Federal tax revenues were lower in 2018 than in 2017, reversing a trend of rising revenues seen in recent years, according to U.S. Treasury data tracked by District Economics Group.
DEG’s Diane Lim said that “2018 was an unusual year for tax revenue. Not just because revenue levels dropped so much but because they dropped so much as the economy was growing so strongly.”
Here’s how the two largest categories of tax revenues fared in 2018:
- Individual tax receipts totaled $2.593 trillion in the 2018 calendar year, one percent higher than 2017 in nominal terms but about half a percentage point lower on an inflation-adjusted basis.
- Corporate tax receipts were lower in both nominal and inflation-adjusted terms, coming in at $233 billion in 2018, down from $316 billion in 2017. That represents a 26 percent drop in revenues on a nominal basis and a 28 percent drop in inflation-adjusted terms.
In a separate blog post Thursday, DEG addressed the cause of the shortfall, saying that it “is too early for anyone to know (or even provide an adequately-informed guess on) how much of the apparent (and to at least some extent unexpected) ‘sag’ in revenues can be attributed to a costlier-than-expected tax cut versus a weaker-than-expected (yet still expansionary) economy. But it is clear that tax revenues are not as strong as in previous years, despite the economy being in good shape and still growing.”
The revenue results suggest that federal budget deficits may be larger than expected in the next few years, DEG said. The Congressional Budget Office projected higher individual tax revenues for the 2018 fiscal year, but DEG says the most recent figures for the calendar year suggest that projection is too optimistic: “Given the April 2018 CBO outlook of slowing economic growth and rising budget deficits through 2020, the real revenue ‘sag’ of 2018 that CBO did not predict may presage even larger deficits than previously forecasted.”