CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Higher US Tax Revenues Must Not Prompt Complacency: CBO

Higher US Tax Revenues Must Not Prompt Complacency: CBO

by Mike Godfrey,, Washington

14 October 2014

After the release of statistics from the Congressional Budget Office (CBO) showing a fall in the US budget deficit in the fiscal year 2014, the Committee for a Responsible Federal Budget (CRFB) cautioned that, despite the positive news, the US "remains on an unsustainable fiscal path."

With revenues for fiscal year FY2014 to end-September totaling USD3,013bn – USD239bn, or nine percent, more than in FY2013 – the CBO estimated that the US federal government ran a budget deficit of USD486bn, which was USD195bn less than the shortfall in the previous fiscal year.

The CBO said that, based on the preliminary figures, the deficit for FY2014 would be worth 2.8 percent of gross domestic product (GDP), slightly below the average experienced over the past 40 years.

FY2014 was the fifth consecutive year in which the deficit declined as a percentage of GDP, having peaked at 9.8 percent in FY2009.

Within the FY2014 tax revenue statistics, the USD154bn (or seven percent) rise in individual income taxes and social security taxes to USD2.4 trillion was largely due to the growth in wages and salaries, but almost one-third of it also stemmed from changes to the tax code.

The tax rates in effect from October to December, 2013, were higher than those in effect during the same period in the previous year, due to the expiration of the two percent cut in payroll taxes and an increase in tax rates for income above certain thresholds from January 2013.

In addition, receipts from corporate income taxes rose by USD48bn (or 18 percent) to USD321bn in FY2014, mainly due to US taxpayers' improved profits in the calendar years 2013 and 2014.

Taxable profits were boosted in large part by the expiry of certain temporary tax provisions at the end of December 2013 (the "tax extenders"), which have not yet been renewed. The most significant effect on corporate tax receipts was seen after the expiry of the bonus depreciation rules that previously allowed the deduction of 50 percent of the cost of new capital purchases within the first year.

However, while the CRFB accepted that budget deficits have fallen substantially over the past five years, as noted by the CBO, and that there have been rapid increases in revenue (mostly as a result of the economic recovery), it commented that "simply citing the 66 percent fall in deficits over the past five years without context is misleading, since it follows an almost 800 percent increase that brought deficits to their highest levels in post-war history."

"Even as deficits have fallen, debt has continued to rise, more than doubling as a percent of GDP since 2007 to record levels not seen other than during a brief period around World War II," it added. "Both deficits and debt are projected to rise over the next decade and beyond, with trillion-dollar deficits returning by 2025 and debt exceeding the size of the economy before 2040, and as soon as 2030."

TAGS: individuals | tax | economics | business | fiscal policy | corporation tax | payroll | tax rates | United States | revenue statistics | individual income tax | Tax

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »