Almost all governments run deficits, so it’s a big deal when a government achieves a surplus. This graph includes data for all levels of U.S. government (local, state, and federal) on the net result of their lending and borrowing: A net deficit appears below the zero line, and a net surplus appears above the zero line. Notice the sudden jump in the fourth quarter of 2017 that reaches just above zero? This is a seasonally adjusted data series, by the way, so this jump has nothing to do with the regular influx of tax payments as the filing deadline approaches. (And that particular seasonal jump is in the second quarter, anyway.) So what’s going on here?
This jump from deficit to surplus has to do with the 2017 Tax Cuts and Jobs Act. One of its provisions is a one-time tax of foreign corporate earnings from 1986 to 2017. The so-called repatriation tax. This one-time capital transfer from businesses to government is estimated by the Bureau of Economic Analysis to be about $250 billion. Converted to annual rates, this implies a $1 trillion jump in government revenue in the fourth quarter that will not happen again. If we deduct this $1 trillion, the series actually moves downward from the third quarter’s value.
How this graph was created: Search for “net lending,” click on the government series, then select “Add to Graph.”
Suggested by Christian Zimmermann.