Through the first nine months of the budget year, the deficit totaled $206.5 billion, down 17 percent from the same period in 2005, when the government's red ink totaled $318.5 billion.
The deficit for the nine months puts the government on track to turn in a smaller deficit this year than last, when the red ink totaled $319 billion for the full year, the third-highest federal deficit in dollar terms. The record deficit was $413 billion set in 2004.
Despite the surge in revenues, the deficit for the 2006 budget year ending Sept. 30 is projected to be only a bit better than last year's. War spending for the year well exceeds $100 billion, while Congress has appropriated $87 billion in hurricane aid within the past year.
The red ink is expected to climb again next year, and the longer-term outlook is more bleak.
President George W. Bush credited his tax cuts earlier this week as he basked in new deficit figures that were far lower than earlier White House estimates.
White House figures released Tuesday estimate that the deficit for 2006 will be $296 billion, much better than the $423 billion, Mr. Bush predicted in February but only a slight improvement over last year's $318 billion.
Impressive corporate profits and big income gains by the wealthy have been largely responsible for driving up tax revenues and, in turn, pushing the deficit lower.
Mr. Bush portrayed the new estimates as validation of a budget policy centered on tax cuts passed in 2001 and 2003, and his clampdown on domestic agencies funded by Congress each year.
Democratic critics countered that Bush was celebrating figures that still represent the fourth-largest deficit in U.S. history. The surge in taxes paid by corporations and upper-bracket taxpayers, they added, is proof that the current economic recovery is tilted in favor of the wealthy.