CBO forecasts largest-ever monthly surplus as record tax receipts pour in Published: May 8, 2018 12:40 p.m. ET
ROBERT SCHROEDER FISCAL POLICY REPORTER
Reuters April’s budget surplus will set a record, the CBO says, but President Trump’s tax law is expected to widen the deficit for the full fiscal year. Record tax receipts will lead to the largest-ever monthly budget surplus for the federal government, congressional analysts said in a new report, as Americans hand over more money to Washington.
The nonpartisan Congressional Budget Office estimates the April surplus will total $218 billion, breaking the prior record of nearly $190 billion notched in April 2001.
Greater-than-expected tax receipts drove the surplus, CBO said, noting the record $515 billion in receipts for the month was as much as $40 billion more than the agency estimated about a month ago.
The agency chalked up the difference to greater payments of individual income taxes in April, when tax returns and certain taxpayers’ quarterly estimated payments are due. The reasons for higher payments were twofold, CBO said.
“Those payments were mostly related to economic activity in 2017 and may reflect stronger-than-expected income growth for that year. Part of the strength in receipts also may reflect larger-than-anticipated payments for economic activity in 2018,” the agency said. The prior record for receipts was $472 billion in April 2015.
The tax cut enacted by President Donald Trump last year was expected to result in a boost in workers’ take-home pay. The CBO said withheld taxes rose in April since wages and salaries were higher — but the share of wages withheld for taxes was lower thanks to the new tax law.
The expected April surplus, meanwhile, isn’t keeping the U.S. from running a wider budget deficit for the fiscal year to date. For the first seven months of the budget year, the shortfall totals $382 billion, or $37 billion more than the same period a year ago, CBO estimates. The CBO recently estimated the full-year deficit would be $804 billion, and that trillion-dollar deficits would return in 2020.
Read: Tax cuts will lead to sea of red ink, CBO forecasts.
For the fiscal year to date, corporate income tax receipts have fallen by 22%, CBO said. Corporations made their first estimated tax payments for the 2018 tax year in April, as well as their final payments of taxes for 2017. The new tax law cut the corporate rate to 21% from 35%.
Companies may also have pushed losses into higher-tax 2017 to generate a refund.
See: Money-losing companies could take advantage of tax law’s 2018 start date.
The government’s fiscal year runs from October through September.