Post-2026 Midterm Election Policy Outlook

It's really a snapshot in time.

So what we're going to be covering today, we're going to first break down the midterm results, including what Congress has looked like for the 119th Congress and then what it's going to look like for the 120th Congress, at least as of right now with the results that we have. We're also going to talk about some of the leadership changes, particularly for some of the tax committees because that's going to be important. Obviously, they're the ones who are going to be directing and driving all of the tax policy changes for the next two years. We're going to talk about legislative priorities, what we think both parties are going to be focusing on, and that may or may not include tax for both parties. But then we are going to talk about tax legislation, what tax legislation has been introduced in the 119th Congress? What do we think could maybe still pass before the end of the year?

And then what we think if it either doesn't pass before the end of the year or just going into the 120th Congress, what we think is going to be introduced and what we think could potentially pass. And then finally, we're going to talk about state results very, very quickly. I am not in our state group. It's really just a very quick four or five minute overview of what some of those results were in the states because the states are important and there were some big results on the state level that really should also be kept in mind.

So we actually have our second polling question now, so kind of early on here. So I think we can just go through and I can keep going. Is that correct? All right. [Poll #2]. It should pop up and everyone should do that. So right now for the Senate, this is the 119th Congress, so this is right now. There are 45 Democrats, two independents who caucus with the Democrats and 53 Republicans. So overall it's 47 Democrats, 53 Republicans. Okay. I'm not surprised most people are concerned about tax changes. And then on the House of Representatives, we have had for really since 2022, a very slim majority for Republicans. So right now we've had 214 Democrats, 219 Republicans. There have been two vacancies that never had a special election, so those will actually be filled from this election. But this slim majority has really been a major factor in what legislation has been able to pass.

The Republicans only able to lose at most one vote, maybe two depending on when the vacancies are filled. So we've really seen a lot of gridlock even within the Republican party and just overall what's able to be legislated because we've had these very slim majorities both in the House and in the Senate to a certain degree.

So now as a result of these elections, right now we have at least seven seats that were held by Republicans that have been won by Democrats. So Ohio, North Carolina, Iowa, Maine, Texas, Kansas, and South Carolina all flipped to elect a Democratic senator. So these seven people will be in the Senate for the next six years, and we are actually still waiting for a couple of results. We're still waiting for Mississippi and Alaska. So that number could grow up to nine new Democratic senators. And then on the House side, this is not even the full amount of flipped house seats. I think I only had room for 30 and at least 43 right now have flipped. That number may go up depending on some of the results that we have, but this is some of the highest turnover in Congress that we've seen in decades.

And just to kind of put it in perspective, there are 43 seats that were flipped, but there's going to be over a hundred new House members between flipped seats, retirements, people having lost their primaries. So we're going to have a huge, huge freshman class coming in.

So right now the count that we have is at least 52 Democrats, two independents who again caucus with the Democratic Party. So we have at least 54 Democrats now, and then we have 44 Republicans. That number may change. It may end up being 55 Democrats, 45 Republicans. It may end up being 56 Democrats, 44 Republicans. We won't know probably for a little bit. Alaska takes a very long time to count all of their votes. I was discussing this with somebody else earlier. It takes quite a long time for them to do that because they have ranked choice voting. And then Mississippi, today's actually the deadline for ballots to arrive, mailed in ballots to arrive that were dated by election day. And then those should be certified on November 13th.

Mississippi is a little interesting in that it actually does not have a recount mechanism, so it should be known by November 13th. Obviously something could happen like a lawsuit or something that could end up changing that, but right now we hopefully will know on the 13th. So with the House of Representatives, so this is the one that's a little bit off because of course AP called three races this morning. So right now we do have 254 Democrats. Some people may have seen that CNN called another seat. So you may see some places that say it's 255 for Democrats. AP has not called that race as of this morning. So I'm going with 254. We've got 165 Republicans actually have now been called. So we still have 16 outstanding races. Again, this is going off of AP. That's kind of the gold standard in terms of when a race is called and unlikely to change.

With those outstanding races, five of them have the Democratic candidate leading. The margins that they're leading range from several thousand votes to 99 votes. There are two races in Louisiana that are going to a runoff.

Those will be very interesting to watch since they're going to be special elections. So there'll be kind of a good barometer for us to gauge if Democrats win those seats, if that indicates if the shift has kind of stuck. The rest of them are outstanding for Republicans. So right now it's looking like it's going to be probably about 259 Democrats, 174 Republicans, and then those two outstanding races. So right now we've had these major players and we've had these major players for really the past two to four years. So right now, still, Mike Johnson is still technically speaker of the House. Representative Emmer is the majority whip. Jason Smith is the ways and means chair, and that's the committee that does all of the tax writing. Senator Thun is both the Senate majority leader, and he's actually also a member of Senate Finance. And then Senator Mike Crapo is the Senate Finance Chair.

On the Democratic side, we have Hakeem Jeffries, he's the House Minority Leader and likely next speaker. We have Representative Katherine Clark. She's the House Minority Whip. We have Representative Richard Neal. He's the ranking member on Ways and Means and likely the next chair. Senator Chuck Schumer, he's the minority leader. And then we have Senator Wyden, he's the Senate finance ranking member and also likely next chair.

So there are some leadership shakeups that we're expecting, and most of those are going to be on the Republican side. That is to be expected. Obviously, typically whoever loses, there's an examination in leadership. There may be some people stepping down, just some general shakeups. So Mike Johnson is stepping down from leadership. That makes sense. So far as Representative Scalise, he's the majority leader and Jim Jordan, they announce their candidacy for minority leader. Thun, on the other hand, he's expected to seek the Senate minority leader position. There may be some grumbling about it, but I do expect that he'll probably stay as the Senate minority leader. He is overwhelmed very well respected and does a pretty good job working across the aisle.

A couple of these got flipped. Sorry about that. So Emmer is also facing a challenge as the whip. It's kind of unclear exactly how serious that challenge is right now. Like I said, Representative Hakeem Jeffries, he's likely to become the next Speaker of the House. Chuck Schumer is probably going to become Senate majority leader. There's been some pushback there. I'm just going to head off anybody putting a question in the chat. There's not been a real major challenge. Senator Van Holland, he's actually one of my senators, has expressed some interest. I right now don't think that that's a very serious threat to Chuck Schumer's leadership. I think that there might be some concessions given to the progressive wing in the party, but that Chuck Schumer remains the majority leader. Again, could change.

Representative Neal is likely to be the way some means chairman again with Jason Smith as the ranking member now. Widen is likely to be finance chair again. So Mike Crapo is kind of to be determined. He should be termed out. So Republicans have limits on how long people can be in leadership in certain committees. I do believe that Mike Crapo is termed out. He could potentially still stay on finance or he could ask for a waiver to continue to be ranking member. I haven't really heard anything on that yet, so that's kind of a to be determined. We don't exactly know who's going to necessarily be the ranking member on Senate finance for next Congress.

So we have some coalitions that are kind of growing in terms of influence and just also in size. And then we have other kind of caucuses and coalitions that are going to be reduced in their influence. And I'm not going to go all the way into this, but for the most part, we're going to see both moderates and the progressive caucuses. Moderates on both sides of the parties probably are going to have an upswing into their influence on policy. The progressive caucus is the second largest caucus for Democrats, so they will also probably see some of their influence grow. And then I just put Blue Dogs on here because they were kind of an endangered species for a while there. And now with all of these Southern states have elected a lot more, these more conservative Blue Dog candidates, they're actually expected to double their size this incoming Congress.

So just wanted to kind of point that out in terms of some of the influences that are going to be happening within the Democratic Party. And then on the other side, the Main Street Caucus, that's one of the more conservative groups in the Republicans. In terms of their actual influence on Congress, that's going to be reduced. And the House Freedom Caucus in particular, they have been extremely influential for the past four years.

They were able to oust a speaker with Kevin McCarthy. Their influence has been greatly reduced in terms of Congress. Now, if Jim Jordan wins the minority leader position, he's a member of the House Freedom Caucus. That may be kind of a sign of where people are going and that might continue to have some influence within the Republican Party, but not necessarily within Congress. They're not going to have quite the same leverage that they've really enjoyed for the past few years. So like I said, there's a lot of changes that are going to be happening, not just in Congress in general, but also a lot of shakeup for the committees that are dealing with tax. So Ways and Means, like I said, that's the House Tax Powerhouse, right? So actually fun fact, constitutionally speaking, tax legislation must start in the House and Ways and Means is the committee that does that.

So it's really the most influential committee in terms of tax that you're going to find. Right now with Republicans in power, there's 43 members in total. There's 17 Democrats and 26 Republicans.

Eight of the Republican members either retired, lost their primary or lost their race, so they will be leaving. And then on the Democratic side, five members were leaving. So that's going to be a lot of turnover. And particularly if we assume that these numbers kind of flip and going into the 120th Congress, there'll be somewhere between maybe 26 and 27 Democrats and somewhere between 16 or 18 Republicans. We're going to see a lot of turnover on ways and means, and that extends to the tax subcommittee. On the tax subcommittee, that's a 19 member subcommittee. Five Republicans were leaving there. There's only six left, only one Democrat left on that side. So they still have pretty much their whole cohort left. On the Senate finance side, a little, in some ways, possibly more dramatic really when you look at the ratios. There's 27 members on the Senate Finance Committee, 14 Republicans, 13 Democrats, six of the Republican members lost their primary, retired or lost their race.

So we're going to see six members leaving there. We only had one person, Tina Smith, who retired on the Democratic side.

So there's going to be a lot of turnover, and this is kind of important. There is a reason that I'm talking about this, and that is one of the things that makes it a little difficult in terms of knowing exactly what the tax agenda is going to look like is there's going to be a lot of new people. Like I said, there's going to be probably between 14 and 16 new Democrats on ways and means. There's going to be at least six new members on the tax subcommittee itself. There's probably going to be about seven new members in Senate finance. And at the same time, members may ask to rotate on and off committees. So that's just what we know the changes are going to be.

The committees will also have the shuffling, so we might end up with even more. And that can make it a little, you can know the agenda, but there's going to be new personalities. There's going to be new coalitions forming. There's going to be new partnerships forming and everything. So it's really an interesting time in terms of the amount of turnover that's happened. And now to the legislative priorities. So one thing that I do want to point out for the rest of the year and for the rest of this Congress, there's a lot of discussion on what do we think they're going to get done? So I just figured that I would use this time to point out that there's 18 legislative days left, fewer now because we're actually on the 10th. So there's 16 legislative days left for Congress to get anything passed that they want to get passed before the 120th Congress forms.

Now they could always extend, they could always work into the Thanksgiving and the Christmas breaks, but that's not hugely likely.

And because of that, because of this time crunch, we're going to be looking at must pass bills. They're going to be the ones that are taking their priority. They're going to be the ones that must pass. Most of these bills are going to be funding bills or bills that are just really instrumental to keep certain programs functioning. These bills can be kind of a blessing and a curse in terms of other policy because they have to pass. Sometimes it can be a really good opportunity to attach a typically less controversial piece of legislation, sometimes tax, sometimes other things. On the other hand, because of the time crunch, sometimes you want to just have a very streamlined bill, add absolutely nothing on, just pass a clean bill.

With the time crunch, I think it's probably more likely that it's going to be looking at clean bills, but you never know. It can also be used for some negotiations, a little less likely probably in the next 16 days. But for instance, some of the FISO support in the summer was withheld by Republicans even in order to pressure President Trump to nominate a different DNI director. So that's a good example of when it can be used in terms of other and outside negotiations. So the bills that are going to be must pass are going to be, and I keep forgetting to tell everyone, suffices the Foreign Intelligence Surveillance Act. So that is probably going to be considered a must pass. I put in a little asterisk as to appropriations. So appropriations is the kind of fancy word that Congress uses for funding the federal government.

It's their budget process. It's appropriating money to fund all of the different branches of government, the different agencies and everything like that.

Appropriations is going to be interesting because there had been negotiations going on with appropriations and really up until November 4th, the expectation had been that we were going to see a full funding bill. So right now the government is being kept open by what's called a continuing resolution. That runs out in December. And like I said, the expectation had been we were going to see a full year bill, negotiations were going to be picked back up sometime after the election. That has kind of changed. It is a lot less likely that we're going to see, I think, a full funding bill. I think we're more likely to see a continuing resolution until the 120th Congress. I think Democrats are no longer going to feel like negotiating.

Again, I could be wrong, but that's just kind of the impression that I have got from some people who I've talked to is that it's much more likely that we're going to see a continuing resolution in December. We also have the National Defense Authorization Act, that's a must pass bill, transportation reauthorization bill. And then I don't have it on here, but the farm bill really does kind of need to be addressed and maybe that gets attached to the NDAA, but that's another one. So that's a lot of things that Congress has to get through in 16 days. And even with doing a continuing resolution, that also contains negotiations.

So there's not a lot of room for tax, at least not in the next 16 days. And in terms of the legislative priorities for each party, they're not going to be quite as focused on tax either. So Democrats, at least right now, their legislative priorities are going to be really what they campaigned on and what they feel like they won very largely on. So that's going to include government oversight, subpoenas, addressing corruption, things like that. That ended up being a really, really big part of, a rather big concern for voters late in the game. So that's probably going to be a big one. Government oversight was always going to be a big one, but especially now that there's this perception that there was kind of a mandate there.

AI and data center regulation, this also became such a big part of the campaign's people's concerns about data centers in their backyards, AI in general. I think that's going to be addressed and we're already seeing that with some of the permitting reform with the permitting reform bill. The manager's amendment did contain some provisions regarding data centers, healthcare access and costs, that was a big one, making the wealthy pay their "fair share." Housing and grocery costs, rolling back those OB3 Medicaid cuts. And then the Iran war and tariffs I think are also going to be just, they have to be high up there. That was another one that voters really said that they were concerned about. Now on the other hand, for Republicans, at least for the next probably few months, a lot of what they're going to be doing is more regrouping, reevaluating, testing messaging, trying to look ahead towards 2028, possibly kind of a 2026 election postmortem.

They're going to try and distance themselves, or at least some of them will, some of them won't, but probably a large part of them will try to distance themselves from some of the more unpopular policies, in particular the tariffs, the Iran war. And those might give some room for bipartisan compromises, so that's one to watch as well. They're going to absolutely refocus on border security and immigration enforcement, and we've already seen that with President Trump replacing his chief of staff with Stephen Miller, who's very heavily focused on immigration and border security. Military funding and building back up military resources would probably be a big priority. And then at least for the next few days, pushing through as many nominations as they can before the end of the year, before they no longer have the upper hand on those judicial nominations or really any other nomination.

Sorry, I'm going to need a drink of water. So there is tax legislation that has been introduced. A lot of them are in varying stages of the whole process, and I kind of have them in order of where they are and how they might do. So the Taxpayer Assistance and Service Act, that's a bipartisan bill. This was actually introduced back in March of 2025. This is something that Senators Crepo and Wyden have put together and they've been championing for a very long time overall. I'm going to go into more detail on this in just a minute, but just Overall, it's focused on modernizing the IRS and strengthening taxpayer rights as well as oversight on tax preparers. The other one is the Motion Picture Television and Entertainment Revitalization Act. This one is actually a newer introduced bill, but it's very bipartisan. It's a pretty small bill.

It's pretty tailored. This would create a new tax credit of 20% for qualified compensation paid for qualified film and television productions, and that would really mean domestic television and film productions. There would also be a little bit of a bonus bump if you met other requirements, so the credit could go up to 30%. That is a very bipartisan bill. I could see that being attached to another vehicle or rolling over into the 120th Congress. ACA extenders, also known as the premium tax credit. There was these enhanced subsidies during COVID, and they also really expanded who could qualify for the subsidies. Under the regular law, once you're over a certain amount of the federal poverty line, you just don't qualify for these subsidies anymore. Those expired at the beginning of 2025, I believe. Sorry, 2026. This has been a really big fight for Democrats. It's been so long since it happened, but this was what Democrats shut the government down for that incredibly long period of time over, was these subsidies.

So there's absolutely still an appetite to bring them back. I don't think we'll see them at the level that they were during COVID, but I do think that that is something, again, that we could see attached either to a bill this year maybe, or as an extender's bill or an extender's package or addressed next year. I've had some people ask me what I think with Democrats taking such a large majority, if that changes the calculus on this, if they think Democrats are going to push back and just try and wait till next year. I think Republicans would be smart to make a deal now while they can and have their voice be included in it and also have a bit of a win for themselves on healthcare. I don't know if Democrats will push back or try and push it to the next Congress, but that is part of why I think that there's a good chance of this being attached to something at the end of the year.

I think there's a good chance that a deal will be made before the next Congress is formed. The Digital Asset Tax Certainty Act. So this was originally the Parity Act. This is kind of the update to it. This is Jason Smith's version of it, so he put some of his own fingerprints around it. This is also bipartisan. This is kind of a crypto digital asset. I'm supposed to call them digital assets, not crypto because it's more than crypto. Digital asset tax modernization bill. I'll be talking about that also a little bit in more detail just because I do think that digital asset tax is going to be a big part of the conversation. We've got a new Congress, it's going to be a younger Congress. I think things like digital assets are going to be a bigger part of the conversation just in general. The work opportunity tax credit, I feel like everyone forgot about the poor Watse.

This also expired after 2025 and has not been extended. Now, historically speaking, this is kind of its pattern is that it's expired for a year or so, and then it's retroactively renewed back to when it had expired. I do think that that's probably what's going to happen. Overall, this is not an expensive credit. I think it's under $10 billion for 10 years. So it's a very, in the grand scheme of things, very, very cheap.

And then finally, Reconciliation 3.0. So there's been, and this was really pre-midterm, but still potentially kind of circulating as an idea to try to use reconciliation a third time to pass Republican priorities before the end of the year, before the next Congress was formed. And that could include more tax provisions. I'll talk about it a little bit more in detail, but I don't think that it is likely to happen, at least not right now. All right, so we have our next polling question here. [Poll #3].

All right, so I'm going to talk a little bit more in depth about the Taxpayer Assistance and Services Act. This is not a really flashy bill, so I don't think there's been a huge amount of discussion about it. Sorry, my throat's kind of dry here. So I'm just going to talk about the major highlights. This actually has several different titles. There's a lot of different provisions within it, but I'm just going to talk about the highlights. So it would require that all returns be accepted electronically, including any amended returns. It would also require the digitization of returns and any correspondence using optimal character recognition. So if somebody sent in a correspondence, a letter, whatever, via mail, it would have to be digitized and put onto the accounts.

This is one that people seem very excited about. It would require the IRS to establish a dashboard on the website where it would provide you with real-time call volume and wait times. It would expand actually the callback options, and it would disallow any calls made using any type of automation. So any type of auto dialer or AI agent, they would have to find a way to shut those down. I'm not sure what that process would look like. It would expand all the online account options for individuals and businesses. This one is interesting. So this is something that's been going on actually in the courts. It's been this question of when exactly is supervisory approval of penalties required? What's the timing on that? There's several different court cases that have been dealing with this question. I think there was one actually fairly recently that was found in favor of the taxpayer that the supervisory approval was not obtained in time, and so their penalty was disallowed for the IRS.

They would modify and clarify the IRC section 6751 to make it clear exactly when that is and that it has to be approved by the immediate supervisor or the office of service-wide penalties before a notice of the penalty is sent. So that is essentially Congress addressing their own ambiguity, which I like.

People are most interested in the Taxpayer Assistance and Services Act. It would also require some studies about compliance burdens on Americans living abroad. And this one was very interesting. It would also repeal the filing deadlines for Form 3520 and 3520-A. And then another one, an instance of Congress addressing potentially an ambiguity on their own. There's this case Farki, and there've been a couple of other cases with different names that have been very similar where the tax court has held that some of these foreign penalties are actually not accessible, that the IRS has to bring a lawsuit really to assess these penalties. This would address that issue by specifically saying that these foreign penalties are accessible and that the IRS does not need to bring a lawsuit in order to recoup those penalties.

It would also expand the jurisdiction of the tax court to hear certain cases, and some of that would include some refund cases. Right now you really have to sue in a different court to recover a refund. There's similar provisions for the National Taxpayer Advocate and the Office of Appeals. Generally speaking, it's trying to ensure the independence, both of the National Taxpayer Advocate and the Independent Office of Appeals, and it would expand the National Taxpayer Advocate's access to some IRS information and allow them to have greater autonomy over personnel decisions. And like I said, it would expand oversight of tax return preparers, and that would include some new penalties. Some of this is trying to address those concerns with ghost preparers.

And then finally, this one I found very interesting. It would create the option for independent contractors to have their taxes withheld from their payments. So it would allow essentially businesses to withhold taxes for their independent contractors. I'm not sure how popular that would be, but it would be probably for independent contractors. They would probably appreciate having that option, some of them. It'd also extend the mailbox rule to electric filings, and then finally require large partnerships. So those partnerships with over 50 partners or a million dollars in assets to file electronically. I think right now it's a hundred partners.

So again, not the flashiest bill, but there's a lot of provisions in there. It's a very bipartisan bill. So I do expect that if not this Congress, then certainly probably in the next Congress, that this becomes law. There's actually a similar package that has been working its way more piecemeal through the House that Oz passed through the House. This passed through the Senate with unanimous consent right before they left for the midterms. So there's a lot of bipartisan support. I think it's really just a matter of if there's time and momentum before the end of the year.

So the Digital Asset Tax R&D Act, like I said, this is kind of an update to the previous bill called the Parity Act, and it's mostly concerning streamlining reporting burdens with digital assets, but there are some tax implications as well. So right now you have to report everything with digital assets. So this would streamline some of the reporting process there. It would also allow taxpayers to exclude gain or loss on the sales of stable coins. You would also be able to use digital assets for certain fees under $10 without having to report that as a gain or a loss. And then finally, it would create an election for a simplified accounting method for digital assets. I am not an accounting person, I'm not a CPA, but I do work with somebody who works in this area quite a lot, and I think he would be very happy to see a more simplified accounting process for some of these digital asset issues.

It would modify lending rules to allow taxpayers to lend digital assets. Right now, it's unclear what the treatment should be. So it would basically clarify that that's not a taxable event. It also would allow the use of market to market accounting for digital assets. Right now with charitable donations, you have to go and get a valuation done for charitable donations are treated very similarly to stock, but you have to actually have somebody go out and value it as of the exact time. That's kind of a burden in terms of people donating these assets. So it allowed charitable donations of what are called large digital assets to be treated similar to public traded security. So you'd be able to just pick an average or a point in time there. Large digital assets would be things like Ethereum, Bitcoin, those ones where you can just go and it's tracked on some type of exchange or tracker like that that's readily available.

This one is not so friendly for taxpayers. Right now, you do not have to apply the wash sale rule to digital asset transactions. I can sell Ethereum and the next minute buy Ethereum and any loss is allowed, any gain. So this would apply the wash sale there. It would also apply constructive sale rules to digital assets.

One other thing, so a lot of people don't even know that they have a reporting requirement for digital assets. So this would actually create a voluntary disclosure program for people who haven't been in compliance. I would require the IRS to set up a voluntary disclosure program for people to avoid some of those penalties. And I absolutely love this because it has nothing to do with digital assets, and this is a really big win for Representative Horsford from Nevada. It would restore the ability for taxpayers to deduct all wagering losses against their winnings. So if everyone, you might not remember this or not, but the one big beautiful bill changed how much you can deduct with your wagering losses. You can deduct up to 90% of winnings with it. This would revert back to the old law. So it's, like I said, very big win for Representative Horsburg if this becomes law.

This one I do think is not as likely to pass in this Congress, but I do think, like I said, with the younger Congress coming in, digital assets and digital asset taxation changes are going to be a part of the conversation. So I wouldn't be surprised if this comes back in the 120th Congress. And then Reconciliation 3.0, I'm not going to spend a huge amount of time on this just because I want to make sure that we get to everything and all the polling questions. But like I said, there were some conversations, I believe it was Senator Moreno was calling for a discussion about Reconciliation 3.0. So the House actually did pass a resolution that would start the process over the summer, but it doesn't contain anything for ways and means. The way that it works is basically a resolution is passed with instructions to certain committees to start writing these provisions.

And the instructions are for agriculture armed services, committee on intelligence and administration. So no ways and means, no Senate.

It's possible that something is introduced. Like I said, I don't see Republicans having the time to do it. Reconciliation is a tricky process. There's a lot of different provisions that you have to, a lot of hoops you got to jump through. So I don't think that it's likely to be pushed through in such a short period of time. I just don't. Again, could be proven wrong. All right, so moving into the 120th Congress. So what tax legislation do we expect to see in 2027? So I believe as somebody pointed out, many things are likely to be vetoed.

Democrats have Congress, but they're still a Republican president. How much President Trump is willing to negotiate and compromise with Democrats will really have to remain to be seen. There's kind of two buckets I think of in terms of the tax legislation that we're likely to see. And one of them is what I call flashy bills. These are going to be big swings, messaging bills, things like a full restoration of the premium tax credit subsidies from COVID, housing subsidies, maybe like a renter's credit, something like that, restoration of all of the clean energy credits that were curbed by the OB-3, all of the things that maybe didn't even make it through with the IRA, some of the things from what it was built back better. Reduction of the estate and gift tax exemption, I think that will probably, we'll see some bills there and some bills tied to that in terms of maybe addressing basis changes upon death or closing some of these loopholes or the buy, borrow, dive strategies.

I think those will also be targeted. Absolutely think that we'll see bills introduced that will repeal massive swaths of the OB-3.

I don't think these will pass, and maybe some of them will pass. Maybe some of them will pass through reconciliation, but they will be vetoed. They will be vetoed. Any flashy bill that happens to make its way through Congress on a Democratic line is going to be vetoed. These are going to be bills that are focused on honing the message for 2028, seeing what plays well with voters, seeing what people respond to. And then the second bugget for me is kind of this idea of nibbling around the edges in terms of what they can get past.

I think we're going to see smaller things, more targeted things, maybe things for leverage for somebody to get something through. One thing that has been brought up is the carried interest. That is one that I'm going to be watching just because President Trump has indicated his support for it in the past and that could be used to pay for something else. Healthcare and child tax credits, those tend to have some bipartisan overlap. Expansion of HSAs I think is something we could see that was part of OB3. Increased IRA funding or sorry, IRS funding. I do think that that's one that we will also probably see. Overall, that's not a huge ask and it does bring in money in order to pay for other things. So I think it's going to be a lot more smaller. It's going to be a lot more targeted. I have one question.

Widen has gone on record to want to modify capital gains rules.

I think that modifying the capital gains rules is going to be difficult to get through in this Congress with the makeup that we have right now. We will certainly see bills introduced though, either increasing capital gains or changing how some things are treated, maybe lengths of time to hold to gain capital gain treatment. What are some few agenda items that... Well, right now they're agreeing on the permitting reform bills, so I would say that's actually a good sign. I think they agree to a certain extent on some of the AI data center regulation stuff. I'm actually going to talk about that in just a minute. I think they overall do agree on making some changes with healthcare. And I do think there is absolutely, we've seen, there is bipartisan agreement on extending some version of the premium tax credit subsidies that expired. There's been plenty of bipartisan bills introduced.

We just haven't seen them get over the threshold. So I think there's some room there. This is a really good question.

So like I said, data centers, this was such a big part of the 2026 midterms, and not just on the federal level. There were 44, at least 44 ballot measures or voter initiatives that would've restricted outright banned or curbed data center building or would've banned tax incentives. 43 of them passed. Something like half of them were in Ohio alone. So AI is very much, and data centers are, I think, going to continue to be a large part of the conversation. Like I said, there's already some small things in the permitting reform bill that we're seeing. I absolutely think regulation is going to be a part of the conversation. Some of the things that I've already heard discussed is curbing some of the R&D incentives. So either disallowing portions of the credit. So right now you may be able to qualify for the credit if you're building out your own AI software or something.

So there's a potential there. I've heard some discussions about maybe we make it clear that it doesn't count for AI agent building or you just allow the 174 cap A deduction for that. There's also discussion about using excise taxes on data centers or the companies and either just create an excise tax to bring in some revenue or to create federal retraining programs for individuals and workers who are displaced by AI. And another one I've heard is maybe disallowing or reducing the amount of bonus depreciation that these centers could qualify for their equipment purchases. Remains to be seen what, if anything, ends up happening, but those are just some things that I definitely expect that we'll see some discussions about. Whether or not they become law is unclear right now.

And then one other thing is 2028, there's a lot of things that are going to be expiring in the OB-3 in 2028, and that's going to be a big part of the conversation for the next two years in terms of bringing that up, campaigning on it. So there's no tax on tips, no tax on overtime, no tax on car interest, the enhanced senior deduction, the enhanced salt cap, bonus depreciation for manufacturing. I think those are going to be a big part of the conversation, and I expect Republicans to begin campaigning on some of those as soon as they really can. And then one last thing is social security.

I get asked this question. I don't think Congress is going to address social security until they absolutely have to. We have seen those proposals from multiple Democratic senators to up the cap from 184. I don't know if that's going to pass or not, but that will be, I suspect, a large part of the conversation. And then, like I said, I'm going to have four minutes on state results, but first we're going to have our last polling question. [Poll #4].

All right, so one last just kind of few minutes. We spent a lot of time, almost all of the time, talking about the results on the federal level, but there were a lot of changes on the state level that need to be kept in mind because it will have an impact on tax policy. The states I think are going to be actually where more changes in terms of tax policy are going to happen. So Minnesota, Michigan, Arizona, Nevada, Arizona, and Pennsylvania all flipped to a democratic trifecta, which means that Democrats control both chambers of the legislature and the governor's house.

That means that there are 22 states now that have a democratic trifecta, 19 states have a Republican trifecta, and nine states have split. Although I think technically speaking, we don't really know with Alaska because we're still waiting on the outcomes of the gubernatorial race there. Does that make sense? So one of the things that we're kind of seeing in terms of the states is what I kind of call it a tug of war. In some states, we're seeing these proposals to increase property taxes on secondary homes or unproductive property. We've seen that in Rhode Island, New York with its petition tax. Initiatives to increase taxes on the wealthy or put one-time wealth taxes. The one in California did not... Well, one of the ones in California did not pass. The billionaires tax in California did not pass. There is a surcharge one that did pass, but that's been around for a while.

And then taxes on digital services and sales. And on the flip side, we see some other states decreasing their property taxes, decreasing their sales taxes, decreasing their income taxes. So there's very different trends that we're seeing.

So these are some of the state tax ballot initiatives that we saw in this election, and they had, like I said, a mixed reception. When I made these slides, we did not know. I did not know for sure that the California billionaire's tax had failed. It certainly looked like it had, so that failed. AI data center initiatives, like I said, at least 43 out of 44 of those passed in terms of restricting data centers and initiatives or incentives rather for those. The income tax surcharge did pass. Washington has a millionaire's tax that was on the ballot for voters to repeal it. They did not repeal it.

It stayed. Florida is increasing its property tax exemption. Tennessee completely repealed their property tax. I think that's phased in. Colorado voters voted to gradually increase their income tax and have a graduated scale. And then Arizona is now going to limit grocery sales to 2% tax. I have one question, could any of these state proposals make it to the federal level? I think we'll see bills introduced that are like surcharges on wealth or net wealth. I mean, we've already seen some of those introduced. I don't suspect that they'll go anywhere. The AI ones, I think we'll see possibly some movement on data centers. It might take a while though. It might not be this Congress. Obviously the property tax ones, we're not going to see on a federal level because there's a federal property tax, but I do think we'll see bills introduced not necessarily become law.

All right, and that is all our time. I managed to do it in the time allotted. I'm very proud of myself. If I didn't answer your question or you have more questions that you didn't have time to ask me, please feel free to reach out. I love answering questions. I love gaming these things out. I'm always happy to talk to somebody about all of these different things.

_{Transcribed by Rev.comAI}