Tax News & Views Weekly Roundup: Change Coming to Washington

Midterms Fallout

Trump Probes and Policy Fights: Here Is Democrats’ New Agenda - Richard Rubin and Lindsay Wise, The Wall Street Journal ($):

Republicans used their slim majorities to push through a major tax-and-spending law last year. All Democrats voted no on the “one big, beautiful bill,” and they have vowed to try to reverse much of that legislation.

They will aim to undo changes to Medicaid that require recipients to work and are slated to take effect soon, as well as changes to nutrition-assistance policies that have contributed to a 13% reduction in food-stamp rolls. They also will try to revive Obamacare health-insurance subsidies that Democrats expanded during Joe Biden’s presidency and that lapsed under Trump.

“We’re going to focus on health care. We’re going to focus on electricity,” Schumer said on MS NOW. “We’re going to focus on gasoline and diesel by ending this damn war, a useless, stupid war, as quickly as possible.”

What the Democrats’ Midterm Sweep Could Mean for Tax Policy - Cady Stanton, Tax Notes ($):

But while gridlock in many areas is expected, bipartisan tax work is still possible, and larger trends around deficits, revenue offsets, and the upcoming debt ceiling deadline will likely color what legislation might become law, Anna Taylor of Deloitte said.

“With Democrats controlling all of Congress, President Trump in the White House, and both parties having largely different visions for tax policy, prospects for the enactment of broad, substantial tax code changes appear dim over the coming two years," Taylor said. "Nevertheless, bipartisan cooperation on select issues remains possible and, for certain must-pass bills, may prove necessary."

Some areas of recent shared interest — including affordability, IRS administration in the Taxpayer Assistance and Service Act (TAS Act; S. 5441), and digital asset taxation — could spark bipartisan movement despite the uphill battle of divided government.

Top Tax Democrats Preview Their Agendas for January - Chris Cioffi, Bloomberg Tax ($):

Both Neal and Senate Finance Committee ranking member Ron Wyden (D-Ore.) are jumping to outline their agendas, showing a party eager to set a framework that will deliver wins to voters ahead of the 2028 presidential election.

They highlighted high prices as a top concern and also promised to tackle trade policy and longstanding healthcare issues.

Wyden also identified specific oversight areas he plans to look into now that Democrats will have broad authority to probe the Trump administration’s implementation of last year’s tax law that companies benefited from.

GOP Poised to Lose Decades of Taxwriting Experience Postelection - Jared Serre and Tyrah Burris, Tax Notes ($):

Observers foresee the House and Senate taxwriting committees experiencing some challenges as the election results will have many long-serving Republican members exiting while the newly elected Democrats bring different policy agendas to Capitol Hill.

At least 14 of the 40 Republicans seated on either the House Ways and Means Committee or the Senate Finance Committee retired or lost their bids for reelection during the 2026 election cycle, meaning at least 35 percent of the caucus’s current taxwriters will be leaving Washington, unofficial election results show.

That figure, calculated by Tax Notes, doesn’t factor in the results of two House races — each featuring a Republican incumbent — in which a winner has yet to be declared.

Companies Could Get Caught Up in Future Democratic Tax Probes - Chris Cioffi, Bloomberg Tax ($):

Tax-writing Democrats will have broad jurisdiction to investigate what they see as corruption and abuse in President Donald Trump‘s administration — and companies that are not the usual suspects could get caught up in them.

Law firms and lobby shops have spent months boosting teams specializing in Hill investigations as they prepare for an onslaught of clients worried that Democrats will soon be knocking on their door.

Those outside “the usual cast of characters” could get drawn in, said former Finance and Ways and Means Committee staffer Christopher Armstrong, now at Holland & Knight. “There’s been an underestimation of the importance the tax-writing committees will play.”

Trump, Congress Set to Clash Over Economic Costs of Tariffs - Alicia Diaz and Laura Curtis, Bloomberg Tax ($):

The last time Democrats had the opportunity reverse Trump’s tariffs, the Biden administration actually expanded them in a bid to target China. And while Republican and Democrats alike disapprove of the ongoing trade war with Canada, support for a tough approach with China is bipartisan.

It’s also unclear whether all Democrats would rebuke tariffs. For example, Democrat Sherrod Brown, who is set to return to the Senate after winning an Ohio seat in Tuesday’s election, has previously spoken out against free trade. He’s criticized some of the White House’s tariff policies, but the historic exodus of manufacturing jobs from his home state as a result of global trade makes any decision to walk back duties more complicated.

California Wealth Tax Defeat

‘What a waste’: How California’s billionaire tax campaign fell apart - Jeremy B. White, Politico:

Long before the billionaire opposition formed, labor union leaders were deeply divided over the ballot proposal. The measure directed nearly all its revenue to health care, and its sponsor pushed ahead without broad consensus. Those rifts cost the campaign key endorsements, left it without enough moneyto mount a serious response and allowed billionaire opponents to magnify and exploit disagreements among groups that generally support taxing the rich.

“What a waste,” said Jim Mangia, the president of a health clinic chain who supports Proposition 40 and has worked with Dave Regan, the main labor leader behind it, in the past. “What a waste of resources and what a squandering of an opportunity. There was no coalition, they pissed off everyone, and so many of those natural allies that would’ve supported it refused.”

Democrats see new momentum for plans to tax the rich - Brian Faler, Politico:

Democrats don’t even necessarily care that President Donald Trump — now promising to be “Mr. Veto” — will still be in position to shoot down anything they pass. Many are already looking past him as the party builds a platform for the 2028 presidential elections, saying that they need to focus on highlighting their priorities for voters.

Democrats should also welcome a veto fight next year with a weakened Trump over taxing the rich and improving affordability, said Sen. Chris Van Hollen (D-Md.), arguing that will only help the party drive home the point with the public.

IRS

IRS announces new federal income tax brackets for 2027 - Kate Dore, CNBC:

The IRS has announced new federal income tax brackets and standard deductions for 2027.

In its announcement Thursday, the agency raised the income thresholds for each bracket, which apply to tax year 2027 for returns filed in 2028.

The IRS also increased figures for other key provisions, including long-term capital gains brackets, the estate and gift tax exemption, and eligibility for the earned income tax credit, among others.

Trump admin names new economic Opportunity Zones to spur private investment in struggling communities - Bradford Betz and Edward Lawrence, Fox Business:

The designations will take effect Jan. 1, 2027, according to Treasury and IRS guidance, and will remain in place for a decade.

Of the newly designated zones, 2,594 are in rural communities eligible for enhanced tax incentives under the law.

Opportunity Zones are economically distressed census tracts where qualifying investments may receive preferential tax treatment. The program was created under the 2017 tax law and was made permanent under President Donald Trump’s Working Families Tax Cuts.

Blogs & Bits

How Tax Policy Fared on the Ballot in 2026, Jared Walczak, The Tax Foundation Tax Policy Blog. "On a night in which voters gave Republicans a drubbing, they mostly rejected sweeping tax changes, locked in recent reforms, and sent a message that the affordability agenda runs, at least in part, through the tax code."

From Al Capone To Mickey Cohen: How Tax Crimes Helped Define Alcatraz, Kelly Phillips Erb, Taxgirl. "While their criminal careers were separated by decades, their cases shared a common thread: The federal government used the tax laws to prosecute men whose other alleged criminal activities had proved far more difficult to bring into court."

Tax policy possibilities under a coming Democratic Congress, Kay Bell, Don't Mess With Taxes. "And, of course, there is Democratic interest in clawing back some of the 2025 GOP tax reform bill’s benefits afforded high earners and multinational corporations."

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