"Record April surplus" doesn't change the reality of massive year-long US deficits

Given all of the talk about rising US deficits, this story from late this week seems somewhat surprising.

The federal government swung to a surplus of $214.3 billion in April, primarily reflecting the revenue from that month's annual tax filing deadline.

The Treasury Department reported Thursday that last month's surplus increased 17.4 percent from a year ago. The April surplus reflected both an increase in tax revenue and a decrease in the costs of certain health care and benefit programs that were pulled forward to March.

Federal income tax returns were due on April 17. The month usually generates a surplus even if the government is on pace to run a deficit for the entire year. The government collected $314 billion in individual income taxes in April, about $100 billion more than what it received from all its revenue sources in March.

Whoa, are the predictions of Steve Mnuchin and Paul Ryan coming true? Are we getting great growth that’s allowing these tax cuts to pay for themselves?

No, not really. If you look at the actual statement from the US Treasury, the “increased” surplus is simply a trick of the calendar.

Approximately $45 billion in outlays for Military active duty and retirement, Veterans’ benefits, Supplemental Security Income, and Medicare payments to Health Maintenance Organizations and prescription drug plans accelerated into March, because April 1, 2018, the normal payment date, fell on a non-business day.

Receipts were increased by approximately $19 billion over last April because of an additional day of collections in April 2018.

Take out that $64 million, and the surplus for April drops to $150 million, which is 17.6% less than the surplus we had the year before. That’s even more underperformance than we’ve seen for the 3 months that we have seen since the tax cuts started taking out less money from people’s paychecks in February.

Net deficit
Feb-April 2017 $185.8 million
Feb-April 2018 $209.7 million (+12.8%)

If that 12.8% year-over-year increase in the deficit holds over the last 5 months of Federal Fiscal Year 2018, you’d see a year-end deficit around $750 million, which would actually be better than the $804 million deficit that the CBO projected in March. And of course, the deficit gets even higher after that.



But if you look at the Treasury’s statistics on tax refunds for individual taxpayers, there’s reason to believe that the deficit will reach that $800 million CBO prediction for 2018. Particularly given that the tax cuts are not paying for themselves yet.

Withholding income taxes, Feb-April 2017 vs 2018
Feb-April 2017 $349.9 billion
Feb-April 2018 $342.4 billion (-2.1%)

In fact, the only reason that April revenues were relatively good is that there was barely any difference in the level of individual income tax refunds handed out this year vs last year.

Individual income tax refunds, Jan-April 2018 vs 2017
Jan-April 2017 $199.8 billion
Jan-April 2018 $202.7 billion (+1.5%)

But you know who has gotten bigger tax refunds? Corporations, which could well be a result of that PR blitz of year-end bonuses and other one-time stunts that were pulled after the GOP’s Tax Scam was put into law in December.

Corporate tax refunds, Jan-April 2018 vs 2017
Jan-April 2017 $21.1 billion
Jan-April 2018 $11.6 billion (+82.4%)

Because adding those year-end expenses at the higher tax rate means that there is less profit than otherwise would have been forecast earlier in 2017. So now corporations are getting some of their earlier payments back, while getting the write-offs and refunds at a higher tax rate, giving them an extra boost of profit on top of what the tax scam is giving them in 2018.

With all of the extra money coming from Congress and the Treasury, why would any corporations take the risk of adding onto their businesses or hiring more workers? Just take advantage of the giveaways and let the money roll in (and pay your fellow execs more money and buy up your stock along the way)! You wonder why I’m skeptical that we hit the 3.3% growth the CBO assumed for this year?

So while some ignorant financial writers and cynical Republicans might want to talk up the “record surplus” in April, a simple look inside the numbers (or at a calendar) will tell you there is nothing special to talk about. In fact, an honest examination of the numbers show that the Piece of Shit tax bill continues to cost well above the benefits it’s giving to the typical American, and that the deficit picture continues to worsen going forward.