Uncle Sam’s tax revenue has taken a surprising dip, coming in lower than expected — and analysts say one reason could be that taxpayers are looking for ways to push their IRS payments into the future, banking on Republicans to deliver tax cuts that would save them money in the long run.
The lower stream of income to the U.S. Treasury is one reason administration officials say the government will run out of room under the federal debt ceiling earlier than expected.
In its latest monthly report, the Congressional Budget Office said the federal government’s tax income is running 3 percent below projections over the previous eight months, which works out to a shortfall of as much as $70 billion.
The CBO said the chief cause is smaller than expected individual and corporate tax receipts.
CBO analysts said there are two possible explanations: Either incomes rose less than expected last year or taxpayers are shifting income recording “from 2016 to later years, expecting legislation to reduce tax rates to be enacted this year.”
Financial analysts said there is reason to suspect the second explanation.
“Whenever there’s that uncertainty there’s more indecision, and such payment delays can affect the bottom line for the government,” said Blake Christian, a partner at the accounting firm HCVT.
“I think collectively, it can move the needle enough,” he said. “That’s part of it.”
Mr. Christian said he has cases where it may make sense to delay action, such as deferring a first payment on a purchase until the following year, when rates could be lower.
“It definitely, I think, pays to wait on certain big-ticket items, and certainly income,” he said.
Analysts have pointed to an uptick in receipts toward the end of 2012 ahead of the “fiscal cliff” of tax increases and spending cuts as evidence that federal tax policy, or anticipated policy, affects such behavior.
But with the prospect of lower rates, the trend has reversed, said Lucy Dadayan, a senior research scientist at the Rockefeller Institute of Government.
Early indications of further declines in income tax payments for April are “mostly due to shift in income from tax year 2016 to 2017 in the anticipation of federal tax rate cuts,” she said.
“Anecdotal evidence from the states [does] indicate that taxpayers take action whenever they can take action to minimize their tax liability,” she said.
She also pointed out that even as the stock market showed relatively strong gains last year, the CBO projected a 10 percent decline in capital gains because wealthier people who are more apt to have significant liabilities in that area push things forward.
“They are shifting income, taxable income on capital gains, from 2016 to 2017 because they do anticipate [that the] tax rates are going to go down,” she said.
The lower-than-anticipated federal receipts are already having policy implications on Capitol Hill. The Trump administration has urged Congress to raise the debt ceiling before lawmakers break for August, though Treasury Secretary Steven T. Mnuchin has said there should be enough room to keep the government open through September.
But the decline in revenue is also having a spillover effect on budgets in states such as California and New York, which rely heavily on capital gains taxes, Ms. Dadayan said.
“Unfortunately, the states are in a really tough position,” she said. “They really cannot be sure what’s going to happen at the federal level.”
Others acknowledged that the delayed tax payments and the smaller-than-expected federal collections could be connected, but they cautioned against drawing too many hard conclusions about cause and effect until they can sort through more data.
“I think it’s a reasonable conjecture,” said Doug Holtz-Eakin, a CBO director under President George W. Bush. “The notion that people would be paying attention to the prospect of lower tax rates and not paying in anticipation of getting lower tax rates makes perfect sense,” he said. “That’s a well-established phenomenon.
“This is one where time will tell,” he said.