–Tariff Income +93%; Corporate Taxes -13%
By Denny Gulino
WASHINGTON (MaceNews) – The February U.S. budget deficit was a record $234 billion but Treasury officials were happy to show Friday that despite the tax cut, receipts were also a record for the month.
The February deficit was 9% wider than the same month a year earlier, on its way to what the updated administration estimate March 11 said would be a $1.1 trillion deficit for the entire 2019 fiscal year. The latest figure topped the previous record in February 2012 by about $2 billion.
For the October-February fiscal year so far, the monthly deficits add up to $544 billion, $153 billion wider than the same period a year earlier. Treasury officials said that 95% of that increase was due to higher outlays and only 5% to lower revenues.
The administration has been criticized by deficit hawks for tax cuts that are adding to the national debt. Now the White House can counter that government receipts are actually increasing, with individual tax receipts up 5% in February. In fact receipts overall were a record for any February at $167 billion.
Corporate tax receipts in February were down 13% and for the fiscal year to date, down 23% to $77 billion.
Individual tax refunds were down about $3 billion for the month compared to a year earlier net of earned income credits.
The budget line titled “customs duties,” i.e. tariff revenue, was up 93% from a year earlier at $5 billion for the month. Those tariffs are paid by U.S. importers, not the countries targeted. For the fiscal year to date the tariff revenue is up 91% to $30 billion.
Federal Reserve earnings remitted to the federal government were down 62% to $3 billion, thanks to both higher interest rates the Fed paid on bank reserves and a one-time transfer to Treasury of about $2.5 billion.
Fed Chairman Jerome Powell, in his news conference Wednesday afternoon after the Federal Open Market Committee meeting, addressed the size of annual deficits and how they are adding to the national debt, saying, “It’s not really controversial to say that our debt can’t grow faster than our economy indefinitely and that’s what it’s doing now.”
“It’s important that the public discussion really come back to it,” he added, “and we will have to deal with it eventually.”
February was the first month that some withholding rates reflected those specified in the tax cut legislation. In March the new withholding rates will be totally in place.
Interest on the public debt, at $29 billion, was up 3% for the month. For the fiscal year to date it is up 9% to $221 billion.
The administration’s budget estimates updated last week saw annual deficits of more than $1 trillion for fiscal 2020 and 2021 in addition to the current year. Even so deficit hawk critics said the red ink estimates were being unrealistically low-balled through a variety of questionable assumptions, including economic growth of around 3% a year, substantially higher than most other estimates.
Also in his news conference Wednesday the Fed’s Powell noted that the imposition of retaliatory tariffs has been “a prominent concern among out business contacts for some time now.”
So far the effect of tariffs on the U.S. economy has been “relatively small,” he said.
February has been a deficit month in 53 of the past 65 years since it includes no tax reporting month for corporations or individuals that would return revenue and is the beginning of the tax refund season of disbursements.