Weaker corporate tax receipts worsen U.S. budget picture
WASHINGTON - The U.S. budget picture will likely worsen in coming months as companies wait until next year to see what actions Congress will take on taxes, a report from the Congressional Budget Office showed on Wednesday.
The U.S. budget deficit for fiscal year 2014 will be an estimated $506 billion, a slight increase from the $492 billion projected in April, based on lower-than-expected corporate tax receipts, the non-partisan CBO said.
Revenues to the government from company tax payments are expected to total $315 billion, down from an estimated $351 billion in April.
The bigger budget deficit comes because companies are deferring tax payments while they wait for Congress to decide whether to revive expired tax breaks, CBO officials said. Lawmakers are expected to take up legislation after the November elections to renew through 2015 a mix of 50 temporary tax breaks, known in Congress as "tax extenders," that expired at the end of 2013.
The extenders bill would continue tax relief for a wide range of activities, including auto race tracks, wind energy, school teacher expenses, Puerto Rican rum producers and multinational corporations.
The budget deficit is expected to fall to $469 billion in 2015, but then begin to rise as spending outpaces revenues, CBO said. Climbing deficits would result in growing levels of federal debt that would in turn weigh on federal spending options and economic growth, CBO warned.
The deficit is expected to rise to $960 billion in 2024 if current federal tax and spending laws remain unchanged, the agency added.
Some lawmakers and analysts argue that what matters is that the U.S. deficit remains steady in relation to the growth of the U.S. economy. U.S. budget deficits are expected to remain less than 3 percent of gross domestic product through 2018 but grow after that, rising to nearly 4 percent of GDP in 2022 as revenues fail to keep pace with spending, the budget agency said.
CBO said its projections are based on the assumption that the economy will grow at a 1.5 percent annual pace this year but then speed up to an annual rate of 3.2 percent in 2015 and 3.5 percent in 2016.
CBO officials said they believe that despite declines in unemployment levels, a substantial amount of slack remains in the U.S. labor market due to the lower participation rate and an increased number of people working part time.
An important signal that significant slack remains in the labor market is the slow growth in hourly wages, CBO said.