Key Takeaways
- There’s some speculation that Congress could pass another tax-and-spending bill over the summer.
- The attempt faces long odds, due to the complexities of the process and the impending election.
- Concerns over cost-of-living issues could push lawmakers to action.
- Trump tax audit immunity controversy derails bipartisan push for IRS administrative reform.
- Elon Musk's net worth boost from SpaceX IPO revives wealth tax proposals.
On June 10, Congress passed and President Trump signed legislation to boost funding for Immigration and Customs Enforcement, as well as Customs and Border Protection, by $70 billion. Senate Republicans avoided a potential Democratic filibuster on the bill through the “reconciliation” procedure—the second time they’ve used it since Congress was sworn in last January.
Now that this is out of the way, there is plenty of speculation that Congress might pass a third reconciliation bill over the summer, to enact a variety of proposals which didn’t end up in either this latest bill or last year’s One Big Beautiful Bill Act.
It would be a daunting task. It took months for lawmakers to craft and pass last year’s tax bill, including several tough votes that nearly failed. The reconciliation process is complex, requiring input from the Senate parliamentarian that can often strike key provisions.
Nevertheless, many Republicans want to try anyway, despite the long odds. With polls showing widespread voter anger over cost-of-living issues, a reconciliation bill could be the last chance to address those concerns before the midterm elections in November. The House Republican leadership said it’s committed to pushing through a bill.
The whole caucus isn’t on the same page about this, however. Rep. Jason Smith, R-Mo., the chairman of the Ways and Means Committee and a key figure in passing the OBBBA, has said he’d rather focus energy on ensuring that voters are aware of what was in last year’s bill, than trying to pass another one. During an event held by the conservative-leaning Tax Foundation last month, he lamented that the party hasn’t done enough to inform voters of how much the bill has benefited their finances.
But that’s also a difficult task. Many provisions in the OBBBA directly concerned the tax rules for businesses, not individual taxpayers. New deductions for tips and overtime have proven to be popular, but affect relatively few people. And while the bill did prevent a large hike in individual tax rates in 2026, for most taxpayers that simply means their tax payments remained the same.
Many observers doubt that Congress will be able to pass something substantial on taxes and spending over the next few months, especially this close to an election. This Congress has surprised doubters before, however. But if it does manage to put together a third reconciliation bill, what tax-related items would be in it?
There’s little consensus on specific proposals. Many want to include a tax cut for pass-through entities such as partnerships or self-owned businesses, which was included in early versions of the OBBBA. Increases in tax credits available to individuals could be a way to address cost-of-living concerns, but might provoke opposition from fiscal conservatives. They could also work to reinstate expired tax credits such as the Work Opportunity Tax Credit, or to reverse the OBBBA’s limitation on recognizing gambling losses, but those affect relatively few people.
It’s a tricky puzzle for Congress to piece together as the summer heat and humidity descend on D.C.
Recent Tax Pieces:
Trump Audit Immunity Delays Action on Tax Administration Fixes – Chris Cioffi, Bloomberg Tax ($):
The skirmish threatens to grind committee work on bipartisan tax administration legislation, among other priorities, as Democrats see the markup as a chance to bring the issue to light. Holding up the legislation has some advocates worried about a delay pushing past the midterm election.
“This is not necessarily an ‘oh well, better luck next year’ situation,” said Pete Sepp, the president of the National Taxpayers Union, which is largely supportive of the legislation. “We could be measuring our next opportunity in many, many more years than just 2027.”
Musk Trillionaire Status Stokes Democrats’ Tax-the-Rich Push – Ted Mann, Bloomberg Tax ($):
“The typical American household would have to work more than 11 MILLION years to make Elon Musk’s level of wealth,” Senator Elizabeth Warren, a Massachusetts Democrat, wrote in a post on X after the opening of trading in SpaceX shares ballooned Musk’s fortune. “We need a wealth tax.”
Representative Ro Khanna, a Democrat who represents a Silicon Valley district that includes venture capitalists who are prominent backers of Musk’s fortune, said it’s a sign the economy isn’t working. “It’s a sign the system is rigged,” he wrote in an email to his supporters.
Economists Call for Overhaul of Corporate Cash Flow Tax – Edward Beeby, Tax Notes ($):
According to one of the proposal’s authors, Elena Patel of Brookings, the corporate tax system has already drifted away from a traditional income tax thanks to the expensing provisions for machinery and equipment in the One Big Beautiful Bill Act (P.L. 119-21).
“We have a hybrid system that kind of has the problems of both systems without the virtues of either,” said Patel.
Solar, Wind Credits Still Clouded After Safe Harbor Revived – Kat Lucero, Law360 Tax Authority ($):
On June 6, U.S. District Judge Colleen Kollar-Kotelly vacated 2025 guidance that had eliminated the 5% safe harbor rule as one of two methods for solar and wind developers to establish when construction began for projects seeking to claim the clean electricity production and investment tax credits.
The judge ruled that the guidance failed to adequately justify the Internal Revenue Service's decision to eliminate the long-standing safe harbor rule for solar and wind projects in the guidance. It was issued in late August as part of President Donald Trump's push to reduce federal support for those forms of renewable energy.
Tax Treatment of Newly Regulated Crypto Perpetuals – Lee A. Sheppard, The New York Times ($):
Most crypto trading takes the form of derivatives rather than tokens, and the vast bulk of that activity is offshore. The Commodity Futures Trading Commission hopes to move those derivatives — options, futures, and perpetual futures contracts, or perps — to regulated markets. So while the CFTC battles Kalshi about what kind of contracts can be sold on prediction markets, it simultaneously permitted Kalshi to sell bitcoin perps to U.S. retail investors. This article looks at the tax treatment of perps, which the CFTC has just cleared for trading on regulated markets.
Public Domain Supervillain of the Week
Every week, a new villain from the Golden Age of comics, that's fallen out of favor.This week's entry: John Kidd.
Debut Year:1953
Debut Publication: Danger Is Our Business #1
Arch-nemesis: Captain Comet (see April 29 post)
Origin story: A descendent of Captain Kidd, he's taken the family's pirating heritage to the stars.
Abilities: He has a ray gun, but is also pretty good with his fists in a fight.
