ICYMI: Beltway Revenue Boom
This isn’t news the politicians want to broadcast, but federal tax revenue is booming. The latest monthly Congressional Budget Office review released Monday reports that, for the 11 months of the fiscal year through August, revenue is up $284 billion or 13% from a year earlier. We’re guessing that’s bigger than your raise this year.
Individual income tax payments are up an amazing 15.8%, or $160 billion, presumably due in large part to higher tax rates. Payroll taxes are up $90 billion, or 11.6%, following the elimination of the two-year FICA tax holiday. Corporations have also been chipping in more as their profits climb, with a 16% or $30 billion increase.
The revenue increase is already the biggest for the feds since 2006, and it should bring revenues as a share of the economy closer to their historical average of 18.5% than they’ve been since the recession. The revenue boom has also contributed to a more than $400 billion cut in the fiscal 2013 deficit—to $750 billion for the first 11 months. September is usually a good revenue month with quarterly tax payments due, so the deficit is likely to decline even more for the year.
In an even bigger surprise, federal outlays are also down by about 3.9%. Defense is the biggest loser, falling 7.6%, while entitlements keep rising, especially Medicaid at 6.1% a year to $244 billion. The sequester has helped to shave 3.5% from “other activities,” as CBO likes to call the vast expanse of government.
By far the biggest reduction in outlays came not from spending cuts but from the Treasury’s $82 billion windfall from Fannie Mae and Freddie Mac payments. In the perversities of federal accounting, CBO counts these not as revenues but as “net transfers” under outlays. Treasury still gets the money.
Next month’s figures will provide a more complete picture of the federal fisc, but even this news is good to know as the latest budget showdown approaches. A question for President Obama: Why are you insisting on another tax increase when you’ve already received a $284 billion raise this year?