The federal government incurred a budget deficit of $871 billion in the first seven months of fiscal year 2011, CBO estimates in its latest Monthly Budget Review, roughly $70 billion more than the deficit incurred in the same period in 2010. That deficit would have been higher if not for the larger-than-expected payments with individual income tax returns filed near the end of the spring tax-filing season.
The federal government incurred a budget deficit of $871 billion in the first seven months of fiscal year 2011, CBO estimates in its latest Monthly Budget Review, roughly $70 billion more than the deficit incurred in the same period in 2010. That deficit would have been higher if not for the larger-than-expected payments with individual income tax returns filed near the end of the spring tax-filing season.
Receipts in April totaled $289 billion, $44 billion (or 18 percent) more than collections last April. Nonwithheld receipts of income and payroll taxes, largely from filings of income tax returns, rose by about $35 billion (or 27 percent) to their highest level for the month of April since 2008. In addition, refunds paid as a result of filings of income tax returns fell by $5 billion, boosting net receipts.The resulting deficit in April was $41 billion, CBO estimates, about half as large as the deficit recorded in April 2010.
Including collections associated with the mid-April filing deadline that were posted in early May, total receipts are running $75 billion to $85 billion more than what CBO estimated in March. That development suggests several possibilities: Certain types of income may have grown faster in 2010 than expected; income growth may have been more concentrated than expected among taxpayers subject to relatively high tax rates; and the impact of changes in tax law may have differed from what was projected.
In total, receipts through the first seven months were about $1.3 trillion, $110 billion (or 9 percent) higher than receipts recorded in the same period last year. Individual income tax receipts were higher by $130 billion, or 26 percentthe result of increased amounts withheld from paychecks and strong growth in payments accompanying 2010 tax returns. In contrast, receipts from social insurance taxes declined by about $31 billion (or 6 percent) because of the temporary reduction in payroll taxes that took effect in January.
The increase in revenues has come from both taxes that are withheld from peoples paychecks and from other tax payments. Specifically, despite the temporary payroll tax cut in effect since January, total income and social insurance taxes withheld from paychecks rose by $46 billion (or 5 percent); that gain reflects, at least in part, the recent strength of wages and salaries in the economy. Nonwithheld receipts rose by $39 billion (or 18 percent) through April; most of that increase occurred in April.
Spending through April was 9 percent higher than in the same period in fiscal year 2010. That increase is almost entirely explained by the difference in net costs recorded for the Troubled Asset Relief Program (TARP) and advance payments of premiums made to the Federal Deposit Insurance Corporation (FDIC) in 2010. Excluding TARP outlays and the prepayments to the FDIC (which were recorded as negative outlays), spending through April increased by less than 1 percent relative to outlays during the same period last year.
Net interest on the public debt was the fastest-growing category of spending, rising by $20 billion, or 16 percent. Spending for Medicaid increased by 7 percent and that for Medicare and Social Security grew by 4 percent each, adjusted for shifts in the timing of payments. In contrast, smaller cash infusions and slightly larger dividend receipts reduced net payments to Fannie Mae and Freddie Mac by $27 billion. Outlays for unemployment benefits decreased by $22 billion, or 23 percent, because of a decline in the number of claims and because average benefits were lower than they had been a year earlier.
The Monthly Budget Review was prepared by Elizabeth Cove Delisle, Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin.