updated 7/7/2006 7:40:41 PM ET 2006-07-07T23:40:41

The federal deficit appears on track to register less than $300 billion for the budget year ending Sept. 30, as surging tax revenues continue to signal significant improvement over White House estimates released in February — though only modest gains over last year.

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The nonpartisan Congressional Budget Office, which makes estimates for lawmakers, said Friday that the deficit for the first three quarters of fiscal 2006 came in $41 billion less than the red ink recorded for the same period in 2005.

The 2005 deficit registered $318 billion. It would take major erosion in the fiscal picture in the final three months of the budget year for the deficit to exceed $300 billion.

The administration is poised Tuesday to put its own spin on the deficit picture as it updates its earlier estimate of $423 billion for the 2006 deficit. President Bush is expected to tout the numbers as proof of the success of Bush-sponsored tax cuts in reviving economic growth and, in turn, tax revenues.

Indeed, tax collections are surging at a 13 percent growth rate, reflecting particularly strong growth in taxes paid on corporate profits and income taxes paid by wealthier people and small businessmen who pay taxes quarterly instead of having them withheld by employers.

White House critics say the Bush team always inflates its February numbers so as to trumpet good news later in the year. And they say that seemingly intractable deficits in the $300 billion range are nothing to celebrate.

The improvements in the deficit picture come despite the high cost of the wars in Iraq and Afghanistan and continuing federal outlays related to Hurricane Katrina and other disasters last year.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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