Key Takeaways
- Following last week’s historic election results, Congress faces a long to-do list, including tax measures, that it probably won’t be able to complete.
- Tax-related items include a cryptocurrency tax bill and administrative changes to the tax code.
- They may also consider a credit to boost film production, and restoring expired tax breaks.
- Still a chance for uncontroversial tax package this year, Dem W&M leader says.
- California defeat a setback for wealth tax movement.
Last week’s election results dramatically overhauled the political landscape. But before that sets in, Congress has to finish out the year.
Lawmakers who returned to Washington this week face an unusually packed lame duck session of Congress, especially for a majority party’s last few weeks before giving up power. They will almost certainly need to trim down the long to-do list and focus on the most crucial items. How taxes will fit into that remains to be seen.
Perhaps the biggest task will be to ensure the government stays funded beyond the current Dec. 11 deadline. Usually, this is routine—neither party has much of an incentive to shut down the government over the holidays. But already some Democrats, charged by their decisive victory, are claiming they will refuse to support any measure that doesn’t block funding for the military incursion in Iran. With Democratic votes needed to pass a continuing resolution to keep the government open into 2027, this could turn into a complicated negotiation.
Republican Senate leadership has made clear that one of their other top priorities will be pushing through Trump administration nominees, especially for judicial posts. This could occupy much of the chamber’s time, leaving little room for other legislative matters.
There’s also still talk of a partisan reconciliation measure, which—if it’s based on the current budget resolution—would only include spending items, not on the tax side.
If they can tackle all of those “must-haves,” they may have time to consider a few tax-related provisions that have strong bipartisan support. A bill to update the tax rules on cryptocurrencies and digital assets easily passed the House Ways and Means Committee, but faces an uphill climb to gain full approval from both chambers, given the complexity of the issues and skepticism towards the crypto industry.
A bipartisan slate of administrative tweaks to the Internal Revenue Service and the tax code has overwhelming support from lawmakers, and could likely be approved with a quick voice vote. But House and Senate staffers need to reconcile differences in their legislation, which could take time while they’re distracted with other matters.
Trump’s support gave momentum towards a tax credit for domestic film production, which many key Democrats also support. But getting it past the finish line could require finding new revenue to offset the cost, which is always a difficult task. There’s also a list of expired or soon-to-expire tax provisions, such as the Work Opportunity Tax Credit and the Sec. 181 deduction for film or television production, that could be settled in a single “extenders” bill. But that could also require some new revenue to offset.
This partial list gives you an idea of how many competing priorities Congress has in the next few weeks. But the real unpredictable factor will be how the historic election swing affects the Congressional mood and desire to move ahead.
Recent Tax Pieces:
Neal still hopes for year-end tax package – Brian Faler, Politico:
There are several provisions many in the tax world would like to see lawmakers move by the end of the year, though the odds appear to be long given how many other issues are competing for lawmakers’ time.
Tax writers have been working on a number of relatively uncontroversial tax-administration proposals, and there are several items lawmakers hope to re-up, including the Work Opportunity Tax Credit, a subsidy for employers to hire people like felons who tend to have trouble finding jobs, and a special credit for semiconductor companies.
Failure of Billionaire Tax Strikes Blow to Progressive Agenda – Andrew Duehren, The New York Times ($):
“The conditions were probably the best they could have been to get this to pass, and even then it failed,” said Antoine Levy, an economist at the University of California, Berkeley. “That suggests there is a reluctance to pass wealth taxes.”
Murky Prospects Ahead for Tax Bill as Congress Returns – Cady Stanton, Tax Notes ($):
But between the midterm results and some lingering differences between the House and Senate on the TAS Act — the Senate advanced the package by unanimous consent before leaving for recess, while the House has worked to move aspects of the bill piece by piece — the prospects for a large tax bill appear to be dimming, according to Rohit Kumar of PwC.
“I think the political environment, the mood is just not conducive to this,” Kumar told Tax Notes. “It’s just hard to see a tax bill come together.”
Democrats Struggle With How Big to Go on Nascent Tax Agenda – Chris Cioffi and Macon Atkinson, Bloomberg Tax ($):
Democrats face a strategic crossroads as lawmakers balance investigations into a hostile White House with an eager progressive base demanding bold policy changes, and some new members who want to see Democrats go big to deliver on promises to voters. Do they spend political capital on sending progressive bills to Donald Trump to veto or seek bipartisan support on things that the president might sign?
“They need middle-income tax relief,” said Maine’s senator-elect Troy Jackson. “They don’t need Elon Musk tax relief.”
Top Tax Democrat Vows Social Security Action, Trump Oversight – Chris Cioffi, Bloomberg Tax ($):
“There’s already a lot of interest and some are starting to pop up on the other side of the aisle for raising the cap, so we’ll be very involved in that,” said Sen. Ron Wyden (D-Ore.), referring to the maximum amount of a taxpayer’s earnings that are subject to the Social Security payroll tax.
Wyden is expected to retake the Senate Finance Committee gavel in January and spoke to reporters Monday as lawmakers returned to Washington for the first votes after last week’s midterm elections. Democrats’ victories that cemented comfortable majorities in both chambers put the party on a collision course with President Donald Trump.
Public Domain Supervillain of the Week
Every week, a new villain from the Golden Age of comics, who's fallen out of favor.This week's entry: Professor Zomax.
Debut Year: 1941
Debut Publication: Jungle Comics #14
Arch-nemesis: Fantomah (see April 16 post)
Evil Plan: After several unfortunate run-ins with wild animals that left him scarred, Zomax plans to kill all of the beasts of the jungle.
Abilities: He created a machine that could create a giant tidal wave, big enough to flood the whole jungle.
