- Tax officials predict federal revenue could fall by 10% this season compared to a year ago amid big staffing cuts and changing behavior among tax payers, sources told The Washington Post. The decline in collection would come as the federal government is expected to run out of cash as soon as June or July unless Congress raises the debt ceiling.
The April 15 deadline for filing taxes is coming up, and federal officials reportedly expect less revenue this season compared to a year ago, just as the government has a few months left to raise the debt ceiling before running out of cash.
Sources told The Washington Post Treasury Department and Internal Revenue Service officials predict a more than 10% decline in collection, translating to over $500 billion.
That’s due to changes in taxpayer behavior and President Donald Trump’s cuts to the IRS, according to the report, which cited nonpublic revenue projections based on scheduled payments from already-filed returns and outstanding balances.
The IRS has also noted more talk online about not paying taxes this year as well as claiming credits and deductions despite not being ineligible for them due to reduced concern of being audited, sources told the Post.
That’s as the IRS has plans to lay off 20,000 employees with more than 11,000 already dismissed. The report said the agency has dropped investigations of some top companies and taxpayers as it prioritizes resources to keep internal systems operating.
Even before Trump returned to the White House, IRS officials warned his transition team that plans to slash staff could hit revenue.
“Aggressive reductions to budget and personnel capacity risk backlogs, delays, reduced receipts, and diminished capacity to build next generation digital capabilities,” a January presentation from tax officials said, according to records obtained by the Post through the Freedom of Information Act.
The government could collect more revenue from Trump’s tariffs, though the IRS typically accounts for 95% of federal revenue each year.
The IRS didn’t immediately respond to a request for comment, but the Treasury Department denied the report.
“Sensational and baseless claims from people, who for years promoted wasteful IRS spending, should be dismissed out of hand, as should their attempts to ensure that taxpayer funds continue to be wasted in a sad attempt to stop meaningful reforms,” a Treasury spokesperson said in a statement.
A decline in tax collection would contrast with robust economic gains last year, when GDP grew by 2.8%. Meanwhile, personal income at the end of 2024 was 8% higher than a year earlier, and the stock market jumped more than 20%.
Less revenue coming into the federal government would also coincide with a cash crunch imposed by the debt limit. Because Congress has not lifted the $36 trillion ceiling yet, the government’s ability to borrow more is constrained, and the Treasury Department has been using “extraordinary measures” since January to prevent a debt default.
The Bipartisan Policy Center think tank estimated Monday the government’s ability to manage its cash flow to pay its bills on time will run out sometime between mid-July and early October, unless Congress lifts the debt ceiling.
That largely depends on how this year’s tax season goes, and less revenue could bring the deadline even sooner.
“Although it is quite unlikely, if collections from tax season fall far short of expectations, there is a potential for heightened X Date risk in early June ahead of quarterly receipts on June 15,” the report said.
This story was originally featured on Fortune.com
