Federal tax revenues fell by 0.4 percent to $3.33 trillion in 2018, the first year under the new tax law, The Treasury Department said Wednesday. The drop in revenues, combined with a 4.4 percent increase in spending, to $4.2 trillion, produced an $873 billion budget deficit during the calendar year, 28.2 percent higher than the year before.
“A strong economy typically leads to narrower deficits, as rising household income and corporate profits help boost tax collections, while spending on safety-net programs tends to decline,” The Wall Street Journal’s Kate Davidson wrote. Last year, however, the combination of tax cuts, higher government spending and increased interest costs produced the opposite effect.
Tax receipts in the first three months of the 2019 fiscal year, which started in October 2018, are up 0.2 percent compared to the year before, in part due to trade tariffs on imports, while spending is 9.6 percent higher. The budget deficit rose to $319 billion during the period – a 42 percent increase from a year earlier.
The Congressional Budget Office projects an annual budget deficit of $897 billion for the 2019 fiscal year, rising to $1 trillion in 2022 and beyond.