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The increase in corporate federal income tax payments was largely due to changes in the tax rules that corporations were required to follow. The federal government incurred a budget deficit of $1.1 trillion in fiscal year 2012, the fourth consecutive year with a deficit above $1.0 trillion, said the CBO. Revenues from all major sources increased in 2012, CBO reported. Corporate income taxes accounted for about 40 percent of the increase in total revenues, rising by $61 billion (or 34 percent) and increasing from 1.2 percent to 1.6 percent of GDP. The growth in corporate receipts resulted largely from changes in tax rules in recent years, particularly those that dictate how quickly firms may deduct the cost of their investments in equipment.
Individuals also paid more taxes in 2012, according to CBO. Receipts from individual income taxes grew by $41 billion (or 4 percent), and remained at 7.3 percent of GDP in 2012. More than half of the increase came from withheld taxes, which rose by $27 billion (or3 percent). At the same time, defense spending declined in 2012. Defense outlays fell by $19 billion (or 3 percent) in 2012 after rising at an average annual rate of 6 percent over the past five years. Most ($17 billion) of that decline was attributable to the reduction in the number of U.S. Army personnel in Afghanistan and Iraq. Defense spending was 4.2 percent of GDP, down from 4.5 percent in 2011. At the same time corporate income taxes were increasing by about 34 percent, economic growth was lagging. In the fourth quarter of 2011, real GDP grew at 4.1 percent, according to the Bureau of Economic Analysis. But in the first three quarters of 2012, it grew by 2.0 percent, 1.3 percent and 2.0 percent.
The national unemployment rate in October was 7.9 percent, according to the Bureau of Labor Statistics. In January 2009, when President Barack Obama was inaugurated to his first term, it was 7.8 percent. When calculated as a share of GDP, the last four fiscal years have seen the four highest deficits since the end of World War II in fiscal 1946. (Prior to 1974, federal fiscal years ran from July 1 to June 30.) As a share of the nations gross domestic product (GDP), the deficit declinedfrom 8.7 percent in 2011 to 7.0 percent in 2012but it was still the fourth highest as a share of GDP since 1946, said CBO.
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