The Congressional Budget Office (CBO), in its latest budget review, now estimates the fiscal year 2026 federal budget deficit reached $1.4 trillion, up from the $1,2 trillion estimate released in its report for May. (Monthly Budget Review: June 2026)
Total receipts for the fiscal year hit $4.151 trillion, an increase of $142 billion compared to last year. Outlays grew to $5.523 trillion, an increase of $178 billion. “Collections of individual income and payroll taxes were larger than a year ago, and changes in tariff rates led to a net increase in collections of customs duties this year,” CBO noted.
Changes in receipts compared to FY 2025 were as follows:
- Individual income and payroll taxes together increased by $169 billion (or 5%).
- Withholding grew by $115 billion (or 4%), “a reflection of rising wages and salaries,” CBO said.
- Nonwithheld payments of income and payroll taxes rose by $90 billion (or 9%).
- Individual income tax refunds increased by $31 billion (or 10%).
- Collections of customs duties increased by $55 billion (or 51%), which was attributed to changes in tariff rates due to executive action. Through April 2026, monthly collections were higher than in a comparable period in FY 2025. “[H]owever, net collections of tariffs declined sharply in May and June, when tariff refunds, which were related to a February 2026 Supreme Court ruling that struck down certain tariffs, began to be paid. Refunds of about $70 billion were paid during those months,” CBO explained.
- Receipts from corporate income taxes declined by $86 billion (or 24%) and totaled an estimated $280 billion. “The enactment of the 2025 reconciliation act allowed corporations to take larger deductions for certain investments, thereby reducing some payments and offsetting the increases in those receipts that otherwise would have been expected, given the rise in corporate income,” CBO noted.
CBO highlighted outlays for the three largest mandatory spending programs which rose by $169 billion (or 7%):
- Spending for Social Security benefits rose by $62 billion (or 5%) “because of increases in average benefits and in the number of beneficiaries.”
- Medicare outlays increased by $58 billion (or 8%) “because of increased enrollment and higher payment rates for services.”
- Medicaid outlays increased by $49 billion (or 10%) “largely because of rising costs per enrollee.”
Outlays for net interest on the public debt grew by $98 billion (or 13%) reaching $857 billion. This was attributed to the debt being larger than it was in the first nine months of FY 2025 and higher interest rates. “Declines in short-term rates partially mitigated the overall rise in interest payments,” CBO said.
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