Tax Day Cash Will Indicate Just How Close US Is to Default
The question of when the US could default will come into sharp relief this week when the Treasury reveals how big its tax take is likely to be.
Tax Day Cash Will Indicate Just How Close US Is to Default
Alexandra Harris
Mon, April 17, 2023 at 12:45 PM GMT-4·5 min read
(Bloomberg) -- The question of when the US could default will come into sharp relief this week when the Treasury reveals how big its tax take is likely to be.
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With the political battle over the statutory debt ceiling set to amp up again, the Treasury’s tax receipts will give a clearer idea of how much cash it will have on hand as it approaches the limits imposed by the $31.4 trillion cap that will prevent it from borrowing.
Right now, the estimates for that so-called drop-dead date are wide — anywhere from early summer through to the US fall — but investors and officials are hoping they will have a better idea soon.
This Tuesday is the deadline for most US taxpayers to get their annual paperwork filed and make payments for what they estimate is owed. Those funds should show up in the Treasury’s bank account shortly afterward to bolster its rapidly dwindling cash pile.
The key question is by how much and whether that will be enough to keep the Treasury flush with dollars until around June when there’s an additional influx of tax money and when it can also tap some additional accounting gimmicks beyond those that it’s already employing to keep the government away from the precipice.
“We maintain our current base case for a mid-August X-date but see risks skewed towards earlier,” Bank of America analysts Mark Cabana and Katie Craig wrote in a note to clients, referring to the point when the US is about to run out of ceiling headroom.
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