Capitol Hill Recap: Congressional Action on Tariffs? Don't Count on It.

In theory, last week’s landmark Supreme Court ruling on tariffs, by rolling back some of the trade powers asserted by the Trump administration, has thrown the issue back into Congress.

But it appears that Congress is unlikely to heed the call to tweak the duty-setting powers of the executive branch—either to expand them and negate the court ruling or to limit them further.

Trade has become one of the most divisive issues on the Hill, making legislation difficult to move through the chambers. Further developments on the issue are likely to be either in the White House or the courts.

Not that there aren’t any proposals out there. Many lawmakers have rolled out plans to respond to the court ruling since it was issued. Sen. Bernie Moreno, R-Ohio, a strong supporter of Trump’s trade agenda, called for legislation to either reverse the Supreme Court ruling, or to heighten the president’s trade powers under other laws such as Section 301 or 122, which allow the executive branch to issue tariffs in certain situations.

Meanwhile, Democrats are pushing for legislation to ensure tariff refunds are issued to consumers or small businesses. While the Supreme Court ruled that Trump’s tariffs issued under the International Emergency Economic Powers Act were invalid, it left open the issue of refunds or reimbursement for past tariffs paid.

With the parties strongly divided on trade issues, finding a bipartisan agreement which could pass the Senate seems out of the question. That would leave reconciliation, the process that allows the majority party to pass legislation through both chambers of Congress with a bare majority.

Republicans used reconciliation to enact the One Big Beautiful Bill Act last year. But that was to reduce taxes–an issue there’s strong unanimity on within the GOP. And even then, it required strong arm-twisting and deal-making to get through by a tiny margin. Using the same process to pass something on trade, a much more controversial issue, could be very difficult. While some Republicans support Trump’s protectionist agenda, others still support free trade ideals, and many toe a middle path. House Speaker Mike Johnson has already downplayed the chances of using reconciliation for tariffs.

A less divided Congress could step in and provide some certainty in the U.S. trade situation, which businesses say they desperately need. But the foreseeable future continues to look unpredictable.

Recent Tax Pieces:

New Online Trump Account Form Does Not Faithfully Implement Tax Law – Gabriel Zucker and Nina E. Olson, Tax Notes ($):

As we already discussed in our open letter to Secretary Bessent, navigating the two-step enrollment procedure, with its cold outreach from a trustee, will be a challenge and an inevitable friction point in the section 530A process. Encouraging taxpayers to do the first part of a two-step process now, when the second step will not happen for likely five months, makes a hard process even harder. The delay is probably worth the benefit when it comes to filing Form 4547 as part of a regular annual tax return. However, launching this stand-alone online tool now, so far in advance of account activation, creates risk without an appreciable benefit. Doing so without providing meaningful clarity about what the account activation will look like is also a huge missed opportunity at best.

The Tech-Neutral Credit Rules Could Use More Clarity – Marie Sapirie, Tax Notes ($):

First, a caveat is in order. The government’s efforts since the Inflation Reduction Act in drafting, revising, and publishing guidance to give taxpayers certainty on energy credits have been remarkably fast and thorough. The result is that the framework laid out in the many pages of guidance is largely workable. Minor misfires inevitably happen in projects with such a sweeping scope — particularly when the language that must be interpreted and reconciled was written and passed with minimal vetting by Congress.

Tax-the-Rich Campaigns Arise Across US as Billionaires Push Back – Eliyahu Kamisher, Bloomberg Tax ($):

The wealth tax, proposed by SEIU United Healthcare Workers West, California’s largest health-care union, would be retroactive to January of this year, if it passes. It could potentially raise tens of billions of dollars for the state to prevent hospital closures and job loss, according to supporters.

However, a state fiscal analysis found that after a temporary increase in revenue, tax dollars would decline over time if wealthy residents relocate.

Brian Brokaw, an adviser to Newsom who is working on one of the committees opposing the wealth tax, said other workers in the state, including teachers and public-safety professionals, are worried about what the measure could mean for the state’s finances.

‘Trump Accounts’ for Kids Come With $1,000—and Tax Complications – Ashlea Ebeling and Richard Rubin, The Wall Street Journal:

For most families, it doesn’t make sense to add their own money. Offerings such as 529 savings plans and even custodial accounts are more flexible and have better tax advantages for parents’ contributions.

Financial advisers say the best case for adding family money to the accounts could be for wealthy people who have already maxed out 529 savings plans and want to also jump-start their young children’s retirement savings.

The Tax Nerd Who Bet His Life Savings Against DOGE – Richard Rubin, The Wall Street Journal:

Cole isn’t an old Washington hand or even an expert on federal spending. At the right-leaning Tax Foundation, he lives in the complex world of international corporate taxation. If you want to know about QDMTTs (a real thing) or the DBCFT (don’t ask), he’s your guy. He posts on X about subpar city snow clearing and various internet memes.

Crucially, he’s been around long enough to see politicians’ promises collide into reality and to know basic federal-budget math.

Capitol Hill Recap: Congressional Action on Tariffs? Don't Count on It.

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Alex Parker