The Congressional Budget Office is seeing a $400 billion reduction in the federal government’s budget deficit for the current fiscal year, thanks to increased tax revenues due largely to the expiration of the payroll tax cut.
The federal government ran a budget deficit of roughly $750 billion for the first 11 months of fiscal year 2013, CBO estimates—a reduction of more than $400 billion from the shortfall recorded for the same period last year, according to a report released Tuesday by the CBO. “Revenues have risen significantly, accounting for more than two-thirds of the decline in the deficit,” said the report.
Tax revenues for the first 11 months of fiscal year 2013, from October 2012 through August 2013 rose 13 percent compared with tax collections during the same period in fiscal 2012. Tax receipts for those first 11 months totaled an estimated $2.47 triillion, $284 billion more than receipts for the same period last year.
Individual income taxes and payroll taxes together increased $251 billion, or approximately 14 percent, according to the CBO. Taxes withheld from workers’ paychecks rose by $160 billion (or 10 percent), mainly because of the expiration of the payroll tax cut in January 2013, along with higher wages and salaries, and increases that began in January in the tax rates for income above certain thresholds as a result of the fiscal cliff deal.
Nonwithheld taxes rose by $91 billion, or approximately 27 percent, according to the CBO. About three-fourths of that increase occurred during the tax-filing season from February through April, mainly because final payments for the 2012 tax year were much larger than their counterparts last year.
Some of the growth in nonwithheld receipts also reflected an increase in estimated payments for the current tax year (made in the spring and the summer) and some payments made at other times for the 2012 tax year, such as the quarterly payments made in January 2013.
The large percentage increase of 53 percent in other receipts of individual income and payroll taxes, which the CBO refers to as “social insurance taxes” and which are net of refunds, occurred because last year’s refunds offset much more of the payments than this year’s tax refunds have.
In addition, net corporate income taxes were higher by $30 billion (or 16 percent), probably because of growth in taxable profits in calendar year 2012 and the first half of calendar year 2013, the CBO pointed out.
The CBO is expecting the federal government to see further tax revenue increases later this month, as the next quarterly estimated payments by individuals and most corporations are due in mid-September.
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