The Washington PostDemocracy Dies in Darkness

July tax filings helped boost revenue, but U.S. budget deficit is tipping toward $3 trillion for 2020

Spike in income has not kept pace with surge of spending as country tries to fend off pandemic fallout.

The U.S. Capitol as seen from the Washington Monument last year. (Patrick Semansky/AP)
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America’s federal deficit fell dramatically from June to July, a decline driven primarily by the payment of taxes that had been delayed earlier this year because of the coronavirus pandemic.

The U.S. budget deficit came in at an astonishing $864 billion for the month of June, a record and mostly the result of a massive increase in federal spending in response to the pandemic. But in July, the one-month gap between federal spending and revenue was $63 billion, the Treasury Department reported Wednesday.

The budget deficit for the fiscal year, which began in October, is now a record $2.8 trillion.

Budget experts say the vast majority of the decline in the monthly deficit is the result of the delay of the federal tax deadline this year from April to July. That shift resulted in a huge increase in tax revenue coming into the U.S. Treasury last month. Typically, April represents the only month in which the Treasury sees a large revenue surplus, but the filing deadline was postponed this year to give taxpayers more time.

“We are seeing a huge influx of taxes that would otherwise be paid in April,” said Marc Goldwein, senior vice president at the nonpartisan Committee for a Responsible Federal Budget, of the decline in the monthly budget deficit. “The vast majority of the lower deficit is driven by the delay of tax season.”

U.S. budget deficit shattered one-month record in June as spending outpaced revenue by $864 billion

A small part of the decline in the deficit is the result of modestly improving economic conditions. Employers’ payments of taxes withheld from paychecks — one measure of how much economic activity is translating into tax revenue — rose slightly, by about 4 percent, from $187 billion in June to $195 billion in July, according to Goldwein. But payments of withheld taxes this June, although an improvement from the previous month, still remain about 7 percent lower, compared with this time last year.

“That’s kind of consistent with what we think is happening with the economy,” Goldwein said.

Other experts noted the deficit is still on track to be much higher than last year. Brian Riedl, a budget analyst at the conservative-leaning Manhattan Institute, pointed out that April 2019 saw a $160 billion surplus as taxes were paid that year, a far higher number than this year’s tax filing month.

On a year-to-date basis, the federal deficit remains about $2 trillion higher than last year — a more than 200 percent increase. Congress has approved an additional $3 trillion in spending to fight the pandemic, and lawmakers are weighing whether to spend more money to combat the downturn.