A Looming Government Shutdown Threatens to Upend a Volatile Tax Season Published March 12, 2025
Yes, you’ve seen this movie before. A potential government shutdown looms this Saturday if Congress fails to pass a spending package to continue funding it. Congress faced the same dilemma at the end of December, but successfully averted a shutdown just days before Christmas.
How much more can entrepreneurs withstand, especially in the midst of tax season, nosediving 401(k) plans, and yet more tariffs slapped against Canada on aluminum and steel? The damage is piling up. Harvard University economist and former treasury secretary Lawrence Summers says the chances of a recession are now 50-50. Go ahead and try to plan around that.
But back to the shutdown and here’s the good news. House lawmakers on Tuesday voted through the 99-page spending bill that will keep the government open until September 30. Among other things, the measure will bump defense spending by roughly $6 billion, while aiming to maintain overall spending levels from the year prior.
The GOP, which holds a thin majority in the House, could only afford to lose one vote from its own party, which it did with Representative Thomas Massie (R-Ky.) opposing the bill.
The measure now heads to the Senate, and will require 60 votes to pass. Assuming all 53 Republicans in the Senate vote the spending package forward, eight Democrats would still need to support the bill. And that’s not a given.
Rather than delineate specific funding measures for specific programs, this proposal leans into language that’s too vague, Democrats argue. They claim, for example, that the continuing resolution (CR) would allow the Trump administration to redirect funding geared toward combating fentanyl toward mass deportations instead.
Senator Patty Murray (D-Wash.), the vice chair of the appropriations committee, called the measure a slush fund that would allow President Trump and Elon Musk too much control.
“Instead of working with Democrats to invest in working families and communities all across America, Speaker Johnson has rolled out a slush fund continuing resolution that would give Donald Trump and Elon Musk more power over federal spending—and more power to pick winners and losers, which threatens families in blue and red states alike, ”Murray said in a statement.
What makes a shutdown unusual this time around is how close it is to tax season. Historically, past shutdowns have transpired toward year’s end (when legislators have an incentive to get home for the holidays). But a government shutdown a month ahead of tax day could significantly throttle tax filings, especially in the event of a protracted shutdown. It will hurt Small Business Administration borrowers, too. “There will be lending that will stop through the SBA,” says Hansen Rada, the co-founder and CEO of Tax Guard, which provides real-time tax data to lenders. “But I think the greatest impact will be a long tail, which is the IRS then having to catch up during tax season.”
The last time the nation saw something similar was during the pandemic, he continues, which kneecapped the IRS when it resumed operations and had to play catch-up. That spells out processing delays, at the minimum. So business owners counting on tax credits or refunds to help propel their businesses forward would be wise to start weighing other options if they had been counting on that funding to help them out in a pinch.
Source: A Looming Government Shutdown Threatens to Upend a Volatile Tax Season
