Tax Receipts Reducing US Budget Deficit Ahead Of Schedule

by Mike Godfrey, Tax-News.com, Washington

12 July 2005

United States Treasury Secretary John Snow indicated last week that higher tax revenues bought about by a healthy US economy have resulted in a substantial decrease in the US budget deficit.

"It's pretty clear now that the path we're on will take us below the president's initial target, that is below 2 percent of GDP and beyond that going forward," Snow stated at a press conference last week, adding that: "The outlook for the fiscal deficit for the next couple of years is excellent."

Figures from April and May this year show that tax revenues are running around $1 billion a day higher than in 2004, and the Congressional Budget Office predicts that the budget deficit this year will fall to $325 billion, down from $412 billion in 2004.

President Bush has pledged to reduce the deficit to 2.25% of gross domestic product by 2009. According to some analysts, the administration is well ahead of this target, which could be reached by 2006.

Snow puts the increase in tax revenues firmly down to America's strengthening economy, brought about by President Bush's round of tax cuts in 2003.

"The way you deal with budget deficits is, one, have a strong growing economy, and since the president's tax cuts took effect in May of '03 we've had the American economy grow strongly," he observed.

Snow is due to announce final revenue figures later in the week.

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