The U.S. budget deficit fell sharply to $21 billion in December thanks to surging tax revenue and fading government stimulus.
The U.S. deficit shrank from $144 billion in the same month of 2020, the Treasury Department said Wednesday. The federal government’s fiscal year began on Oct. 1.
Tax revenue increased a whopping 41% to $487 billion last month from a year earlier. Receipts totaled $346 billion in December 2020.
Tax revenues have bounced back strongly due to a robust economic recovery and high business profits.
Government spending rose just 4% to $508 billion from a year earlier.
Last year, the U.S. racked up its second largest deficit ever at $2.8 trillion. Washington spent trillions in the past two years on stimulus checks for families, extra unemployment benefits and grants to businesses.
The deficit is expected to fall sharply in the current fiscal year, especially if President Biden’s stalled $2 trillion Build Back Better plan fails to get resurrected.
The deficit totaled $378 billion in the first three months of fiscal 2022, compared to $573 billion in the same period a year ago. That’s a 34% decline.
Still, high U.S. budget deficits are expected to persist for at least several years given the current trajectory of spending and tax receipts.