The federal budget deficit is the annual difference between the government’s spending and the revenue collected. With steady economic growth, the U.S. is trying to implement strategies that will decrease the budget deficit. The deficit for this year is expected to be much lower than previous years. For the first eight months of the 2013 fiscal year, the deficit was 26 percent lower than the deficit for the same period in the recent past. According to the U.S. Treasury, the deficit for the first eight months totalled $626 billion.
The federal budget for 2013 is expected to reduce the pressure on Washington to raise the federal borrowing limit. One of the primary reasons for the reduction in the deficit is an increase in taxes. Along with the expiration of important tax cuts, such as the payroll tax cut, taxes were increased for the wealthy, which contributed to more collected revenue.
The strategy of the Obama administration to increase revenue while decreasing government spending shows that the government is looking for ways to improve revenue generation. Apart from raising taxes, the government is also taking steps to improve tax compliance. The recent efforts under the Foreign Account Tax Compliance Act (FATCA) bring more transparency with financial transactions of U.S. taxpayers abroad and should limit tax evasion considerably.
Many multi-national companies use tax strategies to avoid paying taxes in the U.S. without breaking the law. Recently, Apple was found to be legally avoiding their tax obligation in the U.S. The government is currently implementing strategies and agreements to curb tax scams carried out using loopholes in the tax code.
The tax increase for high-income groups that went into effect on January 1, 2013, has also impacted revenue generation. President Obama has hinted that if needed, taxes on the rich might be increased for the second time.