Deficit shrinking, revenues rising, says CBO

10/06/2006

The Congressional Budget Office is estimating "that the federal budget deficit was about $250 billion in fiscal year 2006, around $68 billion less than the shortfall recorded in 2005. Relative to the size of the economy, that deficit was equal to 1.9 percent of the gross domestic product (GDP), down from 2.6 percent in 2005." Moreover, tax receipts have grown 12% in the last year, while corporate tax receipts have risen 21%, with the effect that "CBO estimates that the federal deficit was about $250 billion in 2006, down from $318 billion in the previous year ... [Which] is about $10 billion lower than CBO projected this summer, primarily because receipts of corporate income taxes were greater than expected."

(Congressional Quarterly's Midday Update notes that said deficit of "$250 billion equals about 1.9 percent of gross domestic product, down from 2.6 percent of GDP in 2005.")

So let's get this straight: tax revenues have risen, yet tax rates has not. Hmm, whatever could be happening that would explain this weirdness?