CBO: January deficit shrinks as new taxes kick in

The Congressional Budget Office on Thursday estimated that the federal budget deficit for January was only $2 billion, compared to $27 billion in January 2012.

The sizable drop was largely due to the new tax revenue generated by the "fiscal cliff" deal struck between the White House and Congress on New Year’s Eve.

The government collected $36 billion, or 15 percent more, in revenue, $9 billion of it coming from the expiration of the 2 percentage-point payroll tax holiday, CBO estimates.

The fiscal-cliff deal also allowed income taxes to rise on households making more than $450,000 per year and allowed new caps on exclusions and deductions to take effect. 

Overall the budget deficit was $295 billion for the first four months of fiscal year, CBO said. That is $54 billion less and would have been even $30 billion lower if not for the shift of payments into the period.

CBO overall this week estimated that the deficit would come in at $845 billion for fiscal 2013, which ends Sept. 30. That would be the first time since President Obama took office that the annual deficit fell below $1 trillion. 

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