The White House midyear budget says that an increase in tax revenues, mostly coming from relatively wealthy taxpayers, along with a good stock market performance, will drop the deficit to $333 billion this year.
That amount is $79 billion below last year's deficit, and nearly $100 billion below earlier projections. In a report, the White House said that the biggest revenue increases came from quarterly payments on capital gains and business income, instead of wage withholdings. A one-time contributor was the expiration of a tax break that allowed businesses to more quickly write off investments in new equipment. The improved revenues are coming in at levels 15 percent higher than last year.
In a briefing, President Bush pointed to his administration's tax cuts and growth policies as being the reason behind the improving numbers.
According to the White House report, "The nation's budget picture has improved dramatically. Due in large part to tax relief, the economy is strengthening and the growing economy is producing the tax receipts necessary to cut the deficit far faster than was initially predicted."
Democrats have noted that the deficit for the budget year ending Sept. 30 will still be the third largest ever, and that the use of a $173 billion in surplus Social Security taxes hides the true deficit. They have also said that the projections leave out the long-term costs of occupying Iraq and Afghanistan, and proposals to make changes to the alternative minimum tax that protect the middle class.
The Congressional Budget Office, a nonpartisan agency, also saw improvement in the deficit, announcing last week that the deficit for 2005 could be below $325 billion. The office's official update will be released in August. The White House report also forecast a 3.6 percent real growth rate for this year, slowing down to 3.4 percent in 2006.
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