According to Action Economics, daily data from the U.S. Treasury for April show that the booming economy produced soaring tax receipts that came in 15 percent above a year ago.
Spending was only 2 percent ahead of last year. So, the FY 2006 budget gap should come in around $270 billion dollars. That’s much lower than the CBO estimate of $337 billion dollars, and vastly lower than the OMB prediction of $423 billion dollars.
As a share of GDP, this year’s gap will be only 2.1 percent, and could be only 1.6 percent next year, since state and local governments are actually running surpluses. The combined budget gap will be even smaller.
Is it possible that with lower tax rates the booming economy is throwing off ever-greater tax revenues? Didn’t someone once call that the Laffer Curve?