CBO Reduces US Corporate Tax Revenue Forecast
In its latest estimates, the Congressional Budget Office (CBO) has maintained its forecast for a reduced United States federal budget deficit this year, but has had to increase it from the forecast made in April, mostly because of lower-than-anticipated receipts from corporate income taxes.
At 2.9 percent of gross domestic product (GDP), the CBO points out that this year’s deficit would be much smaller than those of recent years.
In fact, the CBO notes that persistent fiscal deficits during its long-term projections until 2024, would raise the federal debt to GDP ratio even higher. Although, according to its updated projections, the annual deficit would remain at less than 3 percent of GDP until 2018, and grow thereafter to reach nearly 4 percent by 2022, those persistent deficits would mean that debt would reach 77 percent of GDP in 2024.
Revenues from all major sources should rise this year, including individual income taxes (by an estimated 6 percent); payroll taxes (by 8 percent); and corporate income taxes (by 15 percent). Increases in wages and salaries and changes in laws – such as those affecting payroll tax rates and income tax deductions for investments in business equipment – largely account for the higher tax receipts.
The CBO is, however, also seeing some effects being caused by uncertainties within the corporate tax system, and, in particular, the congressional debate on whether to extend, in full or in part, the “tax extenders” (the 50 tax measures that expired at the end of 2013).
For example, on the basis of tax collections until July, the CBO expects receipts of corporate income taxes in FY2014 to be USD37bn less than the amount the agency projected in April, largely due to a revised assessment of the timing of businesses’ tax payments following the expiration at the end of December 2013 of increased provisions allowing them to immediately deduct 50 percent of their investments in equipment (one of the tax extenders). The CBO now expects that firms will also delay more payments from 2014 to 2015.
Source: tax-news
