Why neither political party should take credit for the surge in tax revenue

Yahoo Finance columnist Rick Newman joins Yahoo Finance Live to discuss how both Republicans and Democrats are trying to take credit for the rise in individual tax revenue and why both parties are wrong.

Video Transcript

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DAVE BRIGGS: Tax receipts are up this year, expected to account for nearly 20% of the GDP in 2022. And as you might expect, that's become the latest political football. Our own Rick Newman is here with who's taking credit for that. And Rick, most importantly, who deserves credit for that?

RICK NEWMAN: Neither side. But that's not stopping Republicans and Democrats from saying, hey, there's good news about all this tax revenue that's coming in and where we should get credit for it. So the quick backdrop here, Dave, federal tax receipts for 2022 are up 39% from the same point last year. Individual tax revenue is up 69%. That's huge. And business tax revenue is up 22%. It looks like they're both going to hit new records this year.

So President Biden has been saying it's my pro-growth policies that are responsible for all this economic activity. And people are working and making money and paying taxes. And Republicans say, no, it's not. It's the 2017 Trump tax cut law. We told you trickle-down economics was going to work its magic, and it was going to produce this boom of economic activity and higher tax revenue down the road.

And by the way, nonpartisan experts on this matter say, neither side is right. What's going on here is, we just have a booming economy from the recovery. Inflation is a factor. And so is all that stimulus spending, which kept people on the payroll, kept businesses going, and gave people a lot of money to spend. So it's a good thing that's happening. Both sides trying to take credit, and neither one's really right.

RACHELLE AKUFFO: And of course, no one to be found when there's ever blame to be handed out, of course. I want to talk to you about this "Wall Street Journal" survey, because, obviously, a lot of people not really feeling like they're doing well. 83% of Americans describe the economy as poor. Is this true? And can Biden even turn this around in a midterm election year?

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

People just feel terrible about the economy, even though most things in the economy are doing pretty well. So this is Biden's biggest problem by far. And I don't see any quick fixes coming. I think gas prices actually, they're around $4.80, $4.85 right now, on average. I think they're going to go above $5 and could be in the middle, $5.50 by summer on average. This will get better eventually, but not on the political timetable Biden wants.

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 in the summer, so certainly not a step in the right direction. When it comes to who voters blame, though, for higher prices, is it President Biden that's taking most of the blame? And then, of course, how big of a challenge is this potentially for the Democrats in the midterm? Because it seems like at this point, at least, when you look at the polls, it's huge.

RICK NEWMAN: It's Biden. You know, I actually don't think Biden is responsible for most of the inflation we've seen over the last year, but it doesn't matter because he's the guy in charge. And when things go wrong, for the most part, voters blame the guy in charge. That's the way it always is, no exception here for Biden. So this, of course, leads into the midterm elections.

And I think it does not help that Republicans don't have anything like a unified message. I mean, if you ask a typical voter who's busy and isn't watching cable news all day long, what do the Democrats stand for? Give us the top three things. I think a lot of people would not know. And I think it's because Democrats stand for a lot of different things. It's a disunified party. And this has been a big problem for Biden. So he can't say what we have done to make inflation better. And he can't say what we will do to make inflation better in the future. So this is looking ugly for Democrats in the fall.

DAVE BRIGGS: It may not matter, Rick, but what is the Republican plan to bring down inflation? We had Kevin Brady on, Texas congressman, who is retiring. And his best plan was-- and this is a direct quote. I'm not making this up. He said, we're not going to make it worse. Is there any plan from the Republican side to bring down inflation?

RICK NEWMAN: Republicans don't really have to have a plan because I think-- I mean, everything we've been talking about, voters are just so pissed off, that that's enough. That is the Republican plan right there. So let's say Republicans do take one or both Houses of Congress next year. It still isn't going to matter what their plan is because if it's not something President Biden wants, he's not going to sign it.

But if we did have Republicans in control of all three branches again, I think for sure, one thing you'd see is a much more favorable stance toward the fossil fuel industry. And there certainly are things you could change, both through legislation and through regulation, that would, number one, make it more encouraging for oil and gas companies to drill, but number two, open up the financing for those companies because that's a big part of the story right here, at least with regard to energy.

People don't want to invest in the oil and gas industry because they think the government is working to shrink and ultimately get rid of this industry. So it doesn't sound like a great long-term investment. That's one thing could change. But if that's ever going to happen, it won't be until 2025.