Sleepy Joe’s $140 Billion Day Of Infamy

By David Stockman

If you don’t think we are in la-la land, just recall what happened at 9:00 AM on March  17th. On the signal from the IRS, thousands of banks instantaneously credited the  accounts of 100 million customers with their $1,400 stimmy check.  

Whoosh! $140 billion of free stuff out the door just like that.  

All hail the electronic helicopter dump!  

Not surprisingly, the Dems couldn’t get back to their districts fast enough to remind  voters that it was their beneficence that fattened up checking accounts all across the  land. Thus, averred Dem Representative Conor Lamb, who scrapped into his seat in a  2018 special election in Pennsylvania:  

People are going to feel it right away, to me that’s the biggest  thing…...Politics is confusing, it’s image-based, everyone calls everyone else a  liar — but people are going to get the money in their bank accounts.” 

Likewise, Representative Sara Jacobs of California claimed Democrats have learned  their lesson after fumbling Barry’s $800 billion “shovel ready” stimulus in 2009. To wit,  soak future taxpayers with reckless abandon, but be sure today’s taxpayers know exactly  who supplied the loot:  

“……learned the lessons from 2009, we made sure we went back to our districts  this weekend to tell people how much help they were going to get from  this bill.” 

Folks, March 17 was a day of infamy, to borrow Franklin D. Roosevelt’s famous phrase.  Just as the bombing of Pearl Harbor was an act of wanton insanity on Tokyo’s part,  hardly less can be said for Washington’s third round of stimmy checks.  

What this helicopter drop signifies is that America’s fiscal equation has now gone full  retard. As we show below, almost no one is paying income taxes to Uncle Sam any 

longer, while almost everyone is getting free money drops regardless of need,  employment status or financial condition.  

If you don’t think that juxtaposition spells unprecedented fiscal calamity, you are surely  smoking something.  

For instance, in the most recent year (2018) there were 108.4 million tax-filers with  AGIs (adjusted gross income) of under $75,000, who accounted for nearly 71% of all tax  filers (153.8 million).  

As a practical matter, every one of these taxpayers will have now received a minimum  of $3,200 worth of stimmy checks in the three rounds since last March ($1,200, $600  and $1,400); and that haul would total $6,400 if they filed joint returns or were two adult families.  

And that doesn’t include additional stimmy checks of up to $2,500 from the three  rounds ($500, $600 and $1400) for each eligible child. Given that total stimmy  amounts are family size dependent, it is therefore worthwhile to detail by family type the  amounts that will have gone out to these 108.4 million tax filers since last March:  

Total Stimmy Amount Per Family Since March 2020: 

 Single filer: $3,200;  

 Married couple, no kids: $6,400;  

 Married couple, one kid: $8,900;  

 Married couple, 2 kids: $11,400;  

 Married couple, 3 kids: $13,900;  

 Married couple, 4 kids :$16,400;  

 Married couple, 5 kids: $18,900.  

Given these stimmy entitlements, we next looked at the 108.4 million returns under  $75,000 AGI by filing type. That provides a basis for estimating the aggregate dollar  amounts received by adult taxpayers.  

For instance, joint return filers and heads of households would have gotten $6,400,  while married separate and single filers would have received $3,200 a piece.  

Breakout of filers under $75,000 AGI: 

 Married joint return: 23.2 million;  

 Married separate return: 2.6 million;  

 Head of household; 19.4 million;  

 Single taxpayer: 63.1 million;  

 Total returns <$75,000: 108.4 million

Based on this data, we can compute the rough amount of stimmy checks which have  gone to these under $75,000 AGI tax filers. This figure comes to $490 billion for  adults in the households of these filers.  

That amount, in turn, represents about 81% of the $602 billion in stimmy checks  which went to all adults among all tax filers. In addition, another $268 billion went  out to eligible dependents, bringing the total helicopter drop from all three stimmy  rounds to a staggering $870 billion. 

As we amplify below, an estimated 126.0 million tax returns were eligible for stimmy  checks during one or more of the three rounds.  

So we are talking about an average of $6,900 per return in less than one year. And  these were pure helicopter drops without any loss of employment or income test  whatsoever.  

In terms of the 108.4 million returns with less than $75,000 of AGI, we assume that the  distribution of eligible dependents is similar for all tax filers who received stimmy  checks. Accordingly, about $218 billion of the $268 billion of total stimmy-for-kids  also went to filers under $75,000.  

In short, during the past year, Washington has turned the relationship between tax paying and tax-getting upside-down. To wit, the 108.4 million tax filers under $75,000  of AGI paid $154 billion in Federal income taxes during the most recent year, but  during the past year have received $708 billion in stimmy checks!  

As the man says, you can’t make this up. The insane people on both ends of  Pennsylvania Avenue and from both parties have dumped helicopter checks on 108.4  million tax filers that amount to 4.6X what they paid in Federal income taxes!  

For want of doubt, here is the basic data for this 71% share of all tax filers.  Profile of Tax Filers Under $75,000 AGI: 

 Total # of filers: 108.4 million;  

 Total AGI: $3.283 trillion;  

 # of taxable returns: 57.8 million;  

 % of total returns with taxable income: 53.3%;  

 AGI of taxable returns: $2.375 trillion;  

 % of total AGI in taxable returns: 72%;  

 Taxable income: $1.477 trillion;  

 Taxable income as % of total AGI: 45.0%;  

 Taxes Paid: $154 billion;  

 Taxes paid as % of total AGI: 4.7%;  

 Taxes paid as % of taxable income: 10.4%;  

 Average tax paid by all filers: $1,420; 

 Total stimmy payments: $708 billion;

 Stimmy checks received as % of total AGI: 21.6% 

 Average stimmy payment for all filers: $6.530;  

 Ratio of Stimmy payments to taxes paid: 4.6X 

The third line from the bottom tells you all you need to know. Our foolish elected  officials have helicopter- dropped stimmy checks equal to 21.6% of the underlying AGI  of these households without asking one crucial question. That is, how many of these  eligible taxpayers lost their jobs, became temporarily laid-off or suffered even a single  dime of lost income due to the Covid-Lockdowns?  

But as they say on late night TV, there’s more. These 71% of tax filers didn’t pay squat in  income taxes in the first place.  

As we show above:  

 Barely half (53.3%) of these 108.4 million filers had taxable income;   Another 50.7 million filers with $908 billion of AGI owed zero Federal  income taxes;  

 The 57.8 million taxable filers with AGI of $2.38 trillion paid just $154 billion in  taxes (6.5%);  

 This accounted for only 10% of total income taxes collected by Uncle Sam that  year ($1.539 trillion);  

 Actual taxes paid by these 108.4 million filers as a group amounted to  only 4.7% of the total AGI of these households ($3.283 trillion).  

In short, the bottom 71% of US tax filers were not meaningfully in the tax-paying  business to begin with, but during the last year have been showered with an average  of $6,900 per return in stimmy checks.  

As a matter of social policy and government safety net, this is pure lunacy. But, again,  that’s not what Washington was doing. The craven herd of pols was using the Covid as  an excuse to pass out free stuff like never before, no questions asked.  

And, among what passes for policy-makers, were a bunch of clueless Keynesians trying  to stimulate “demand” to recover $800 billion of lost GDP last year.  

Yet this GDP loss had nothing to do with a demand shortfall: It was self-evidently the  result of government ordered shutdowns and contractions of the supply-side of the  economy—heavily concentrated in the social congregation sectors (restaurants, bars,  movies, gyms, retail stores etc)  

Needless to say, this grand experiment in Keynesian fiscal stimulus wouldn’t have  happened in hundred years if the Fed had not virtually monetized all of the spending.  The Fed’s madcap bond buying, in effect, shielded household and business borrowers  from any ill-effects on interest rates and the carry cost of their existing massive debts,  albeit only in the short run. 

And, no, we are not done. Under the stimmy rules, married joint filers were eligible up  to $150,000 of AGI, with a phase out to $200,000 in the first two stimmy rounds and  $160,000 in the Bidden round. Also, heads of household filers were eligible up to  $112,000 of AGI, with similar pro rata phase-outs.  

Accordingly, we estimate that slightly more than half or 17.6 million married joint filers  and heads of household filers with AGIs between $75,000 and $200,00 also got stimmy  checks. Specifically, married joint fillers in this bracket received about $150 billion of  

stimmy checks, and heads of household filers between $75,000 and $147,000 (the  phase-out point in rounds # 1 and #2) will have received about $12 billion. 

As it happens, the $75,000 to $200,000 AGI bracket includes a total of 34.8 million  filers, but again, even at these income levels, there is a surprisingly large amount of tax getting relative to tax-paying:  

Tax Filers Between $75,000 and $200,000 AGI Eligible for Stimmy Checks: 

 Total # of filers: 34.8 million;  

 # of Filers getting stimmy checks: 17.6 million;  

 # of filers not getting stimmy checks: 17.2 million;  

 Total AGI: $4.0 trillion;  

 Taxable income: $3.17 trillion;  

 Taxes paid: $418 billion; 

 Share of total income taxes paid: 27.2%;  

 Taxes paid as % of AGI: 10.5%; 

 Stimmy checks received: $162 billion; 

 Stimmy checks as % of AGI 4.1%;  

 Taxes paid per return: $12,000; 

 Stimmy checks per return: $4,655 

What this means, of course, is that even upper middle income filers don’t pay a lot of  income taxes: To wit, $418 billion or just 10.5% of AGI.  

But what is really crazy is that notwithstanding having $3.58 trillion of AGI left-over  after paying Federal income taxes, these filers still got a $162 billion helicopter drop  from Uncle Sam!  

That is to say, notwithstanding an average of $103,000 of after-tax AGI, these upper  middle bracket filers still got $4,655 of stimmy checks on average. The term insanity  hardly suffices.  

Moreover, that leaves the question as to who didn’t get the stimmy checks. As best as we  can estimate, the break out of Federal income tax filers based on 2018 returns is as  follows:  

1. Filers under $75,000 AGI who got the stimmy checks: 108.4 million (70.5%); 

2. Filers between $75,000 and $200,000 AGI who got the stimmy checks: 17.6  million (11.4%);  

3. Tax filers between $75,000 and $200,000 AGI who didn’t get the stimmy checks:  17.2 million (11.2%);  

4. Tax filers above $200,000 AGI who didn’t get the stimmy checks: 10.5 million  (6.8%).  

In short, an estimated 27.7 million or 18% of tax filers didn’t get stimmy checks. But at  minimum, they paid $1.2 trillion in Federal income taxes or 76% of Uncle Sam’s  collections in 2018.  

Moreover, the overwhelming share of these collections came from the 10.5 million tax filers above $200,000 AGI (group #4 above) who couldn’t have gotten a dime of stimmy  money under any of the three rounds.  

As it happens, these folks paid $966 billion or nearly two-thirds of all Federal income  taxes paid in the most recent year. That amounts to $92,000 per average filer in this  group.  

Tax filers Above $200,000 AGI: 

 Total # of filers:10.5 million;  

 Total AGI: $4.30 trillion;  

 Taxable income: $4.0 trillion;  

 Taxes paid: $966 billion;  

 Taxes paid as % of AGI 22.5%;  

 Taxes paid as % of taxable income: 24.2%;  

 Taxes paid per average filer: $92,000;  

These data also make clear that the 10.5 million filers above the highest stimmy check  threshold are subject to what amounts to a steeply progressive tax system.  

Percent of Total US Tax Filings:  

 # of returns; 6.8%;  

 AGI: 35.9%;  

 Taxable income: 46.3%;  

 Income taxes paid: 62.8%.  

As we said, almost everybody was getting stimmy checks and almost nobody is paying  Federal income taxes.  

Now that the third round of stimmy checks is going out compliments of Sleepy Joe and  the Dems, the insanity of the thing is self-evident, if it wasn’t long before. 

A total of $870 billion of stimmy checks have gone out during the last year to 82% of tax  filers. But those helicopter checks amount to fully 91% of the $966 billion in income  taxes paid by the top 6.8% of tax filers.  

As Senate GOP Leader Howard Baker used to say back in the day: “That dog ain’t gonna  hunt”!  

And the worst thing is that not a dime of those helicopter drops was justified or needed.  That’s because an additional total of almost $700 billion will have been paid out under  the four Federal UI assistance rounds to workers who actually lost jobs or income. 

David Stockman was Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.

The above originally appeared at David Stockman's Contra Corner.