Congress returns from the August recess today (September 9) for a short pre-election work period focused on extension of items expiring on September 30: government funding, farm bill programs, and flood insurance. A continuing resolution (CR) of government funding until after the elections with short-term extensions of other items is expected, after House Republicans first try to advance a bill with their priorities.

Of course, tax continues to feature prominently in the 2024 presidential race, especially given the TCJA tax cliff at the end of 2025. If either party sweeps in the elections, they would be expected to pursue a budget reconciliation bill focused on extending the expiring TCJA provisions as they see fit — the specific items that are extended, the degree to which the cost is offset, and how. Tax increases are possible under a Republican sweep, a Democratic sweep, and divided government, with parties splitting control of the House, Senate and White House. A separate WCEY Alert, "2024 elections have major implications for TCJA tax cliff" (attached below), discusses these potential scenarios.

Government funding — House Republicans September 6 released for consideration this week the Continuing Appropriations and Other Matters Act, 2025, to extend government funding through March 28, 2025, as well as some farm programs, and to provide disaster relief, etc. The measure includes the SAVE Act, a bill intended to ensure only citizens are registered to vote in federal elections, which is opposed by Democrats, meaning it will require the votes of nearly all Republicans in the House, where they hold a 220-211 majority, and is likely to be rejected by the Democratic-led Senate.

The House has passed five of the 12 annual appropriations bills. The Senate Appropriations Committee, which has taken a more bipartisan approach than the House, has passed eleven of the annual bills. The full Senate has passed none of the bills. The table below lists the bills passed and when.

Some House Republicans are likely calculating that the party will have greater control in Washington in 2025 and may want to postpone decisions until then, including on government funding for the remainder of the fiscal year. If the Republican CR released on September 6 clears the House, it likely can't advance in the Senate, where Democrats would oppose, not only for policy reasons, but because the March 28 end date could obviate the need for a post-election lame-duck session. It is expected that a compromise funding measure into November or December would be reached with the Senate later in September in time to avoid an (unlikely) pre-election government shutdown. Both the House and Senate are expected to go out of session September 27 until after the elections.

Senate Majority Leader Chuck Schumer (D-NY) September 6 called for a bipartisan approach, without which, he said, there is the risk of a GOP-caused shutdown. In a September 8 Dear Colleague letter, Schumer said there are still opportunities for bipartisan cooperation on NDAA, rail safety, insulin/prescription drugs, and AI (but made no consideration of a re-vote on the 2024 tax bill, H.R. 7024).

The Washington Post reported House Appropriations Chairman Tom Cole (R-OK) as saying he hoped for a final government funding package between November and the start of 2025. While there are some areas of bipartisan agreement regarding a CR, "Cole and House Speaker Mike Johnson (R-La.) have put forward legislation with major boosts for the Defense Department and veterans' programs, while cutting public health, education, transportation, housing and the State Department. The bills jettison a deal struck last year with President Biden to exclude $69 billion in funding from counting against annual budget caps."

The farm bill is still beset by disputes over food assistance. Senator Chuck Grassley (R-IA) bemoaned the prospect of a short-term bill on social media August 28, saying farmers need the certainty of a 5-year farm bill but Congress will be kicking the can down the road with a 1-year extension. Only some programs expire at the end of the month; others expire December 31 as a Congressional Research Service report explained.

A separate report said after September 30, key authorities of the National Flood Insurance Program (NFIP), such as the authority to issue new insurance contracts, will expire if they are not reauthorized by Congress.

Congress — The House is back today (September 9) and will vote this week on a series of bills addressing foreign adversaries, including the BIOSECURE Act (H.R. 8333) aimed at preventing federal contractors from conducting business dealings with certain nations and the Ways & Means Committee-passed H.R. 7980, targeting the foreign production of EVs.

Today (September 9), the Senate reconvenes at 3 p.m. with a vote on a judicial nomination at 5:30 p.m.

The Senate Finance Committee has scheduled a hearing for Thursday, September 12 on "The 2025 Tax Policy Debate and Tax Avoidance Strategies." Witnesses:

• Indivar Dutta-Gupta, Georgetown University and Roosevelt Institute Tax
• Bob Lord, Patriotic Millionaires
• Jeff Brabant, National Federation of Independent Business
• Daniel Bunn, Tax Foundation

Tax — Prior to recessing for the summer, an August 1 Senate procedural test vote failed on the Tax Relief for American Families and Workers Act (H.R. 7024) addressing the Child Tax Credit, TCJA pre-cliffs (R&D, interest deductibility, and expensing), housing, disaster relief, and Taiwan. The vote was 48-44 with 60 votes required, and only three Republicans voted "yes" after GOP leaders argued that a better deal could be struck on tax issues in 2025 if the GOP gains greater control in Congress and, perhaps, the presidency. It is unlikely that the Senate will pass the bill, at least before the election. There may a better chance of action following the election, if lawmakers opt to try to clear the decks of outstanding business prior to the pivotal 2025 tax cliff, though some Republicans have suggested the Child Tax Credit provisions could be integral to next year's bipartisan negotiations over TCJA expirations and should be held until then.

Efforts to break off pieces of the bill may continue. In May, the House passed the Federal Disaster Tax Relief Act (H.R. 5863) by a vote of 382-7, though it has not been considered in the Senate. Senate Finance Committee member Maria Cantwell (D-WA) may push to have the expansion of the Low-Income Housing Tax Credit (LIHTC) peeled off for a separate vote after introducing a bill (S. 4915) in July with the broader bill's LIHTC changes — reinstating the 12.5% increase for states to allocate more credits for affordable housing projects — and to reauthorize and reform the Generalized System of Preferences.

Presidential race — There have been regular developments in the presidential race as the candidates formulate their tax plans piecemeal and fill in the blanks regarding which Biden administration proposals Democratic presidential candidate Vice President Kamala Harris supports and what policies Former President Donald Trump will pursue in addition to extensions of expiring TCJA provisions. Harris has committed to ensuring that no one earning less than $400,000 a year will pay more in new taxes.

VP Harris August 16 delivered an economic speech in North Carolina, outlining new proposals for:

• Tax incentives for homebuilders who build starter homes sold to first-time homebuyers
• $25,000 down-payment support for first-time homeowners
• Restoring the American Rescue Plan's expanded Child Tax Credit of $3,600 per child
• Expanding the Child Tax Credit to $6,000 for families with newborn children
• Expanding the Earned Income Tax Credit (EITC)

In an August 29 CNN interview, Harris suggested these proposals would be an early priority: "Day one, it's going to be about, one, implementing my plan for what I call an opportunity economy. I've already laid out a number of proposals in that regard, which include what we're going to do to bring down the cost of everyday goods, what we're going to do to invest in America's small businesses, what we're going to do to invest in families. For example, extending the Child Tax Credit to $6,000 for families for the first year of their child's life to help them buy a car-seat, to help them buy baby clothes, a crib."

NBC News August 19 cited a Harris campaign spokesman as saying she would push for a 28% corporate tax rate, calling it "a fiscally responsible way to put money back in the pockets of working people and ensure billionaires and big corporations pay their fair share."

After previously mulling the possibility of a 20% or 15% corporate tax rate, Former President Trump more emphatically called for the lower rate during a September 5 speech at the Economic Club of New York. "To further support the revival of American manufacturing, my plan calls for expanded R&D tax credits, 100% bonus depreciation, expensing for new manufacturing investments, and a reduction in the corporate tax rate from 21% to 15%, solely for companies that make their product in America," he said. "You have to make your product in America. If you outsource, offshore, or replace American workers, you're not eligible for any of these benefits. In fact, you will pay a very substantial tariff when a product comes in from another country, that's made in another country and comes in."

A September 6 Wall Street Journal story said, given the domestic requirement, "The proposal raised immediate questions from economists, corporate leaders and others. Among them: What counts as American-made? And would his plan spur manufacturing, or launch a costly trade war?" The story referenced the IRC Section 199 domestic production activities deduction, which was enacted in 2004 in place of the extraterritorial income (ETI) provision that was ruled an export subsidy by the World Trade Organization (WTO), before being repealed under the TCJA. "The old provision led to disputes over what, exactly, counts as domestic production," the story said.

Other press stories focused on the cost of Trump's tax plans. The Washington Post said in addition to the $4 trillion cost of extending expiring TCJA provisions (estimated by the Congressional Budget Office, excluding interest costs), "other plans endorsed by Trump, including eliminating taxes on tips and a further reduction in the corporate tax rate, would bring his total tax cut plans above $6 trillion and as high as $7 trillion."

Bloomberg cited the $4.6 estimate of TCJA extensions, which includes interest costs, and Republican vice-presidential candidate Sen. JD Vance (R-OH) saying on CBS August 11, he'd "love to see a child tax credit that's $5,000 per child." The September 4 report said Trump has also floated lowering the corporate rate to 15% from 21%, adding another $874 billion to the total, according to a budget model by the Committee for a Responsible Federal Budget. On the campaign trail, the Republican ticket has verbally floated more tax ideas with hefty price tags: excluding Social Security payments from taxes ($1.8 trillion), exempting taxes on tipped wages ($250 billion) and increasing the $2,000 child tax credit per child to $5,000 ($3 trillion). Added all up, that's $10.5 trillion."

In Las Vegas August 23, Trump said economic growth would pay for the TCJA extensions.

After the Harris campaign told media outlets that VP Harris supports tax increase proposals in President Biden's FY2025 budget, the New York Times (NYT) and Wall Street Journal (WSJ) published stories highlighting some of the proposals, including:

• Increasing the corporate alternative minimum tax (CAMT) from 15% to 21% and the stock buyback excise tax from 1% to 4%
• GILTI changes to align the minimum tax with the OECD-led Pillar Two agreement, including a country-by-country calculation, plus a rate increase to 21%
• Top marginal tax rate of 39.6%
• Applying the net investment income tax to pass-through business income of high-income taxpayers, increase NIIT and additional Medicare tax rate to 5%
• Stepped-up basis: donor or deceased owner of an appreciated asset would realize a capital gain at the time of the transfer (with $5 million exclusion)
• a 25% billionaires' tax on total income, including unrealized capital gains, for taxpayers with wealth exceeding $100 million

In a break from the Biden budget, Harris announced September 4 that she supports long-term capital gains and qualified dividends taxed at a maximum rate of 28%, which is lower than the ordinary income treatment proposed by the President (but higher than the current 20% rate, or 23.8% with the NIIT). "If you earn a million dollars a year or more, the tax rate on your long-term capital gains will be 28% under my plan," VP Harris said. She made no mention of the Biden stepped-up basis proposal. (The Tax Policy Center has said they use estimates that "imply that the revenue from taxing long-term capital gains is maximized when the top rate is set to about 28 percent.")

VP Harris confirmed her support for "a billionaire minimum tax and corporations paying their fair share."

The middle-ground capital gains proposal was viewed as reflecting her campaign as a moderate. "Vice President Kamala Harris is turning to tax policy as a way to differentiate herself from both her Republican rival and her Democratic boss, an attempt to simultaneously project a more moderate image and stand by the soak-the-rich populism that animates much of her party," the New York Times reported September 5. "Raising taxes on the rich has long been a central talking point for Mr. Biden and other Democrats, and while Ms. Harris has said she would increase taxes on the wealthy, the capital-gains adjustment was a message to investors and corporate executives: Ms. Harris is a different type of Democratic nominee."

The first debate between VP Harris and Former President Trump, and the only one the two candidates have agreed to, is tomorrow, September 10, in Philadelphia. The vice-presidential debate between Gov. Tim Walz and Senator JD Vance (R-OH) is October 1.

Tariffs — Speaking in North Carolina August 14, Former President Trump built on his previous calls for a 10% tariff on imports, saying, "We're going to have 10% to 20% tariffs on foreign countries that have been ripping us off for years. We're going to charge them 10% to 20% to come in and take advantage of our country because that's what they've been doing for nothing, to take our jobs."

VP Harris has repeatedly been critical of Trump's tariff proposal. During her August 16 speech, she called the proposal "a Trump tax on gas, a Trump tax on food, a Trump tax on clothing, a Trump tax on over-the-counter medication." In her acceptance speech at the Democratic National Convention, Harris said of Trump's tariff proposal, "He intends to enact what, in effect, is a national sales tax, call it a Trump tax, that would raise prices on middle-class families by almost $4,000 a year. Well, instead of a Trump tax hike, we will pass a middle-class tax cut that will benefit more than 100 million Americans."

A story in the August 20 Wall Street Journal noted that the Biden administration kept most of the Trump tariffs and added new ones. "In the current election, however, Democrats haven't indicated support for additional tariffs," the story said. It cited research projecting that "Trump's tariff plans would create a bigger drag on the economy than Democratic plans to let tax cuts on upper-income households expire at the end of 2025 … because the effective tax increase would be bigger, and because it would affect lower — and middle-income households, which are more sensitive to changes in costs."

A separate WSJ editorial blamed tariffs for US motorcycle makers' woes, saying "President Trump's steel and aluminum tariffs in 2018 prompted foreign governments to retaliate" and Biden has retained the tariffs, forcing some US production offshore. Inflation has also increased, increased "production costs and dented U.S. sales." In response to such pressure, "now Pennsylvania Sen. Bob Casey and Wisconsin's Tammy Baldwin — both up for re-election this year — are pushing to enact $7,500 tax credits for electric motorcycles," the editorial said.

IRA energy tax credits — Republicans have had repeal of Inflation Reduction Act (IRA) energy credits in their sights, turning to them in the Limit, Save, Grow Act debt limit bill and the GOP precursor to the 2024 bipartisan tax bill. There is disagreement over the issue among Republicans, some of whom support certain green energy credits and have projects in their districts. In an August 6 letter led by Rep. Andrew Garbarino (R-NY), 18 House Republicans warned against "prematurely repealing energy tax credits, particularly those which were used to justify investments that already broke ground."

An August 15 Politico story said, "Republicans won't have to make a final decision for another several weeks or months regarding the fate of the tax credits. The November elections will determine the balance of power in Washington and dictate whether there's a path to repealing any part of the IRA through the budget reconciliation process, which allows a majority party to bypass the Senate filibuster."

During the September 5 speech at the Economic Club of New York, Former President Trump said, "My plan will terminate the Green New Deal, which I call 'the Green New Scam' … It actually sets us back, as opposed to moves us forward — and rescind all unspent funds under the misnamed Inflation Reduction Act, which the Democrats agreed after it was approved that it wasn't for that purpose; it was for other purposes like giveaways."

Senate — George Helmy, a former staffer to Gov. Phil Murphy (D-NJ) and Senator Cory Booker (D-NJ), has been appointed to serve the remaining term of Senator Bob Menendez (D-NJ), who left Congress on August 20. Helmy is expected to hold the same committee assignments, including as a member of the Finance Committee, then resign from the Senate after the election as Gov. Murphy appoints the winner of the NJ race early, until the next Congress is seated. Depending on committee ratios, up to three Democratic seats on the Finance Committee may be open in the next Congress because of Democrats retiring (Cardin, Carper, Stabenow).

House — Following the passing of Ways & Means member Rep. Bill Pascrell (D-NJ), Rep. Steven Horsford (D-NV) is set to rejoin the panel, Roll Call reported August 30. "Horsford, D-Nev., who will need to be formally nominated by his party's Steering and Policy Committee and approved by the caucus, is next in line to rejoin the tax-writing panel, where he held a seat from 2019 until last year," the report said. "He was forced off the committee after two terms when Republicans took back the majority and realigned panel ratios to give their side more seats and Democrats fewer."

Punchbowl News reported last night: "Pascrell was the top Democrat on the Oversight Subcommittee. Once his committee seat is filled, the panel will reassign subcommittees. It's not clear how that process will shake out, but Rep. Linda Sánchez (Calif.) is the most senior Democrat on the panel without a subcommittee leadership spot."

Election — A story in the August 31 Wall Street Journal focused on the importance of winning Pennsylvania for Former President Trump and Georgia for VP Harris "Trump could return to the White House by simply recapturing the swing-state trifecta of Georgia, Pennsylvania and North Carolina. Under that scenario, the former president could lose multiple battleground states, including Nevada, Arizona, Michigan and Wisconsin, and still win re-election," the story said. "For Harris, winning Georgia's 16 electoral votes and Pennsylvania's 19 electoral votes would put her on the cusp of reaching the 270 electoral vote threshold. Notching a single victory in any of four states — Michigan, Wisconsin, North Carolina or Arizona — would put her over the top."

"As some of the Sun Belt states (Arizona, Nevada, Georgia and North Carolina) have become far more competitive with Harris in the race, it is still probably true that her most direct route to 270 electoral votes would be to keep the three so-called 'Blue Wall' states (Pennsylvania, Michigan and Wisconsin) and the Omaha-area congressional district in Nebraska in the Democratic column," CNN reported August 5. "Trump's most direct path to 270 electoral votes would be to keep all the states he won in 2020 and flip Georgia and Pennsylvania (two states he won in 2016) back to his column."