Donald Trump’s victory was declared when, at just about 5:30 a.m. on Wednesday, November 6, the media projected he had won swing state Wisconsin, taking him over the 270-vote electoral college count needed to win the presidency. 

Republicans will control the Senate in the incoming 119th Congress (2025-2026). The GOP’s undisputed win of 53 of the Senate’s 100 seats means Democrats have lost control of the upper chamber in the 119th Congress.

Republicans won the 218 seats needed to control the House; it will give the GOP the “trifecta”—a clean sweep of all three levers of legislative power in Washington.

If, as expected, the GOP controls both the House and Senate next year, the risks and challenges of the 2025 tax bill have become a bit clearer. Here is a run-down.

Four Democratic Senators have introduced legislation that would subject pass-through (non-corporate) business income to payroll (Social Security/Medicare) taxes. Currently, many pass-through businesses (S corporations, partnerships, sole proprietorships) characterize some of their business income as dividends or other non-wage income and thus avoid having to include it in the payroll tax base.

On September 26 President Biden signed into law the three-month funding bill that avoided a government shutdown on October 1. The continuing resolution (CR) extended fiscal year (FY) 2024 funding levels until December 20 and made few (none of them controversial) policy changes. So, the tough issues—e.g., FY 2025 funding levels, whether to block certain regulations (including the fiduciary rule)—were left to be resolved during the November-December lame duck session of the 118^th Congress.

On September 12, the Senate Finance Committee held a hearing to lay the groundwork for the 2025 tax bill effort to cut down on “tax avoidance.” The hearing highlighted proposals to improve tax equity in current law. It also focused considerable discussion on section 199A, the deduction for qualifying noncorporate business income.

The premium tax subsidies that allow lower-income individuals to get Affordable Care Act (ACA) health insurance free or at reduced cost are scheduled to expire at the end of 2025. If the current subsidies do expire, millions of low-income individuals will face significant health insurance cost increases. Extension of the subsidies will be a key issue in the 2025 tax bill and/or during the November-December lame-duck session of the 118^th Congress.

The ENABLE Act, a bill that makes permanent three provisions of the ABLE account law, passed the Senate under a unanimous consent agreement on September 19. The bill, the ENABLE Act, was introduced in the Senate by Sen. Bob Casey (D-PA), the author of the original ABLE Act, and Sen. Eric Schmitt (R-MO) and in the House by Rep. Lloyd Smucker (R-PA) and Rep. Don Beyer (D-VA).

Private sector economists, including the respected Committee for a Responsible Federal Budget (CRFB), are sounding the alarm over the cost of both presidential candidates’ tax proposals. This suggests the 2025 tax bill will be as much about revenue as tax policy.

A September 30 report from the Treasury’s Inspector General for Tax Administration (TIGTA) finds that millions of taxpayers are not paying the ten percent early withdrawal penalty tax or income taxes owed on pre-retirement early withdrawals from their retirement savings plans. This raises the specter of Congressional review of proposals for tougher enforcement.

A bipartisan bill to cut off employee retention tax credit (ERTC) claims has been introduced in the Senate. The bill pulls the ERTC provisions from the House-passed HR 7024, a bill that has been long-stalled in the Senate.

On September 26, the Internal Revenue Service (IRS) announced it is opening its employee retention tax credit (ERTC) corrections program to allow tax professionals, payroll companies and other third parties that filed ERTC claims on behalf of a business to make corrections to their clients’ claims under the agency’s voluntary disclosure program.

At a September 12 hearing, the Senate Finance Committee explored tax avoidance strategies used by the very wealthy. Strategies identified included lack of current tax liability on unrealized asset gains, step-up in basis, trust rules, and private placement life insurance (PPLI). This is a prelude to the looming 2025 tax bill debate.

Both former President Trump and Vice President Harris announced economic and tax policy agendas earlier this month. Key implementing details are missing from both candidates’ plans, but the general outlines suggest a legislative battle over tax rules regardless of who wins the presidency. Both candidates’ plans have triggered predictions of big (as in trillions of dollars) revenue losses, although both candidates have also suggested ways that those losses would be contained if not offset. So, both pose risks for NAIFA tax issues.

In Moore v. United States, the Supreme Court (SCOTUS) sidestepped the question of whether it is constitutional to tax unrealized income—but four opinions (two concurring and two dissenting) suggest that at least four of the current SCOTUS justices might in another case find it is unconstitutional to tax income until it is realized.

Both House and Senate tax writers continue their preparations for the 2025 tax bill. More potential targets for revenue-raising tax provisions have emerged.

House Ways & Means Committee Republicans have formed ten issue-specific “tax teams” to work on what to include in the looming 2025 major tax bill. Senate Finance Committee Republicans will tackle these issues in six “working groups.” Both say they “may” include Democrats in their deliberations at some point, but for now, it is an all-GOP effort.

Recurring revenue estimates of the cost of extending the expiring 2017 tax cuts suggest that revenue will play a major role in the debate over the upcoming tax bill in 2025. After at least five revenue estimates, all covering a 10-year period that includes 2028, projections of the revenue lost due to current tax rules keep going up.

The House-passed tax bill, H.R.7024, remains stalled in the Senate. However, its chief Senate sponsor, Sen. Ron Wyden (D-OR), says the bill is not dead. Sen. Wyden says he continues to work with Senate leadership to schedule Senate floor time on the bill.