The U.S. budget deficit narrowed 12 percent last month from a year earlier as Congress and President Barack Obama allowed payroll taxes to increase and individual refunds fell.
Outlays exceeded receipts by $203.5 billion, compared with a $231.7 billion deficit in February 2012, according to Treasury Department data issued Wednesday in Washington. Economists projected a $205 billion shortfall, according to the median estimate in a Bloomberg survey.
Obama and lawmakers are negotiating the funding for the government for the rest of this fiscal year and a budget for 2014, while also trying to agree on a long-term deficit- reduction plan. Republicans proposed cutting spending to eliminate the deficit by 2023 while the Obama administration said spending cuts must be accompanied by further revenue increases such as the elimination of tax loopholes.
“We’re having revenue improving mostly because of the higher taxes that started at the beginning of the year but also because of the fact that the economy is on a better footing,” Millan Mulraine, director of U.S. research and strategy at TD Securities in New York, said in an interview. “We’re likely to see further improvement.”
Wednesday’s report showed revenue rose 18.8 percent to $122.8 billion in February from the same month a year earlier. Spending decreased 2.6 percent to $326.4 billion, it showed.
Individual income-tax receipts for the first five months of this fiscal year climbed to $500.6 billion compared with $425.3 billion in the same period last year. Corporate income-tax receipts rose to $71.4 billion from $60.6 billion.
Individual refunds totaled $66 billion last month, $15 billion less than in February 2012, the report showed.
Estimates for February ranged from deficits of $200 billion to $223 billion, according to the Bloomberg survey of 28 economists.
The Congressional Budget Office on March 7 projected a budget deficit of $205 billion in February.
The CBO said that receipts were about $24 billion higher in February 2013 “primarily because individual income-tax refunds were $20 billion lower, reflecting a delay in the start of the filing season for most individuals until Jan. 30 this year.”
Also, the “expiration of the payroll tax cut in January 2013 contributed most significantly to that increase,” the CBO said.
Congress and the administration allowed the payroll tax to return to its 2010 level of 6.2 percent from 4.2 percent at the start of the year. Two months later, they failed to avert the across-the-board spending cuts known as sequestration that will likely help limit the deficit while also hurting U.S. economic growth.
U.S. House Budget Committee Chairman Paul Ryan, a Republican from Wisconsin, on March 12 announced a revised tax-and-spending proposal that he said would eliminate the deficit within a decade by cutting $4.6 trillion out of a vast swath of federal expenditures.
Senate Democrats are unveiling their own budget framework, which will lay out a 10-year plan for reducing the deficit, in part through almost $1 trillion in additional tax increases. Obama plans to outline his priorities for the 2014 fiscal year during the week of April 8, an administration official said Tuesday.
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