I made a mistake in my Wednesday post about CBO’s new deficit projection. I simply misread (and then misreported) CBO’s explanation of why their revenue projection increased.
CBO projects that revenues will increase significantly from last year (2012) to this year (2013) for three reasons:
- The tax increases legislated in the January 2nd “fiscal cliff” law;
- Some taxpayers realized their income in late 2012 rather than 2013 in anticipation of 2013 rate increases;
- For other reasons, personal income increased from 2012 to 2013.
These are all reasons why the U.S. Government is projected to collect significantly more revenues in 2013 than it did in 2012. In my earlier post I had mistakenly said these were reasons why CBO’s most recent baseline update had increased from January/February until now.
CBO’s Jan/Feb baseline document (and, indeed, their August baseline update last summer) had already incorporated tax increases scheduled to occur under then-current law. CBO did not leave them out of their Jan/Feb projection as I wrote earlier.
CBO’s revenue projection increased from their Jan/Feb baseline document to now simply because they have increased their estimate of the magnitude of the second factor listed above.
I apologize for any confusion I caused. While it’s important that I correct this, the error and correction don’t change the fundamental lessons from that post.
You can see the corrected post here. Thanks to a friend for pointing out my mistake.