The budget deficit this year is estimated to be $426 billion, $60 billion less than projected in March, according to new estimates from the Congressional Budget Office, thanks to stronger tax revenues.
Federal revenues are expected to climb by 8 percent in 2015, to $3.3 trillion, or 18.2 percent of GDP. Revenues from all major sources are expected to rise, including individual income taxes (by 10 percent), corporate income taxes (by 8 percent), and payroll taxes (by 4 percent).
Revenues from other sources are estimated to increase, on net, by 5 percent. The largest increase in that category derives from fees and fines, mostly as a result of provisions of the Affordable Care Act, the CBO said Tuesday.
Fiscal year 2015 will mark the sixth consecutive year in which the deficit has declined as a percentage of gross domestic product since it peaked in 2009. Over the next 10 years, however, the budget outlook is expected to remain much the same as the CBO forecast earlier this year. If current laws generally remain unchanged, within a few years the deficit will begin to rise again relative to GDP, and by 2025, debt held by the public will be higher relative to the size of the economy than it is now.
In the CBO’s baseline projections, the budget shortfall will decline to $414 billion next year but then rise substantially to $1.0 trillion in 2025. According to those estimates, which incorporate the assumption that current laws will generally remain the same, the combination of significant growth in spending on health care and retirement programs and rising interest payments on federal debt would outpace the growth in revenues.
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