022. But Biden’s list of policy initiatives — including a law for pandemic relief, a bipartisan infrastructure law, a bipartisan law to boost semiconductor manufacturing, a boost in food stamp benefits and the extension of the Trump-era pandemic freeze on federal student loan repayments — have, in their entirety , raise deficits, not lower, even if you factor in the impact of deficit reduction Biden signs the Inflation Reduction Act.

MacGuineas said Thursday that while Biden may rightly say the Inflation Reduction Act will reduce deficits by $240 billion over a decade, that reduction offsets only a “tiny fraction” of the trillions in new borrowing he has endorses Biden to this day. And Dan White, until recently a senior director at Moody’s Analytics, an economic research firm whose analysis Biden has repeatedly touted in his speeches, said in an email last year: “The actions of the administration and Congress have undoubtedly led to higher deficits , not smaller than these.”

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