Key Takeaways
- Congress is working on a reconciliation measure to fund DHS, but it doesn’t include tax items.
- There’s still some hope that they could consider another tax bill this year.
- The upcoming election could drive lawmakers to address voter concerns about the cost of living.
- Judge invalidates more Trump tariffs.
- AI taxes gaining steam.
Congress continued the process of crafting yet another spending bill this week, unveiling proposals to increase funding to agencies within the Department of Homeland Security.
So far, Republican leaders have succeeded in keeping this bill, being legislated through the Senate’s reconciliation process to avoid a Democratic filibuster, narrowly focused on new spending. Despite some protests to add more, including potential tax measures, the plan is to keep it (relatively) slim and manageable, to meet President Trump’s deadline of June 1.
That would seem to rule out major tax legislation this year, especially as the mid-term campaign season swings into gear.
But there’s still talk of trying to pass yet another bill in the time that’s left. Despite how far-fetched it may seem—the One Big Beautiful Bill took months to move through despite strong support—many aren’t willing to give up hope.
It tends to be difficult to pass significant legislation in election years, when things get heated and politicians hope to get out of DC and onto the campaign trail. In this case, it could give some energy towards a new bill, as Republicans hope to address concerns about the rising cost of living. Others wonder if this could be the last chance this decade for the party to enact major changes in the tax code.
The ideas that could make it into another tax bill include indexing the capital gains tax to inflation, increasing the deduction to pass-through entities, and reversing the OBBBA’s cap on recognizing gambling losses. Many are also pushing for new rules on the taxation of cryptocurrencies, although House Ways and Means Committee Chairman Jason Smith recently said he’d only push for that as a bipartisan measure.
The opportunities for action are still there, but it remains to be seen if Congress can find the willpower to act.
Recent Tax Pieces:
Trade Court Rules Trump’s 10% Global Tariff Is Illegal – Tony Romm and Ana Swanson, The New York Times:
The ruling marked a major setback for Mr. Trump as he prepares to travel to China next week to meet Xi Jinping, its leader, about trade. Tariffs are expected to be a major topic on the agenda, and the court decision could undercut the president’s leverage.
The decision also raised the likelihood that Mr. Trump might once again have to pay back money collected from the illegal duties. A refund process is already underway for the roughly $166 billion collected under Mr. Trump’s prior set of sweeping tariffs.
What Is a ‘Compute Tax’ and Why Is the Idea Gaining Traction? – Katherine Bindley, The Wall Street Journal:
“If you had a tax on electricity, you would tax those companies that are distributing electricity, or you could tax the users of electricity,” says Pascual Restrepo, an associate professor of economics at Yale University.
Whether the Amazons and Microsofts are taxed at the front end, or the businesses and customers on the receiving end have to pay, the cost of using AI would go up, he says.
Senate Dems’ Bill Would Set New Tax on High-Value Trust Assets – Cady Stanton, Tax Notes ($):
“I am simply proposing that the ultra-wealthy — people with more than $50 million sitting in a trust — finally pay what they owe and contribute their fair share back to the country that made their success possible,” Murray said in a May 4 release.
Hurdles in Congress Leave Capital Gains Tax Indexing to Treasury – Katie Lobosco, Tax Notes ($):
Conservative groups that want to index the capital gains rate say recent discussions on Capitol Hill about doing so are beneficial but don’t indicate there’s a clear path forward. Instead, they are renewing calls for Treasury to use its executive authority to redefine “cost basis” in a way that accounts for inflation.
“My sense is that [legislation] is less likely, and more likely is that it will be done . . . by rulemaking at Treasury,” said Grover Norquist, a longtime tax cut advocate and head of Americans for Tax Reform.
The Chief Justice and the Taxing Power – Marie Sapirie, Tax Notes ($):
The power to tax is, in Roberts’s words, Congress’s “birth-right power.” Learning Resources Inc. v. Trump, No. 24-1287, at 15 (U.S. 2026). In two cases separated by almost 14 years, the chief justice has adjudicated a signature policy of the sitting president and looked to the taxing power as a key source of authority or lack thereof. Roberts’s jurisprudence on the taxing power suggests that he views it as special, even among core legislative powers. But the exact contours of the chief justice’s view of the taxing power are harder to ascertain.
