The U.S. budget deficit fell by 28.5% during fiscal 2014 to $486 billion, the smallest shortfall since 2008 and the fifth straight year the deficit has declined as a percentage of gross domestic product, according to the Congressional Budget Office.
In its latest monthly budget review, the CBO said receipts grew nearly 9% from the previous year to $3.01 trillion, while spending rose 1.4% to $3.5 trillion. In August, the non-partisan agency had predicted a slightly larger shortfall of $506 billion.
The deficit has fallen to an estimated 2.8% of GDP since peaking at 9.8% in 2009.
The increase in receipts was fueled by a 6% spike in collections for individual income and payroll taxes, which the CBO attributed to growth in wages and salaries as the economy expands. In addition, receipts from corporate incomes taxes rose by 18% due largely to growth in taxable profits.
But changes in tax law also had an effect. “In particular, the tax rates in effect from October 2013 through December 2013 were higher than those in effect during the same span the year before because of two changes that took effect in January 2013: the expiration of the two percentage-point cut in payroll taxes and an increase in tax rates for income above certain thresholds,” the non-partisan agency noted.
On the spending side, the CBO said the $44 billion increase during fiscal 2014 was fueled by higher spending on low-income healthcare programs as provisions of President Obama’s Affordable Care Act went into effect. Spending on subsidies for health insurance purchased through exchanges amounted to $13 billion.
A $37 billion increase in spending on Social Security was offset by a $30 billion drop in Defense Department outlays and a $24 billion decline in unemployment benefits. The Emergency Unemployment Compensation program expired at the end of December 2013.
The CBO has forecast a $469 billion deficit for fiscal 2015, which started on Oct. 1.
Source: Reuters U.S. fiscal 2014 budget deficit falls to $486 billion, CBO says