Most Americans have a weight off their shoulders this week—assuming they filed their taxes by Tuesday’s deadline. For the Internal Revenue Service, though, the stress has only just begun. Tax season is always a busy time for the agency, but this year it has to process around 160 million returns with a staff that has been decimated by President Trump and Elon Musk’s war on government. Between firings and mass resignations, the IRS is expected to lose a third of its 100,000 workers this year.
And yet, the agency is now expected to collect roughly $5 trillion in tax revenue. That money is critical, of course, to keeping the government running and making good on its debts. But the size of the pot is being watched especially closely this year, as Republicans in Congress wrangle over a budget bill that would extend massive tax cuts, slash social spending, and raise the debt limit—all at the same time. The question is whether the GOP can solve this thorny equation before the government runs out of money later this year.
The Treasury Department is already undertaking “extraordinary measures” to ensure that the U.S. does not go into default, meaning that the clock is ticking for lawmakers to act. But it’s not yet clear when the U.S. will hit its borrowing cap. While the Congressional Budget Office has estimated that this “X date” will occur in August or September, the Bipartisan Policy Center has modeled a broader range—sometime between mid-July and early October. Which end of the range the X date actually falls will depend on a variety of factors, including the tax revenue that the IRS collects this spring.
“When we can think about the cyclicality of federal cash flows, the spring is a very crucial time for the government. It is a time when we are typically bringing in more money than we are spending, and that is rare,” said Rachel Snyderman, managing director of economic policy at the Bipartisan Policy Center. “Tax season is so critical because it allows us to really understand how much those revenues will buoy our finances through the remainder of the year.”
It’s also critical to GOP hopes of passing President Donald Trump’s “big, beautiful” budget bill, which would extend massive tax cuts (disproportionately for the wealthy) and slash federal spending (which would disproportionately hurt lower-income Americans). Given Republicans’ narrow majorities in the House and Senate, passing that bill on its own would be a herculean task for party leadership. But they have also linked raising the debt ceiling—the limit on how much the government can borrow—to that bill, which will be approved through a process known as “budget reconciliation” to sidestep the 60-vote threshold in the Senate.
Historically speaking, raising the debt ceiling has not been popular among Republicans, with dozens of sitting lawmakers voting against measures lifting the cap in recent years. The budget resolution that outlines the parameters of the eventual GOP budget bill would lift the debt ceiling by up to $5 trillion. Moreover, attaching a debt limit hike to reconciliation means that Congress will have to hustle to approve the measure, to avoid the U.S. defaulting on its debts for the first time in its history.
Given the time pressure, the tax filing deadline this week held extra importance: If the tax receipts collected by April 15 are at a normal level, the U.S. has a bit more wiggle room in timing before it defaults on its debts. Based on Treasury Department data, the daily cash balance of the U.S. Treasury on April 14 and 15 was similar to the same days in 2024, indicating no immediate anomalies in tax receipts. However, the gutting of the IRS makes the agency’s ability to collect revenue in the future more uncertain.
Snyderman noted that several states impacted by natural disasters in 2023 and 2024 were able to delay their tax filings, which could “have the impact of artificially increasing the amount of tax revenue that’s coming in this year that would have otherwise come in in past years.” Another spike in revenue could come on June 15, the deadline for corporate tax returns. If the revenue from the April 15 filing deadline is enough to support government cash flows through June 15, Snyderman said, the receipts from the corporate filing deadline would boost the country’s finances through the summer.
“After tax season, we enter months where the government just spends more money, with the exception, really, of that June 15 date,” said Snyderman. On June 30, the Treasury Department is able to unlock more of the “extraordinary measures” used to keep the country from default. But June is also the start of hurricane season, which continues through November, and the federal government response is generally very costly.
Ensuring that the X date lands toward the end of the summer or fall, rather than the beginning, still gives Congress limited time to act. If slashing government spending and extending tax cuts are the sweetener in the reconciliation bill for conservative Republicans, the debt ceiling is the spinach. Fiscal hawks who are vehemently opposed to raising the borrowing cap may be more inclined to do so if it’s paired with their top priorities.
But this strategy comes with a time limit. Without the debt ceiling hike attached, Republicans would have until the end of the fiscal year—i.e., the end of September—to approve the reconciliation bill. With the fate of the debt limit inextricably entwined with the reconciliation bill, they have only until the X date to approve it.
House Speaker Mike Johnson and Senate Majority Leader John Thune hope to approve the bill by Memorial Day weekend, in late May, but that could be a mighty lift. House Republicans initially struggled to approve the budget resolution, in part because some conservative members did not believe the $4 billion in cuts to government spending—the Senate’s budget plan—went far enough.
The House narrowly passed the plan after Thune and Johnson said in a press conference that the final measure would achieve $1.5 trillion in deficit savings over 10 years. It’s not yet clear how they plan to make the math work, given that, as the Tax Foundation has estimated, extending the 2017 tax cuts would cost $4.5 trillion over the next decade. Meanwhile, conservative hard-liners are insistent on slashing the deficit, but moderates in swing districts have balked at cuts to Medicaid.
“The reconciliation bill is going to be—the technical term is ‘clusterfuck,’ just in general, because we have a lot of different people with competing priorities, and narrow margins in both chambers, trying to agree on something while Trump is acting with his style of governance, which is pretty volatile, punitive, and transaction-oriented,” said Laura Blessing, senior fellow at the Government Affairs Institute at Georgetown University. “So if they want to use the reconciliation bill for the debt ceiling, they’re going to have to get their act together … earlier than the deadline normally would be for them.”
If congressional Republicans are unable to pass the reconciliation bill in a timely manner, they might need to approve a debt ceiling hike in a separate measure. This would likely need to be approved on a bipartisan basis, given conservative Republicans’ opposition to a “clean” increase of the limit—without anything else attached to it.
“For some Republicans, that may be the nightmare scenario, if they have to [set aside] their own partisan priorities or jettison them in favor of avoiding calamity,” said Garrett Watson, director of policy analysis at the Tax Foundation. “But that’s part of the bet. [It’s] the risk they’re taking by going with this big, one big vehicle approach, rather than slicing some of the stuff out in parts.”
Raising the debt limit by a specific amount—the $5 trillion currently proposed—rather than suspending it to a particular date would also create uncertainty about when the U.S. would hit that ceiling. The debt limit is frequently used as a political football, meaning that if the next X date falls closer to the 2026 midterm elections, it could be held hostage by lawmakers trying to make a point about the rising federal deficit. “Your next standoff on this is not necessarily going to be at a politically safe time,” said Blessing.
Watson also warned that a potential recession, fueled by Trump’s tariff policies, could affect when the U.S. hits its borrowing cap. “That could really bump deficits even further, because that’s typically how it works during a recession, and then you’re going to reach that debt limit faster, potentially,” said Watson.
However, the impact of a possible economic crisis is a question for a future debate over the debt ceiling. For now, all congressional Republicans need to worry about is writing a major tax package that satisfies their fractious conference and can pass sometime in the near future. Easy as π, you might say.
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