US Tax Revenues Continue To Out-Perform

by Leroy Baker, Tax-News.com, New York

13 July 2006

Congressional Budget Office figures show that in the first three quarters of fiscal year 2006, the US federal government ran a deficit of about $208 billion, $41 billion less than the shortfall recorded in the same period last year. Revenues continued to grow strongly, up by about 13 percent over receipts at the same time last year.

For the first nine months of fiscal year 2006, CBO estimates, total receipts rose by 12.8 percent compared with the same period in 2005. That increase represents the second-highest rate of growth for that nine-month period in the past 25 years (surpassed only by last year’s strong growth). Net corporate income tax receipts continued to show the largest percentage increase, but the rate of growth waned in June. Nevertheless, net corporate receipts during the first nine months of the fiscal year grew by 26 percent, or $52 billion, compared with the same period in 2005.

Although significant uncertainty remains regarding the quarterly estimated tax payments due in September, CBO expects that corporate receipts will exceed $330 billion for the entire fiscal year, an increase of at least 18 percent over the amount collected in 2005.

Withheld individual income and payroll taxes grew by almost $88 billion (or 8 percent) during the first nine months of fiscal year 2006 compared with 2005. That rate of increase probably indicates that wages and salaries have been growing at a robust rate. So far this year, withheld taxes have accounted for over 40 percent of the total gains in receipts.

The estimated budget deficit for the fiscal year is now $296 billion (2.3% of GDP), 30% less than the $423 billion White House estimate earlier in the year. In 2005, the deficit was $318 billion.

"Some in Washington said we had to choose between cutting taxes and cutting deficits. Today's numbers show that was a false choice," said the President.

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