(Adds trade association and Boehner comment, background on
By Mark Felsenthal
WASHINGTON Aug 27 The U.S. budget picture will
likely worsen this year as companies wait to see what actions
Congress will take on taxes in coming months, a report from the
Congressional Budget Office showed on Wednesday.
The U.S. budget deficit for fiscal year 2014 ended Sept. 30
will be an estimated $506 billion, a slight increase from the
$492 billion projected in April, based on lower-than-expected
corporate tax receipts, the non-partisan CBO said.
Revenues to the government from company tax payments are
expected to total $315 billion, down from an estimated $351
billion in April.
The bigger budget deficit comes because companies are
deferring tax payments while they wait for Congress to decide
whether to revive expired tax breaks, CBO officials said.
Lawmakers are expected to take up legislation after the November
elections to renew through 2015 a mix of 50 temporary tax
breaks, known in Congress as "tax extenders," that expired at
the end of 2013.
The extenders bill would continue tax relief for a wide
range of activities, including auto race tracks, wind energy,
school teacher expenses, Puerto Rican rum producers and
Businesses see the extension of the tax breaks as necessary
while Congress dithers on a broader tax overhaul.
"Congress must continue the now-expired tax extenders as an
important bridge to comprehensive tax reform that will give
businesses large and small the certainty they need to plan, grow
and invest," said Carolyn Lee, senior director of tax policy at
the National Association of Manufacturers.
Another corporate tax issue, the trend of companies moving
to other countries to reduce their tax bills, has been in the
spotlight in recent months as the administration weighs actions
to discourage the practice. President Barack Obama has called
the strategy "unpatriotic."
Burger King Worldwide Inc's plans to buy Canadian
coffee and doughnut chain Tim Hortons Inc, is the
latest high profile case of a U.S. firm seeking lower tax rates
abroad. Investors and tax experts say the main reason for Burger
King to move its domicile to Canada is to avoid having to pay
double taxation on profits earned abroad, which the company
would probably be subject to if it remains in the United States.
In addition, the U.S. Treasury Department is looking into
increased use of the master limited partnerships, which are
publicly traded business structures that pay no corporate income
tax. The popularity of such structures could hurt future tax
revenues, officials have said.
The budget deficit is expected to fall to $469 billion in
2015, but then begin to rise as spending outpaces revenues, CBO
said. Climbing deficits would result in growing levels of
federal debt that would in turn weigh on federal spending
options and economic growth, CBO warned.
The deficit is expected to rise to $960 billion in 2024 if
current federal tax and spending laws remain unchanged, the
Some lawmakers and analysts argue that what matters is that
the U.S. deficit remains steady in relation to the growth of the
U.S. economy. U.S. budget deficits are expected to remain less
than 3 percent of gross domestic product through 2018 but grow
after that, rising to nearly 4 percent of GDP in 2022 as
revenues fail to keep pace with spending, the budget agency
CBO said its projections are based on the assumption that
the economy will grow at a 1.5 percent annual pace this year but
then speed up to an annual rate of 3.2 percent in 2015 and 3.5
percent in 2016.
House Speaker John Boehner expressed concern about the
sluggish growth forecast and called on congressional Democrats
to do more to create jobs.
"I again call on Senate Democrats to stop standing in the
way of growth and work with us to get our economy moving again,"
While the Republican-led House of Representatives has passed
a number of measures aimed at spurring growth, many of them are
controversial, such as bills to eliminate the Affordable Care
Act or authorize construction of the Keystone XL pipeline that
would transport crude oil from Canada, and are unlikely to
(Reporting by Mark Felsenthal; Editing by Eric Beech and Chris