Well, it’s official. the IRS has delayed the opening of tax season by 8 days from 1/22 to 1/30 due to the late fiscal cliff deal. I don’t know about broader economic effects from the 8 day delay, but if nothing else, this will likely give us a one week delay in the debt limit saga. Now…for the record…February is just about the worst month you could pick to have a debt limit fight…or best I suppose depending on which side you are on, since tax refunds make it the absolute worst month of the year.
For a few weeks now, my needle on the “Debt Limit Cushion” has barely budged…pointing to 2/1 as the imminent default date…maybe a few days later. Treasury, on the other hand came out and said 2/15. Last year, between 2/2 and 2/15, the government ran a $141B deficit…I just couldn’t understand how we were that far off….but they likely knew about the delay far in advance…heck maybe they even encouraged the delay for extra time. In any case, I can buy 2/15 now…+/- 3 days.
From a monthly deficit perspective, I’m not quite sure how to model this. After all, I almost never have the tax documents I need to file until early Feb. anyway. So if I file the same time I always do, will processing time be the same? Is there excess capacity to process claims, or is there a queue…and I will be pushed back 8 days due to the delay? Since 99% of everything is automated, I wouldn’t really expect a full 8 day delay, but this is our government, so why wouldn’t it be?
The January effect is a bit more certain. Those early filers received about $7B of refunds in late Jan-2012….we can probably expect most of that to get pushed into Feb., lets just say $5B. Not much in the big picture.
February could go either way. In 2012, $129B of refunds went out in Feb., $60B in the last 8 days. If there is a linear delay….expect a material change in February. If the delay is not linear, and the IRS has the capacity to process most of the delayed returns in early Feb, there could be little to no change. All that is left to do now is sit back and watch….and of course hope Treasury even has the cash to pay us: Increase Debt Limit or Tax Refunds Will Not Go Out
