Federal Tax Receipts Surged In April To New Record

Federal tax receipts surged in April to generate the largest monthly US budget surplus in seven years, the latest sign that climbing stock values, hefty corporate profits and rising incomes for wealthier Americans are improving the nation’s budget picture.

The US Treasury collected a record $472 billion last month, up 14% from a year earlier, leading to a $155 billion surplus for the month. While the US typically enjoys a surplus in April due to tax-filing season, this year’s surplus was $50 billion more than last year’s and the fifth-largest monthly surplus on record.

April is always a busy month with the income tax deadline on the 15th, but this year’s haul was historic as noted just above, far outstripping the previous monthly record, set last April, of $414 billion. Spending, meanwhile, was a more modest $317 billion, leaving the government with a surplus for that one month of $155 billion.

The boost in receipts narrowed the US budget deficit for the previous 12 months to $460 billion, down from $510 billion in March and $499 billion in the prior year. It was the lowest annual deficit since last November and the second lowest since September 2008. Over the past 12 months, federal revenues are running 9% above their year-earlier level, while spending is running 7% higher.

The figures illustrate how, despite growing unease over income inequality, the taxes that America’s rich are paying on their rising incomes are yielding a windfall for the US Treasury. Payroll tax collections rose 6% from a year earlier in April, while other individual taxes collected, including those on capital gains and self-employment incomes, were up 18%.

Yet despite the record month in April, and even if receipts continue above normal in coming months, the government will still run a budget deficit for the entire fiscal year which ends on September 30. But it now looks to be smaller than last year’s deficit, and will be the lowest since President Obama took office.

According to the Congressional Budget Office, federal receipts for the first seven months of fiscal year 2015 totaled $1.9 trillion, $155 billion more than receipts in the same period FY2014. That increase is roughly $40 billion larger than what CBO projected back in March. Despite that good news, the government has spent $2.2 trillion so far this fiscal year which began on October 1 last year. So we will still have a budget deficit of at least $450 billion for FY2015.

The latest figures could also affect negotiations between President Obama and congressional Republicans over how to set government spending levels for the coming fiscal year that begins October 1. Mr. Obama has insisted that spending rise above the across-the-board caps that Congress agreed to four years ago, and that any increases in the defense budget must be matched by increases in other domestic spending.

Republicans in Congress last week approved a budget resolution, which doesn’t require presidential approval, to keep the curbs in place. But they added nearly $90 billion in new spending (don’t they always), using a separate account for war funding that isn’t subject to the sequester, to placate defense hawks who are uneasy over military spending restraints.

The Obama administration has argued that deficits can be contained below 3% of GDP by focusing on steps that boost economic growth by expanding the labor force. In their budget resolution last week, Republicans proposed $5 trillion in spending cuts to eliminate the deficit over the coming decade. Unfortunately, that will never happen, especially with the presidential election looming next year.

Meanwhile, Congress has yet to raise the federal debt limit. The Treasury Department has been using emergency measures since mid-March to avoid breaching the ceiling. The Treasury hasn’t yet said how long it might be able to continue doing that, but the CBO estimated in March that those measures should last until October or November.

So, another debt ceiling battle looms this fall. However, with the 2016 election approaching, I don’t expect Republicans to put up a serious fight.

Posted 05-19-2015 4:37 PM by Gary D. Halbert
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