More than half of American households paid no federal income tax last year due to Covid-relief funds, tax credits and stimulus, according to a new report.
The nonpartisan Tax Policy Center estimates that 57% of U.S. households paid no federal income taxes for 2021, up substantially from the 44% before the pandemic.
Howard Gleckman, senior fellow at the Tax Policy Center, said Covid-related job losses, a decline in incomes, stimulus checks and tax credits were largely responsible for the increase.
The expanded Child Tax Credit was a large factor. It substantially reduced “the income tax liability of more than a hundred million households and temporarily turned many from payers of small amounts of federal income tax to non-payers,” Gleckman wrote.
With many of the tax programs ending, Gleckman forecasts the number of non-payers will decline to 42% in 2022 and 38% by 2029.
“We predict it will go back down and remain fairly low relative to historical standards,” Gleckman said.
Not just income taxes
Federal income taxes are just a part of the overall tax burden. Since most workers pay payroll taxes, the share of American taxpayers who pay neither payroll nor federal income taxes was only 19% in 2021, slightly higher than the 17% rate before the pandemic. Taxpayers also often pay state and local taxes.
Yet many conservatives and Republican politicians have seized on the soaring number of non-payers to call for tax reform. Sen. Rick Scott as part of an 11-point “Rescue America” plan, said “all Americans should pay some income tax to have skin in the game.”
In an interview with NPR, Scott, R-Fla., denied he wanted to raise taxes lower earners. “I don’t believe in tax increases,” he said.
“I’m not going to raise anybody’s taxes, but I want to have the conversation,” he said. “We’ve got able-bodied Americans who are living off of government programs instead of working, and that’s caused by these Democrat policies. And that doesn’t work. We got billionaires that are not paying, you know, income taxes.“
The Tax Policy Center estimated that a plan calling for all Americans to pay at least $100 in income taxes would raise $100 billion in revenue in 2022. Yet such a plan, by nature, would be highly regressive: More than 80% of the tax increase would be paid by households making about $54,000 or less, and 97% would be paid by those making less than about $100,000.
Gleckman said Scott’s claims about not supporting tax increases while wanting more Americans to pay taxes are “just silly.”
“If you have people paying no tax and you want them to pay more taxes than they’re paying now, I don’t understand what Scott is saying. The reason people don’t pay federal income tax is that they don’t make enough money,” he said.
There are wealthy taxpayers who pay no federal income tax in a given year, as documented in recent ProPublica articles, and they are likely a small share of non-payers, Gleckman added.
“The tax code is actually quite progressive,” Gleckman said. “There may be some cases where someone with a lot of wealth has little income, or they realize gains and offset those with losses or a charitable deduction. But that’s unusual.”
Disney is raising prices, but this time, don’t blame inflation
Another major American company is raising prices again, but this time, don’t blame inflation.
Disney is increasing the price on its streaming products and signaled that a price hike could be in the works at its theme parks as well. On Wednesday, the company said the price of Disney+ without ads is jumping $3 per month to $10.99 starting Dec. 8. Hulu with ads will increase by $1 per month to $7.99, and Hulu without ads will jump $2 per month to $14.99.
Then on Thursday, Disney Chief Executive Officer Bob Chapek indicated to CNBC’s Julia Boorstin that a price increase will likely happen at theme parks as long as people keep coming in droves.
“We read demand. We have no plans right now in terms of what we’re going to do, but we operate with a surgical knife here,” Chapek said. “It’s all up to the consumer. If consumer demand keeps up, we’ll act accordingly. If we see a softening, which we don’t think we’re going to see, then we can act accordingly as well.”
Instead of blaming the rising cost of materials, labor and gas, Disney is rationalizing the increases based on the consistency of the popularity of its products. Disney said Wednesday that Disney+ added 15 million new subscribers last quarter, blowing out expectations. It also said it expects further growth for core Disney+ (excluding India’s Disney+ Hotstar) next quarter beyond the 6 million it added in its fiscal third quarter.
Raising prices on the back of strong demand isn’t new for Disney. The price of theme park tickets has climbed for decades. During its most recent quarter, the company posted a 70% revenue increase in its parks, experiences and products division, rising to close to $7.4 billion. Per capita spending at domestic parks rose 10% and is up more than 40% compared with fiscal 2019.
Handout | Getty Images Entertainment | Getty Images
Disney strategically caps attendance at its parks, an effort that was borne out of the attempts to avoid crowding during the Covid pandemic. The move is a way to improve the customer experience. Additionally, the company has added Genie+ and Lightning Lane products, which curate guest experience and allow parkgoers to bypass lines for major attractions.
Beyond the parks, Disney annually asks cable TV providers to pay aggressive price hikes for ESPN because it knows there’s strong demand for its stable of live sports rights.
Disney+ first launched in November 2019 at $6.99 per month. About three years later, the price of the ad-free product will have risen 57%. The service now has more than 152 million customers.
Chapek has experienced his share of bumps in the road since taking over for Bob Iger as Disney CEO. But one thing hasn’t changed: consumers still seem to enjoy what Disney has to offer.
Correction: During its most recent quarter, the company posted a 70% revenue increase in its parks, experiences and products division, rising to close to $7.4 billion. An earlier version misstated the percentage and mischaracterized the dollar figure.
WATCH: CNBC’s full interview with Disney CEO Bob Chapek
Disney streaming subscriber growth blows past estimates, as company beats on top and bottom line
A performer dressed as Mickey Mouse entertains guests during the reopening of the Disneyland theme park in Anaheim, California, U.S., on Friday, April 30, 2021.
Bloomberg | Bloomberg | Getty Images
If Disney+’s subscriber growth is any indication, the rumors that the global streaming market is nearing saturation have been proven untrue.
On Wednesday, the Walt Disney Company reported that total Disney+ subscriptions rose to 152.1 million during the fiscal third quarter, higher than the 147 million analysts had forecast, according to StreetAccount.
At the end of the fiscal third quarter, Hulu had 46.2 million subscribers and ESPN+ had 22.8 million. Combined, Hulu, ESPN+ and Disney+ have over 221 million streaming subscribers. Netflix, long the leader in the streaming space, had 220 million subscribers, according to the most recent tally.
Disney shares rose more than 6% after the closing bell.
The streaming space has been in a state of upheaval in recent weeks, as Netflix disclosed another drop in subscribers and Warner Bros. Discovery announced a shift in content strategy. While Netflix expects subscriber growth to rebound, uncertainty has left analysts and investors wondering what the future holds for the wider industry.
Also Wednesday, the company unveiled a new pricing structure that incorporates an advertising-supported Disney+ as part of an effort to make its streaming business profitable.
During the fiscal third quarter Disney+, Hulu and ESPN+ combined to lose $1.1 billion, reflecting the higher cost of content on the services. Disney’s average revenue per user for Disney+ also decreased by 5% in the quarter in the U.S. and Canada due to more customers taking cheaper multiproduct offerings.
Starting Dec. 8 in the U.S., Disney+ with commercials will be $7.99 per month — currently the price of Disney+ without ads. The price of ad-free Disney+ will rise 38% to $10.99 — a $3 per month increase.
In addition, Disney lowered its 2024 forecast for Disney+ to 215 million to 245 million subscribers, down 15 million on both the low end and high end of the company’s previous guidance.
Disney had previously set its Disney+ guidance in December 2020 at 230 million to 260 million by the end of fiscal 2024. The company reaffirmed its expectation that Disney+ will become profitable by the end of its fiscal 2024 year.
Overall, Disney posted better-than-expected earnings on both the top and bottom line, bolstered by increased spending at its domestic theme parks.
Here are the results:
- Earnings per share: $1.09 per share vs. 96 cents expected, according to a Refinitiv survey of analysts
- Revenue: $21.5 billions vs. $20.96 billion expected, according to Refinitiv
- Disney+ total subscriptions: 152.1 million vs 147.76 million expected, according to StreetAccount
Big quarter for parks
Disney’s parks, experiences and products division saw revenue increase 72% to $7.4 billion during the quarter, up from $4.3 billion during the same period last year. The company said it saw increases in attendance, occupied room nights and cruise ship sailings.
It also touted that its new Genie+ and Lightning Lane products helped boost average per capita ticket revenue during the quarter. These new digital features were introduced to curate guest experience and allow parkgoers to bypass lines for major attractions.
The company said it has been able to bring back in-park experiences such as character meet-and-greets, theatrical performances and nighttime events at Disneyland, which has allowed it to increase capacity at its parks, CEO Bob Chapek said during the company’s earnings call Wednesday. Disney has placed caps on attendance since it reopened after the initial round of pandemic closures in early 2020 and instituted a new online reservation system to control crowds.
“As it relates to demand, we have not yet seen demand abate at all and we still have many days when people cannot get reservations,” Christine McCarthy, Disney’s chief financial officer, said during the company’s earnings call. “So, we’re still seeing demand in excess of the reservations that we are making available for our guests.”
Per capita spending at domestic parks increased 10% during the most recent quarter, compared to the same quarter last year and is more than 40% higher than fiscal 2019, the company said. Occupancy at domestic hotels in the third quarter was 90%.
Chapek pointed to EPCOT’s new Guardians of the Galaxy Cosmic Rewind, the launch of the Disney Wish and the opening of Avenges Campus in Paris Disneyland as enhanced offerings for guests that have driven traffic and revenue to this division.
McCarthy noted that international visitors to domestic parks have continued to be slow to return. Traditionally, those parkgoers account for around 17% to 20% of total guests.
“We expect international visitation when its fully back to actually be additive to margins, because those guests tend to stay longer at the parks and they spend more money when they’re there, as well,” she said.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. Comcast owns a stake in Hulu.
Serena Williams announces her retirement from tennis
Tennis legend Serena Williams announced her retirement in a Vogue article published Tuesday.
“I have never liked the word ‘retirement,'” Williams wrote. “Maybe the best word to describe what I’m up to is ‘evolution.’ I’m here to tell you that I’m evolving away from tennis, toward other things that are important to me.”
Williams, who turns 41 next month, has 73 career singles titles, 23 career doubles titles and over $94 million in career winnings.
Williams is widely hailed as one of the greatest athletes of all time. In her Vogue piece, she noted that some of her detractors point out that she hasn’t won the most Grand Slam titles in women’s tennis history, however.
“There are people who say I’m not the GOAT because I didn’t pass Margaret Court’s record of 24 grand slam titles, which she achieved before the ‘open era’ that began in 1968,” Williams wrote. “I’d be lying if I said I didn’t want that record.”
She said she will retire after the U.S. Open, which will run from late August into September. A victory there would tie her with Court’s Grand Slam record.
“I don’t know if I will be ready to win New York. But I’m going to try,” Williams wrote about the tournament, which is played in Queens.
She has counted sponsorships from companies including Nike, Audemars Piguet, Away, Beats, Bumble, Gatorade, Gucci, Lincoln, Michelob, Nintendo, Wilson Sporting Goods, and Procter and Gamble.
“I never wanted to have to choose between tennis and a family. I don’t think it’s fair,” Williams wrote. “If I were a guy, I wouldn’t be writing this because I’d be out there playing and winning while my wife was doing the physical labor of expanding our family.”
Williams focused on her family in the announcement, writing that her nearly five-year-old daughter wants to be an older sister. Williams is married to Reddit founder Alexis Ohanian.
“I have to focus on being a mom, my spiritual goals and finally discovering a different, but just exciting Serena. I’m gonna relish these next few weeks,” Williams wrote in an Instagram post Tuesday.
Professionally, she looks to expand Serena Ventures, a small investment firm of six people that was one of the first investors in MasterClass. Her firm raised $111 million in outside financing this year.
Williams wrote that only 2% of venture capital goes to women and that “in order for us to change that, more people who look like me need to be in that position, giving money back to themselves.”
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