Budget deficit drops to $27 billion in January

WASHINGTON The budget deficit fell sharply in January compared to a year earlier, as an improving economy lifted income tax revenue.

The Treasury Department says the budget deficit dropped to $27 billion last month, from $50 billion in January 2011. Most of the drop was due to several accounting changes.

Excluding the impact of those changes, the budget gap declined 18 percent last month, mostly because of higher tax receipts.

In the first four months of the 2012 budget year, which began Oct. 1, the deficit fell by $70 billion to $349 billion, the department said.

While the deficit is likely to shrink this year, it is still forecast to top $1 trillion for the fourth year in a row.