US Finances: April

Through April of the 2025 US fiscal year —

Where do US federal finances stand?

Bottom line up front: While some data has improved, and some data has worsened, things are looking about the same as last month at this point in the fiscal year despite public talk of a potential economic slowdown and Trump Administration promises to slash spending.

Let’s break down the April results.

Revenue Trend

Total revenue has increased by approximately +5% compared to last year, up from a +3% trend through March. However, this figure is somewhat misleading. According to the Congressional Budget Office (CBO), about $70 billion in early FY 2024 revenue was deferred from FY 2023 due to delayed estimated tax payments. This artificially inflates last year’s numbers, making this year’s increase appear smaller than it actually is.

Revenue, therefore, is doing well overall. In fact, individual income tax revenue is now running at a +7% rate over FY 2024, up from +5% through March. This may reflect continued positive economic conditions. Other revenue results that are likely tied to strong economic performance:

• Withholding taxes from paychecks: +5% (though this is down from a +7% pace last month).

• Excise taxes: +18%.

• Customs duties: +32%.

Increases in customs duties (e.g., tariffs) are likely linked not only to economic strength but also to tariff hikes recently implemented by the Trump Administration. But while the increase on a percentage basis is up substantially, the increase amount is a relatively small +$14 billion over the level through April of FY 2024.

On the negative side, corporate tax receipts remain down 8% from last year—though that’s a level that has been improving over the last several months, and total revenue would likely have been higher than last year’s pace given the aforementioned deferred payments from FY 2023 into FY 2024.

Spending Increases

Federal spending is up +9% compared to last year, although spending timing shifts between years account for part of this increase. After adjusting for these shifts, spending growth drops to about +7%, consistent with spending trend level through March.

However, other factors are at play. The Federal Deposit Insurance Corporation (FDIC) reduced net spending by $70 billion through credits associated with banking cleanups. Excluding both the FDIC credits and timing shifts, the underlying spending increase is closer to the +9% spending growth trend.

Key Spending Increases (adjusting for timing shifts):

• Medicare, Medicaid, Veterans’ Benefits, and Social Security: +8.2% (+$151 billion), driven by demographic shifts, inflation adjustments, and expanded veterans’ benefits.

• Interest on U.S. Public Debt: +11% (+$58 billion).

• Environmental Protection Agency (EPA): +314% (+$22 billion), primarily due to new clean energy grants awarded in Q1.

• Defense (primarily operations & maintenance, military personnel): +7% (+$34 billion).

• Homeland Security: +33% (+$18 billion), primarily for FEMA hurricane disaster response.

• Affordable Care Act (ACA) Tax Credits: +17% (+$23 billion), due to higher health care enrollment.

Budget Deficit Growth

The federal budget deficit continues to grow substantially. Through April, the annual deficit stood at -$1.1 trillion, a +23% increase over the same period last year (about the same pace of increase this year through March).

Adjusting for timing shifts in revenue and spending offers a more complete (less alarming) perspective. According to CBO, removing those distortions reduces the deficit to approximately -$978 billion—a +14% increase over last year’s pace.

While that’s still a big increase, know that CBO has not changed its January projection of a $1.9 trillion budget deficit projection for this year, about the same as last year.

Near-term Outlook

The biggest unknown influencing fiscal outcomes is the state of the U.S. economy. Concerns increased in March and early April that the economy may slip into recession this year—fueled by high tariffs, job losses, and aggressive federal spending reductions.

But, as of now, there is no clear consensus on the economy’s direction. And the full impact—positive or negative—of Trump Administration policies will likely take a few more months to become clear.

Stand by.

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Please feel free to track US fiscal status of key indicators on my dashboard here.