Biden’s Win Means Possible Changes, Senate Control May Limit Scope
On November 7, 2020, after a protracted period of vote counting in several states, nearly all media outlets declared that Democrat Joe Biden will be the 46th President of the United States. While, at the time of publication, this outcome is not yet official, given that several lawsuits have been filed by the reelection campaign of President Donald Trump and the Electoral College still has to vote in December, it seems that most people are proceeding as if Biden will be sworn in on January 20, 2021.
Nevertheless, the legislative outlook is far from clear at this point. While the Democrats did retain a (reduced) majority in the House of Representatives, control of the Senate is still up in the air. At the time of publication, votes were still being counted in Alaska, which looks to be leaning toward a win by the incumbent Republican, which would give the GOP 50 seats in the Senate. Georgia’s two Senate seats are heading toward runoff elections on January 5th, 2021, with the Democrats- needing to win both elections to equal the GOP’s 50 seats, giving the Democrats control of the chamber with Democratic Vice-President Elect Kamala Harris providing a tie-breaking vote.
Thus, one of the most contentious election seasons in recent memory draws to a close. Now is the time to look forward to see how policy, specifically tax policy, will be impacted by a new president. While no one was expecting sweeping tax reform like that seen with the Tax Cuts and Jobs Act (TCJA) in 2017, Biden does have proposals that run counter to that once-in-a-generation sized legislation. Whether those proposals can be enacted depends on the outcome of the Georgia elections as well as the Biden administration’s ability to work with lawmakers on both sides of the aisle.
Not to be overlooked is President-elect Biden’s long experience in the Senate and his relationships with many current Senators in both parties. During his 36 years representing Delaware in the Senate, he displayed an ability to work with members of both parties. Also, during his tenure as Vice President, he displayed a talent for making deals with GOP leadership, most notably during the negotiation of legislation to avert the “fiscal cliff” at the end of 2012.
This briefing is based on President-elect Biden’s statements and proposals on taxes and tax policy during the campaign. Biden’s tax-related proposals may change after Biden assumes office.
LAME DUCK RELIEF LEGISLATION
Before getting into the outlook for Biden tax policy, there is the more pressing need for another round of relief legislation in response to the COVID-19 crisis. Lawmakers on both sides of the aisle feel that some sort of relief legislation is needed, but differ wildly in terms of the scope and focus of the legislation.
Prior to the election, House Democrats seemed content to wait until after the election, when a predicted increase in their House majority and a possible change in Senate control would give them additional leverage to dictate the terms of the legislation. However, the anticipated “blue wave” never materialized, and Democratic leadership is left with an uncertain negotiation stance.
Meanwhile, before the election, Senate GOP leadership indicated that there would be no chance of lame duck legislation in the event of a Biden win. However, this stance has softened over time, with Senate Majority Leader Mitch McConnell (R-Ky.) even indicating an openness to considering some Democratic priorities.
Regardless of timing, it is widely believed that at some point, another round of relief legislation will be passed. Any legislation is not believed to be very significant from a tax standpoint. The likeliest provisions include another round of stimulus payments (which enjoys broad bipartisan support) as well as some new tax credits to help businesses deal with the increased costs of COVID-19 mitigation measures.
For more information about this tax policy update, contact Larson & Company today.