CBO: The deficit will fall sharply this year, then rise again by 2024. Thanks largely to booming economy, a big increase in tax revenues, and the end of pandemic relief, the federal budget deficit will fall to about $1 trillion, down from $2.8 trillion in 2021, according to the Congressional Budget Office’s annual Budget and Economic Outlook out yesterday. But the relief will be temporary, with deficits rising again by 2024 and through the rest of the 10-year budget window.
And tax revenues are flowing, for now. The CBO expects revenues to rise by a whopping 19 percent this year to $4.8 trillion. Thanks mostly to big increases in individual income taxes, revenue will grow to 19.6 percent of the nation’s gross domestic product (GDP)—the most since 2000. But it won’t continue. Revenues will settle in at about 18 percent of GDP through 2032.
Tune in next Thursday for TPC’s Prescription with Brooklyn Law School’s Steven Dean. He will discuss his recent research on racial inequities in the tax code and what policymakers should do while the Biden administration’s Build Back Better agenda is stalled in Congress. Register and tune in June 2 at Noon here.
Michigan lawmakers again propose a $2.5 billion permanent tax cut. They’ve proposed a version of this before, but the latest measure passed by the Republican-led House and Senate would lower the income tax rate from 4.25 percent to 4 percent, increase the personal income tax exemption, make families eligible for a nonrefundable $500 tax credit for each dependent 18 years old or younger, and increase the state’s earned income tax credit. The state expects a $5 billion budget surplus, which lawmakers hope will prevent a veto by Gov. Gretchen Whitmer.
Vaping tax revenues soar in Oregon. The state’s new tax on vaping devices has yielded higher than expected revenues. In October 2020, right before the tax passed, state economists estimated it would raise $10 million. By the end of 2021, it generated $30 million.
French police raid McKinsey’s Paris office. The French authorities are investigating suspected tax fraud following a March report that alleges McKinsey & Co. failed to pay French taxes for the past ten years. McKinsey has denied any wrongdoing.
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