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Solid Treasury Data Imply a Deficit Beat

David Becker
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Solid Treasury Data Imply a Deficit Beat

Daily Treasury data imply a 12% June year over year receipt bounce after dismal 1%-2% April-May gains that leaves a still-disappointing 5% year over year rise for Q2 overall. The stronger number should help reduce the overall deficit. Individual withheld receipts rose 26% year over year to leave a moderate 9% Q2 year over year increase. Given an assumed 41% year over year June outlay pop that reverses a $59 Fannie Mae payment last year at this time, an $80 billion June surplus could be expected, and a $475 billion FY14 gap that sits just below the $514 billion official CBO estimate.

June refunds of $6 billion follow a $14 billion May figure, larger than expected prior refund levels of $64 billion in April and $69 billion in March, and a big January-February gyration that left a February surge to $128 billion from just $1 billion in January. The big early-2014 refund swings reflected the delayed start for electronic filing to January 31. The year over year gyrations are smaller than might otherwise be expected given delays in refunds last January as well.

Tax refunds were surprisingly high in 2014, despite the usual pro-cyclical behavior for tax obligations that leaves refunds falling through the business cycle. Refunds rose to $278 billion in the 2014 refund season from $274 billion last year, though a higher $282 billion in 2012.

Budget improvement will likely beat the CBO’s $514 billion deficit forecast by $40 billion. For prior years, the CBO’s $845 billion FY13 deficit forecast from January of 2013 under-estimated budget improvement by a hefty $166 billion thanks to tax-avoidance strategies in late-2012 that the CBO didn’t fully incorporate into their estimates, and an unanticipated $59 billion Fannie Mae payment to taxpayers.

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