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Where Did the Revenues Go [i] (August 2002)

handle is hein.congrec/cbo0716 and id is 1 raw text is: REVENUE AND TAX POLICY BRIEF CBO A series of issue summaries from the Congressional Budget Office August 13, 2002 Where Did the Revenues Go? Spring 2002 brought an April surprise of a type that had not been seen for roughly a decade: federal revenues substantially lower than expected, a reversal of the pattern that characterized the late 1990s. Even though the current fiscal year is nearly over, revenue forecasters have substantially revised their expectations of how much fiscal year (FY) 2002 revenues will be as a consequence of April, May, and June receipts. A fiscal year that began with a forecast of a budget in approximate balance now faces a deficit of $157 billion, $103 billion of which results from revenues that are lower for reasons other than the effects of legislation. That latest revision comes on top of downward revisions from last August and January. This revenue and tax policy brief reviews what forecasters currently know about the recent falloff in receipts and the likely implications for projections of revenues in years beyond fiscal 2002. How Big a Drop? In its most recent projection of a budget baseline in March, the Congressional Budget Office (CBO) forecast FY 2002 receipts of $2,006 billion, or 19.3 percent of gross domestic product (GDP).(') Since then, the Congress passed a stimulus bill that is estimated to reduce FY 2002 revenues by $43 billion, mostly in corporate income tax receipts.(2) But with the effects of legislation taken into account, receipts have run significantly below CBO's winter projection: withholding (both individual and payroll tax) and estimated individual income tax payments since March are running $9 billion less than expected; final payments in April and May were $41 billion less than expected; refunds for the season were $28 billion higher; corporate receipts are running $20 billion less than expected; and other tax sources are showing modest shortfalls. Thus, revenue collections since March, aside from the effects of legislation, point to a level of FY 2002 receipts that is $103 billion lower than CBO's last projection (see Table I). Table 1. Fiscal Year 2002 Revenues Projected in March and in August (In billions of dollars) March August Baselinea Baseline Change All Withholdingb and Estimated

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