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The projected to be historically close, toss-up election continues to shape up to be something of a red wave: Former President Donald Trump swept battleground states in the presidential election after being declared the winner in Arizona and Nevada, the final two of the seven states long viewed as key to the race; the AP called the Pennsylvania Senate race for Dave McCormick (R) over incumbent Bob Casey (D-PA), who has not conceded; and House control remains undetermined but leaning Republican according to many observers.

There are still several House races uncalled, including five in slow-counting California, and Republicans hold 212 seats, and Democrats 200. Some of the recently called races fell in Republicans' favor, including Democrat Susie Wild (D-PA) losing in PA-07; Rep. Matt Cartwright (D-PA) losing in PA-08; Rep. Scott Perry (R-PA, former chair of the conservative Freedom Caucus, retaining his seat in PA-10; and Rep Jen Kiggans (R-VA) holding onto her seat in VA-02 after winning it from Democrat Elaine Luria (D-VA) in the prior election. Democratic victories include Rep. Don Davis (D-NC) winning re-election in NC-1.

Democratic leader Hakeem Jeffries (D-NY) has not conceded the majority to Republicans, saying, "It has yet to be decided who will control the House of Representatives in the 119th Congress. We must count every vote and wait until the results in Oregon, Arizona and California are clear." Bloomberg reported, "Republicans show leads in enough House races to take a narrow majority, but contests have yet to be called in a half-dozen GOP-held seats in California and districts scattered elsewhere … But in private meetings Thursday with members, Republican and Democratic leaders acknowledged the fight isn't over."

In a pre-election prediction that is likely to prove true, whichever party prevails will have a narrow majority like the current and prior Congress. "Most top Republicans and Democrats say the GOP will end up with between 218 and 221 House seats," Punchbowl News reported this morning. "It's even possible that they end up with 218 seats on the nose." If Republicans win the House, it will, with the presidency and Senate, allow them the opportunity to use budget reconciliation to enact a GOP-only bill anchored by TCJA extensions with a simple-majority 51 Senate votes instead of the 60-vote filibuster threshold applicable to most other legislation.

Senator Casey's defeat brings the number of Democrats departing the Finance Committee in the next Congress to five, with Sherrod Brown (D-OH) having lost re-election and three members retiring (Cardin, Carper, Stabenow). Democrats Jacky Rosen (D-NV) in Nevada and Ruben Gallego (D-AZ) in Arizona, in his race against Republican Kari Lake to replace Kyrsten Sinema, are ahead but the races have yet to be called. If they are victorious, that would bring the Senate ratio to 53 Republicans, 47 Democrats.

Congress is back for the lame-duck session next week and so are Finance hearings. The panel is holding a hearing on Thursday, November 14 (10 a.m.) on the nominations of Deva Kyle to be Director of the Pension Benefit Guaranty Corporation, replacing Gordon Hartogensis, term expired, and David Samuel Johnson to be Treasury Inspector General for Tax Administration, replacing J. Russell George, who passed away. Kyle has held positions at PBGC and Treasury and was detailed to the House Ways & Means Committee. Johnson is currently Assistant Inspector General for Investigations at the U.S. Department of Veterans Affairs.

Next week, there are also leadership elections for Republicans in both the House and Senate. The current slate of House leaders is vying to remain in power: Speaker Mike Johnson (R-LA), Majority Leader Steve Scalise (R-LA), and Majority Whip Tom Emmer (R-MN). In the fourth position is Rep. Elise Stefanik (R-NY), a Trump ally reportedly under consideration for an Administration post, possibly UN Ambassador. Rep. Kevin Hern (R-OK), a Ways & Means member active on tax issues, is running for Republican Policy Committee Chairman. House Democrats are holding leadership elections November 19, and the current leadership is similarly running to remain at the top: Jeffries, Democratic Whip Katherine Clark (D-MA), and Democratic Caucus Chairman Pete Aguilar (D-CA).

Running in the November 13 election to replace Mitch McConnell (R-KY) as Senate Republican leader, and Majority Leader in the next Congress, are tax-writers John Thune (R-SD) and John Cornyn (R-TX), and Senator Rick Scott (R-FL). Senator John Barrasso (R-WY) is running for Whip.

As Finance Committee members, Senators Thune and Cornyn could use their long experience in tax issues in a role to help broker a budget reconciliation bill anchored by extensions of TCJA provisions expiring at the end of 2025, which will likely involve intraparty negotiations over issues like a revenue target for the bill, i.e. how much can be spent.

A November 7 New York Times story said, "lawmakers and advisers to Mr. Trump are undecided about how much money they can commit to lowering the nation's taxes again. The cost of just preserving the status quo is steep." The Congressional Budget Office has put the cost of TCJA extensions at $4 trillion before interest costs, and outside groups have said Trump's additional tax proposals could cost trillions more. The story said "some Republicans said the party would have to show some fiscal discipline. 'We can't just have it be unlimited, whatever we want to it to be,' Senator James Lankford, a Republican of Oklahoma and member of the Finance Committee, said of the cost of a tax bill next year."

A story in the November 7 Wall Street Journal, "A Tax Gamble is About to Pay Off," said Republican power in Washington increases chances of extending the tax cuts — including rate cuts, a higher standard deduction and Child Tax Credit (CTC), the passthrough deduction, and larger estate tax exemption — but the party must face intraparty philosophical differences on issues like a higher CTC versus lower marginal rates. The story also noted that some Republicans have called for rolling back Inflation Reduction Act (IRA) energy credits, but "those credits are funding projects in Republican districts, and many GOP lawmakers are wary of full repeal." Further, "They would, again, consider temporary extensions of many provisions because the reconciliation rules don't allow them to expand budget deficits beyond a 10-year period."

There isn't unanimity among Republicans on paying for tax cut extensions. President-elect Trump has said resulting economic growth would cover the cost, incoming Senate Finance Committee Chairman Mike Crapo (R-ID) has noted the precedent of not paying for extensions of current tax policy, House Ways & Means Committee Chairman Jason Smith (R-MO) has said some members want to increase the corporate tax rate, and other members are likely to push for a package to be at least partially offset.

Trump's main proposed revenue offset is tariffs, describing them as at least 10%-20% for imported products, more for those from foreign adversaries and nations seen contributing to US immigration issues, and even more for some foreign automakers. There isn't a guarantee that Trump's proposed tax ideas and tariffs get enacted as-is, and advisors have made comments in the press suggesting efforts to try to enact change in the spirit of the proposals if not to the letter. A WSJ analysis said, "As for Trump's own plans, he may not raise tariffs as much as threatened, opting for negotiations over trade war. Congress may water down his tax plans. Finally, presidents are seldom the main driver of economic performance."

The thinking has been that tariffs imposed by the President, through various laws that provide authority, couldn't officially count as revenue to offset legislation, but tariffs enacted by Congress could. Politico reported November 7 reported, "Advisers close to President-elect Donald Trump have been in discussions with House Ways and Means Chair Jason Smith (R-Mo.) on a broad tax package that is partially paid for by tariffs approved by Congress … As part of those conversations, staffers and advisers close to the Trump team have also investigated whether House rules need to be changed to use tariffs as offsets for tax cuts." The story said, "Congress has not raised tariffs through legislation in almost 100 years — the Smoot-Hawley Tariff Act of 1930 — and that has led to some confusion over how lawmakers should handle the issue as part of a broader tax package."

The expectation is that Republicans want to try to move the tax bill before acting on debt limit legislation required sometime mid-year after extraordinary measures are exhausted following the expiration of the current suspension (enacted in the June 2023 Fiscal Responsibility Act) expires on January 1, 2025.

Another Politico story said, "Republicans could handle the debt limit on their own (assuming they lock up the House) through the filibuster-skirting magic of budget reconciliation. But that route is unsavory for a couple of reasons, as Democrats acknowledged in 2019 when they decided to leave the debt limit out of the budget resolution that eventually led to passage of the Inflation Reduction Act. Chief among them: Republicans would have to take sole responsibility for the increase. Many budget experts also believe the Senate parliamentarian would force lawmakers to pick a new multi-trillion-dollar total rather than a date for reinstating the debt limit."

Today, November 8 (12:00 p.m. ET), is the EY Webcast, "Special post-election edition: Tax in a time of transition."