Government tax revenue growing in 2011

Feds still notch 32nd straight monthly deficit

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The job market still may be struggling, but wages and salaries are improving, and that helped shrink the federal deficit to $59 billion for May, according to the Congressional Budget Office — the lowest deficit in five years for that month.
Still, the shortfall marks the 32nd straight month the federal government has been in the red — once again extending the hapless record streak.
CBO, in its monthly review of the federal budget, said individual income tax revenue is up $139 billion so far this fiscal year compared with 2010, well outstripping the loss of revenue from the payroll tax cut Congress and President Obama agreed to in December.
Overall, basic spending has gone up less than 1 percent, thanks in large part to the spending-cuts bill lawmakers passed earlier this year. But the automatic spending programs such as Social Security, Medicare and Medicaid, which were not part of the spending deal, continued to grow quickly: Social Security by 3.6 percent, Medicare by 3.8 percent and Medicaid by a worrisome 5.4 percent.
Still, the biggest jump in spending came on interest on the public debt, which is running 16 percent higher this year than in 2010.
With four months left in the fiscal year, the federal deficit stood at $929 billion, or about $7 billion below last year’s record pace. Spending has grown $132 billion in the year to date, while revenues are up $139 billion, which accounts for the slightly improved picture.

Final official figures will be released by the Treasury Department later this month.

FY2010 saw a 3 percent rise in revenue over the previous year, despite the ongoing recession, thanks to increased corporate taxes and higher Fed earnings.

Federal revenues rose nearly 3 percent from fiscal year 2009 to FY2010. But virtually the whole increase came from higher corporate income taxes and a more than doubling of Federal Reserve earnings. Preliminary data in the Congressional Budget Office’s October Monthly Budget Review reveal that revenue climbed $57 billion to $2.16 trillion in the fiscal year that ended last month (see graph). Combined with a $67 billion fall in outlays, that revenue gain cut the federal deficit by $125 billion to a still astronomical $1.3 trillion, or 8.9 percent of GDP. Bad as that is, it’s well below 2009’s deficit of 10 percent of GDP.

The Tax Policy Center is a joint venture of the Urban Institute and Brookings Institution. The Center is made up of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government. TaxVox is the Tax Policy Center's tax and budget policy blog.

Year-over-year revenue changes were highly uneven, however. Corporate income taxes jumped about 40 percent to $192 billion—up $54 billion from 2009—largely because profits rose but also because temporary provisions allowing firms to depreciate assets more rapidly expired. (Congress extended accelerated depreciation retroactively in September, but any tax savings won’t come until FY2011.) Federal Reserve receipts jumped more than 120 percent ($42 billion) on the Fed’s greatly expanded investment portfolio, mostly acquired to boost the economy and prop up the ailing housing market.

But both individual income and social insurance taxes fell in FY2010-- fallout from continuing high unemployment. Income tax receipts were down 1.6 percent ($14 billion) and the taxes supporting Social Security and Medicare dropped more than 3 percent ($28 billion). Had these revenue sources held constant, the deficit would have shrunk another 0.3 percent of GDP.