Monthly Budget Review for March 2013

The federal government ran a budget deficit of $601 billion in the first half of fiscal year 2013, CBO estimates, $178 billion less than the shortfall recorded for the same period last year.

Total Receipts Were Up by 12 Percent in the First Half of Fiscal Year 2013

Receipts in the first half of fiscal year 2013 totaled $1.2 trillion, $132 billion more than those in the same period last year. Compared with receipts in the first half of last year:

• Individual income and payroll (social insurance) taxes together rose by $107 billion (or 12 percent)—accounting for most of the gains so far this year.
   
  • Taxes withheld from workers’ paychecks rose by $85 billion (or 9 percent), mainly because of higher wages and salaries, the expiration of the payroll tax cut in January, and increases (beginning in January) in tax rates on income above certain thresholds.
  • Nonwithheld receipts of individual income and payroll taxes were $14 billion (or 14 percent) greater, mostly from a rise in estimated tax payments in January 2013, much of which CBO attributes to taxpayers’ shifting income from calendar year 2013 into late 2012 in anticipation of higher tax rates.
  • In addition, net receipts rose because refunds of individual income taxes were $11 billion (or 7 percent) lower. The Internal Revenue Service reports that fewer tax returns have been received and processed so far this year than at the same point in last year’s filing season.
  • Those increases in net receipts were partly offset by a $2 billion decline in revenues from unemployment taxes.
• Corporate income taxes increased by $15 billion (or 18 percent), probably reflecting growth in taxable profits in calendar year 2012.
• Other revenues rose by $10 billion. Most of the gains came from excise taxes (up by $4 billion), miscellaneous fees and fines (up by $4 billion), and customs duties (up by $1 billion).

Tax collections in April—the month in which individual income tax returns are due—will provide important information about the likely growth of revenues this year.

Spending Was About 3 Percent Lower in the First Half of the Fiscal Year

By CBO’s estimate, federal outlays—totaling nearly $1.8 trillion—were $46 billion lower in the first half of fiscal year 2013 than in the same period in 2012. With changes to the estimated cost of past transactions of several credit programs (notably TARP) excluded, outlays were about 1 percent lower this year.

Outlays decreased for some major categories of spending:

• Unemployment benefits—Spending fell by $13 billion (or 25 percent).
• Defense—Outlays fell by $20 billion (or 6 percent).
• Fannie Mae and Freddie Mac—Net payments to the government-sponsored enterprises were $25 billion less than those made at the same time last year.
• Troubled Asset Relief Program—Outlays for this program declined by $33 billion, mainly because adjustments to the estimated cost of the program increased outlays by $21 billion in 2012 and reduced them by $13 billion in 2013.

In contrast, for some major programs and activities, spending increased:

• Social Security, Medicare, and Medicaid—Spending so far this year for all three of the government’s largest entitlement programs has been greater than during the first six months of last year. Outlays increased by $22 billion (or 6 percent) for Social Security, by $12 billion (or 5 percent) for Medicare, and by $8 billion (or 6 percent) for Medicaid.
• Agriculture—Spending increased by $14 billion, primarily because drought led to increases in crop insurance payments.
• Disaster Assistance—Outlays for the Federal Emergency Management Agency rose by $8 billion, mostly because of Hurricane Sandy.
• Veterans Benefits—Outlays rose by $4 billion.

The Monthly Budget Review was prepared by Elizabeth Cove Delisle, Barbara Edwards, David Rafferty, Dawn Sauter Regan, and Joshua Shakin.