By Tom Ozimek
The Biden administration has made a record tax haul so far this fiscal year partly on the strength of the meme stock mania and surging corporate profits, government data show, prompting the Treasury Department to scale back its debt sales.
Treasury Department data through May 6, 2022 (pdf) show that tax collections since the start of the 2022 fiscal year that began in October 2021 are at a record high of $2.73 trillion.
By comparison, in fiscal year 2021, in the year-to-date as of May 6, 2021 (pdf), tax collections were at $2.1 trillion.
And in fiscal year 2020, in the year-to-date as of May 6, 2020 (pdf), they were running at $1.82 trillion.
Tax collections on record-high corporate profits were a significant source of the windfall, climbing from $107 billion in FY2020 year-to-date, then to $196 billion in FY2021 year-to-date, and now $237 billion in FY2022 year-to-date.
Companies in the S&P 500 index reported a record net profit margin of 12.18 percent in the 12 months of reports ended in April 2022, according to a Dow Jones Market Data Group analysis of FactSet data, as cited by MarketWatch.
The 12.18-percent corporate profit margin was considerably higher than any other previously recorded, with the numbers managing to break into the double digits in only three years since 1999, with a high of 10.75 percent in 2018, according to the data cited in the report.
But another major source of tax collections came from individual taxes collected this fiscal year, which includes proceeds from the sale of stocks. This figure was $453 billion as of May 6, 2022, more than twice the $156 billion at the same point in 2021.
Analysts told Bloomberg that a big portion of this jump came from capital gains, in particular amid the meme stock frenzy, which saw retail investors pile into the likes GameStop and AMC, sending their shares to dizzying heights.
“A big chunk of it has come from short-term capital gains,” Lou Crandall, chief economist at Wrightson ICAP LLC, told Bloomberg. “Meme stocks were very, very good to the IRS.”
In the face of record-high tax collections, the Treasury Department said it is cutting down on the amount of debt it’s selling.
The Treasury said in a recent press release that it is offering $103 billion in long-term securities at auctions on May 10, which is $7 billion lower than the last quarterly sale in February.
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Meanwhile, the IRS has said that the 2022 tax season has been quite chaotic, beset by “significant challenges” including backlogs of tax returns and staffing shortages.
The backlog of individual tax returns was about 13 times more than the inventory experienced before the pandemic, according to a preliminary report by the Treasury Inspector General for Tax Administration (pdf).