Additionally, investors may prefer to see larger dividends rather than significant annual increases to retained earnings. Retained earnings are the portion of a company’s cumulative profit that is held or retained and saved for future use. Retained earnings could be used for funding an expansion or paying dividends to shareholders at a later date.

They then decline over the next two years before increasing after 2025, when certain provisions of the 2017 tax act expire. Revenues are roughly stable after 2027; they total 18.1 percent of GDP in 2033. A company is normally subject to a company tax on the net income of the company in a financial year. The amount added to retained earnings is generally the after tax net income. In most cases in most jurisdictions no tax is payable on the accumulated earnings retained by a company.

The National Debt Explained

Over the next two years, slowing demand for labor and falling inflation put downward pressure on the growth of wages. Nominal wage growth continues to gradually decline after 2024 but through 2027 remains above its annual average for the 2015–2019 period. Inflation, which was slightly lower in 2022 than in 2021 but higher than in any other year since 1981, continues to exceed the Federal Reserve’s long-run goal of 2 percent through 2023 and 2024 before nearing that rate by 2026. As measured by the price index for personal consumption expenditures , inflation is 3.3 percent in 2023, reflecting the lagged effects of higher home prices on rents as well as tight labor markets. An obligation limitation is a restriction—typically included in an appropriation act—on the amount, purpose, or period of availability of budget authority. The limitation often affects budget authority that has been provided in an authorization act.

Second, a pandemic-related tax provision allowed employers to defer payment of some of their payroll taxes in 2020 and 2021; they paid half of the deferred amounts in 2022 and the other half in 2023. Outlays for Social Security are estimated to increase by $123 billion in 2023, to $1.3 trillion. That increase stems primarily from the 8.7 percent cost-of-living adjustment received by Social Security beneficiaries in January 2023, the largest since 1981.

Beginning of Period Retained Earnings

Net outlays for interest, which rose by 35 percent last year, are projected to increase by 35 percent again this year, from $475 billion in 2022 to $640 billion. Relative to the size of the economy, those outlays will rise from 1.9 percent of GDP in 2022 to 2.4 percent in 2023, nearly one percentage point higher than their level in 2021. Division J of the IIJA provides a total of $266 billion in discretionary funding from 2023 to 2026, and the BSCA provides accumulated deficit calculation nearly $3 billion in funding over that period. After consulting with the Budget Committees, CBO applied the rules that govern how it constructs baseline projections to that funding. As a result, the amount of funding related to the IIJA and the BSCA in CBO’s baseline exceeds the amounts specified in those laws. Under current law, the Federal Communications Commission occasionally auctions licenses for commercial use of the electromagnetic spectrum.

The CHIPS Act also decreased projected revenues over the 2023–2032 period by $24 billion, as discussed below. A present value expresses a flow of current or future income or payments in terms of an equivalent lump sum received or paid at a specific time. In the February 2023 baseline projections shown here, values for 2022 are actual values.

Appendix BCBO’s Economic Projections for 2023 to 2033

Gain in-demand industry knowledge and hands-on practice that will help you stand out from the competition and become a world-class financial analyst. Deficit means an excess of liabilities and reserves of a fund over its assets. Total Revenue Total Expenses Operating Surplus/ Accumulated Funds / Total Assets Total Liabilities Net Assets Total Equity Other a summary of significant changes in financial position during the period. Translation gains and losses are included in the Statement of Operations and Accumulated Deficit.

Historically, when unemployment has been low, deficits have been much smaller as a percentage of GDP than the deficits in CBO’s current projections. From 2024 to 2033—a period in which the average unemployment rate is projected to remain at or below 5.0 percent in each year—deficits in CBO’s baseline projections are never less than 5.5 percent of GDP. From 1973 to 2022, the unemployment rate was at or below 5.0 percent in 12 years.