For the first time in four years, the U.S. budget deficit dropped below the trillion dollar line. The Treasury Department reported a drop in the deficit to $680 billion as of 2013 from $1.4 trillion in 2009. Despite not being lower than the 2008 deficit of $455 billion, it’s a welcome sign across the board.
What drove the troubled economy to drop its deficits? The following excerpt from CNNMoney gives us more information:
“Several factors have contributed to the strong improvement in the nation’s near-term fiscal picture. They include an improving economy and a mix of fiscal restraint—primarily, the expiration of stimulus measures, the imposition of across-the-board budget cuts known as the sequester, and tax increases on high-income households during the 2013 fiscal year, which ended September 30.
Another factor was that Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500) paid back a large part of the $187 billion federal bailout the mortgage giants received starting in 2008, to help them weather the housing crisis.
In addition, total interest payments—$415.6 billion—were moderate relative to the amount of outstanding debt and GDP, but were nearly 16% higher than in 2012.”
Budget deficit refers to the difference between federal spending and tax revenue for a specific year. It’s different from federal debt, which is the amount the government borrows to help manage its budget deficits every year. For a country to lower its budget deficit, it has to either cut its spending or increase its revenue for the year; the U.S. did both in 2013.
Payroll taxes jumped to 6.2 percent at the start of 2013, two percentage points higher than in previous years. Economist Jim O’Sullivan defends the increase in payroll taxes as affecting savings but not spending for some people. To adjust to this new environment, people will have to adjust their spending habits.
As far as increasing revenue is concerned, strict tax compliance will be a key player in helping the government settle its dues. Sacramento payroll outsourcing companies like OmegaComp HR have taken the new tax rates into consideration. In light of tax increases, accuracy when it comes to payroll tax computation will be more important than ever for employers in California and other states.
To stay ahead of any anticipated payroll issues, it is wise to hire a reputable Sacramento payroll company like OmegaComp HR who can offer a complete suite of payroll processing services, including tax compliance, HR, risk management, and benefits management to its clients.
Article Excerpt and Image from U.S. deficit falls to $680 billion; CNNMoney; October 30, 2013