According to the Congressional Budget Office (CBO) the federal budget deficit is now predicted to be as low as $300 billion in fiscal year 2006. While this is still a staggeringly high figure, it is $50 billion less than CBO previously estimated. The improving budget picture is driven by increased tax collections not by decreased spending. Increased corporate income tax collections and nonwithheld receipts of individual income and payroll taxes are the major factors driving the higher tax collections. Corporate income is growing faster than CBO predicted and this is leading to higher corporate income tax payments. In fact, CBO estimated that corporate income collections would be $25 billion higher in fiscal year 2006, but just 7 months into the fiscal year they already increased $40 billion. Corporate income tax collections were $134 billion in FY 2005 and CBO predicts they will be $174 billion in FY 2006, a 30 percent increase. Nonwithheld receipts, which come from personal income not subject to ordinary withholding, increased 17 percent already in FY 2006. Sources of this income generally include capital gains, noncorporate business income, interest and dividends. See the CBO report here.
