The federal government spent $4 billion more than it collected in March compared to the same month last year, bringing the monthly budget shortfall to $164 billion, according to Treasury Department figures released Friday.
The 2% increase in the deficit stemmed largely from significantly higher tax refunds paid to both individual taxpayers and corporations, driven by new tax relief measures. Additionally, government payments to farmers contributed to the spending increase.
Military expenditures related to the Iran conflict remained relatively modest during the war’s opening month, with defense and military program spending climbing just $2 billion to reach $65 billion in March – a 3% increase over the previous year.
However, Trump administration officials have calculated that the military engagement cost $11.3 billion during just its first six days. Senate Democratic leader Chuck Schumer stated Wednesday that the war’s “price tag” had reached $44 billion, though he did not reveal the source of that figure.
A Treasury Department spokesperson explained to reporters that many expenses connected to the conflict, including costs for replacing military equipment and weapons, would appear in subsequent months’ budget reports.
Individual taxpayers received $15 billion more in refunds during March compared to 2025, representing a 22% jump to $85 billion total as the April 15 tax deadline approached. Business tax refunds surged even more dramatically, climbing $5 billion or 215% to reach $8 billion, reflecting benefits from Republican tax legislation passed last year.
The new tax benefits encompass individual deductions for overtime pay, tip income, car loan interest for domestic vehicles, and expanded state and local tax deductions. Businesses can now immediately write off capital investments and research expenses.
Economic analysts warn that higher fuel prices resulting from the Iran war may offset the larger refunds many taxpayers are receiving.
Looking at the broader fiscal picture, the government’s deficit for the first six months of fiscal year 2026, which began October 1, actually decreased by $139 billion or 11% compared to the same period in fiscal 2025, totaling $1.169 trillion. This improvement occurred because government revenue increased faster than spending.
Tariff collections under President Trump’s trade policies provided a significant revenue boost, generating $166.5 billion in customs receipts during the six-month period – nearly four times the $43.6 billion collected during the first half of fiscal 2025.
March customs collections declined following the Supreme Court’s February 20 decision to invalidate Trump’s broadest global tariffs that had been imposed under emergency authority.
Customs revenue totaled $22.2 billion in March, down from February’s $26.6 billion and the low $30 billion monthly figures recorded late last year, but still well above March 2025’s $8.2 billion.
Further decreases in customs collections may be coming, since these duties are typically paid with a one-month delay. Most March collections reflected February imports that occurred before the February 24 suspension of duties ranging from 10% to 50% under the International Emergency Economic Powers Act, the Treasury official noted.
The Trump administration implemented a temporary 10% duty on all imports the same day and maintains various other tariffs under different legal authorities.
Government receipts for March reached $385 billion, climbing $17 billion or 5% from March 2025, while expenditures totaled $549 billion, an increase of $21 billion or 4% year-over-year. Both revenue and spending figures set March records, according to Treasury officials.
When adjusting for calendar-related timing differences in benefit payments, the March deficit would have been $250 billion, representing a $9 billion or 4% increase from March 2025.
For the fiscal year’s first half, government receipts totaled $2.483 trillion, up $222 billion or 10%, while spending grew by $84 billion or 2% to reach $3.651 trillion, Treasury data showed.
