In addition to the November presidential election, the results of the House and Senate races will significantly influence the future of U.S. tax policies. The balance of power in Congress will play a vital role in determining the direction of tax legislation, regardless of whether former President Donald Trump or Vice President Kamala Harris take office.
Numerous tax policies will be impacted, including the future of the Tax Cuts and Jobs Act (TCJA), corporate tax and the individual taxation of social security, tips, overtime and capital gains, along with deductions and the child tax credit. For a comprehensive overview of each candidate’s tax policies and priorities, read our previous insights here.
House of Representatives: A Tug-of-War
Whether a Republican or Democratic administration takes office, the House elections will likely be swayed, as the presidential influence may be enough to tip the balance in a historically divided chamber.
With an eight-seat advantage, Republicans now hold a slim majority in the House. The landscape looks like this:
- Solid Seats: Republicans have 189 solid seats, while Democrats have 175.
- Seats in Play: Republicans have 32 seats in play, compared to 39 for the Democrats.
Cross-Party Districts: Seventeen Republican seats are in districts that voted for Biden in 2020, and five Democratic seats are in districts that supported Trump. For Republicans to hold a strong position in the House, the GOP would likely need to expand their majority to around 15 to 20 seats.
Senate Showdown: The Balance of Power
Senate Democrats face a grueling and narrow path to maintain their slim 51-49 majority this fall as they prepare to defend 23 United States seats, many of which are in purple and red states. Democrats currently hold a two-seat majority.
With 34 Senate seats up for election, Democrats are defending 23, while only 11 Republican-held seats, all in red states, are up for election in November. If Republicans win those races as expected and flip just one state, the Senate will be tied 50-50 with deciding votes made by the new vice president. If they flip two seats, Republicans will win back Senate control no matter who is in the White House.
Senate Retirements and Vulnerable Seats
Democratic Senator Joe Manchin (I-WV) is retiring, making his seat a likely pickup for Republicans. Other possible Republican flips include seats in Michigan (with Stabenow retiring), Ohio (Brown), Montana (Tester), Arizona (Sinema retiring) and Rosen (D-NV).
Stronger Majorities Desired
Both parties aim for more substantial majorities to avoid situations in which a single senator, or a small number of Senators, has the power to block legislation.
If Republicans gain control of both chambers, even with a slim majority, they will have a better chance to extend — or make permanent — the TCJA, passed during the Trump administration.
Republican Majority: Tax Relief or Deficit Control
If Republicans control the House, Senate and the presidency, they are likely to focus on extending or making permanent the TCJA. However, the size of the GOP majority will be important in determining the scope and length of these tax reductions.
In the Senate, a slim Republican majority would mean that every vote counts and party unity would be essential for passing tax legislation through reconciliation, which requires a simple majority. With only a one or two-seat advantage, even a single dissenting senator could derail tax policy changes.
In the House, a significant Republican majority would be necessary to prevent the most conservative factions within the party from prioritizing deficit reduction over tax relief. This dynamic could limit the scope of tax cuts, pushing for a balance between fiscal responsibility and stimulating the economy.
Democratic Sweep: Global Tax Compliance
A Democratic sweep could see a return to the same focus as the first few years of the Biden Administration in seeking to bolster caregiving and lower- and middle-income tax benefits, paid for through “fair share” tax increases on high-income individuals and corporations, including changes to international tax policy.
A unified Democratic government could also focus on aligning the U.S. tax code with international standards set by the Organisation for Economic Cooperation and Development (OECD), as global intangible low-taxed income (GILTI) changes could not get through the Senate even when Democrats were in control of Congress.
International tax increases would likely be pursued. Already, several Democratic blueprints have been released for U.S. international tax reform, including:
- The 2021 House-passed Build Back Better Act
- Biden budget proposals, most recently for fiscal year 2025
- The discussion draft released by Senate Finance Committee Chairman Ron Wyden (D-OR) and members Sherrod Brown (D-OH) and Mark Warner (D-VA)
The Impact of a Divided Government
If the next president faces a divided Congress, with one chamber controlled by the opposing party, tax policy changes could become a drawn-out political clash or stalemate. In this scenario, each party would likely use its position to gain leverage, which could potentially lead to a prolonged period of legislative gridlock.
In cases where the White House and the Senate are aligned but the opposition controls the House, the focus may shift away from tax reforms to other priorities, such as judicial appointments. Tax legislation might take a back seat until a more favorable alignment of political forces emerges.
December 2025: The Next Tax Policy Crossroads
Regardless of the election outcomes, December 2025 is expected to be a critical moment for U.S. tax policy. High-stakes negotiations between the White House and Congress are likely to take place, especially if the TCJA provisions are set to expire. Under a divided government, these negotiations will be challenging, with both parties aiming to secure tax policies that reflect their priorities while preventing major disruptions to the economy.
While no one can predicate election outcomes, the balance of power in Congress and its alignment with the presidency will be a significant factor in setting the direction of U.S. tax policy, at least through 2027 and mid-term elections in the Senate and House.
Disclaimer:
The content focuses on the candidate’s tax proposal plans and is intended to provide general information about the potential tax legislation that may be implemented by the future government. The information provided in this content piece is not intended to serve as legal or tax advice and should not be relied upon as such. The prospective potential legislation mentioned in this content piece is subject to change, and there is no guarantee that any proposed legislation will be enacted into law. Any action taken based on the information provided in this content piece is at their own risk, and Cherry Bekaert shall not be held liable for any such action taken.
