(March 6): A key House Republican projected Wednesday that the US could hit the debt ceiling as soon as mid-May, several months sooner than most analysts project.

The market-rattling date hinges largely on tax revenue — and, if the US collects less than expected this tax season, the borrowing limit could be just over two months away, said Representative Jason Smith, the chairman of the House’s tax-writing committee.

The US Treasury hasn’t forecast a default data, though Wall Street strategists largely estimate that date could fall around late-July to late-August without an increase in the debt limit. Some forecasts, however, put the timing as early as late May.

Small dislocations are appearing along various parts of the Treasury bill curve, where some traders are worried that the US will run out of new room to borrow new debt, an indication investors have yet to coalesce around a concrete date.

But the Trump administration is aiming to cut up to half of the Internal Revenue Service (IRS) workforce by the end of the year, Bloomberg Law reported on Tuesday, citing a person familiar with the matter. Doing so, particularly in the midst of tax season, risks sharply reducing revenue.

Smith didn’t explain why federal tax revenue might come in below projections.

His comments on Wednesday come as congressional Republicans try to rush through a package of tax cuts that would increase the debt limit by some US$4 trillion (RM17.71 trillion). But the party’s narrow and fractious majority in the House threatens to sink the proposal.

Smith, who has previously pressed to lock in a tax-cut package by the end of May to provide businesses financial certainty, argued the debt ceiling date uncertainty is an added reason for Congress to move quickly.

The Treasury Department is current using extraordinary accounting measures to prevent a payments default.

Uploaded by Siow Chen Ming