A second week of the federal government shutdown closes with no clearer indications of how it will end. Democrats continue to demand an extension of enhanced Affordable Care Act (ACA) premium tax credits that expire at the end of 2025 as part of a continuing resolution (CR) to extend government funding and end the shutdown. While that issue has only gained steam, even among Republicans, the party maintains that the government must reopen before a deal is cut. And Democrats have not been swayed by the Trump administration's threats of massive cuts to the federal workforce, which haven't fully been put in place.

House Republicans are expected to remain out of session next week and may stay away from Washington as long as the shutdown continues. That strategy has been consistent from House Speaker Mike Johnson (R-LA), though it has led to grumbling among some rank-and-file GOP members, such as Rep. Kevin Kiley (R-CA), who told Politico, "There is absolutely no reason for the House to be out of session — it's embarrassing."

The Senate won't be in this weekend but will forgo next week's scheduled recess, returning after Monday's holiday. Last night, the Senate voted for the seventh time on the House-passed Republican CR (H.R. 5371) to patch funding until November 21, which failed 54-45 (with 60 votes required). The chamber next convenes at 3 p.m. on Tuesday, October 14. Thus, the shutdown will last into next week, with no discernible backstop. The middle of October could pose an action-forcing deadline because active-duty military members could miss paychecks. There are also concerns about air traffic controllers and staffing shortages that could contribute to travel delays.

But attention has turned back to what moderate Democrats like Senator Jeanne Shaheen (D-NH) suggested before the shutdown began: that a promise by Republican leaders to hold a vote on extending ACA subsidies later this year could be enough for some Democratic members to vote in favor of the GOP CR. Semafor on October 9 reported Senate Majority Leader John Thune (R-SD) as saying, of a promise to vote on the enhanced premium tax credits, "that might be an off-ramp" to reopen the government. Senate Majority Whip John Barrasso (R-WY) said that senators "are in discussions" about making the offer for such a vote.

The House has already passed a CR, but House Democratic Leader Hakeem Jeffries (D-NY) is reportedly opposed to Democrats' agreeing to end the shutdown based on a verbal agreement for a vote on ACA enhanced credits. Senate Democratic Leader Chuck Schumer (D-NY) is viewed as not having drawn a red line against such an agreement as a way out of the shutdown.

Still, Leader Schumer, who was encouraged by some in the party to be more confrontational with the Trump administration after acceding to a March CR, has been projecting that Democrats' footing in the shutdown improves by the day. "It's because we've thought about this long in advance and we knew that health care would be the focal point on Sept. 30 and we prepared for it," he said October 8. Schumer has said an ACA credits deal can come together fast, in "a day or two," and end the shutdown, but that belies the complexity of the issue, with some Republicans insisting on income restrictions and other guardrails and House Democratic leaders also ruling out supporting a one-year patch that some Republicans proposed.

For his part, President Trump said during an October 9 Cabinet meeting that "Republicans have voted repeatedly to pass a clean, nonpartisan bill to reopen our government, and remember — at the same funding levels both parties have supported in the past … And we have the Democrats who are trying to obstruct. They didn't want to have a good economy." The President juxtaposed that assessment of the Democratic view of the economy with his efforts to cut taxes: "We're doing so many tax cuts. We've cut their taxes. The great Big Beautiful Bill, we've cut their taxes at levels that nobody's ever seen. I mean, no tax on tips, no tax on Social Security, no tax on overtime. It's been a great thing for a lot of people."

While reports have suggested that congressional Republican leaders have cautioned the White House about making job and funding cuts during the shutdown, the President suggested they were still a possibility. "We'll be making cuts that will be permanent. And we're only going to cut Democrat programs … we're going to start that. And we have Russell [Vought] who can talk to you about it if he wants to, but we'll be cutting some very popular Democrat programs that aren't popular with Republicans, frankly, because that's the way it works."

The Senate was voting until late last night on amendments to the FY2026 National Defense Authorization Act (NDAA) and ultimately approved the measure, 77-20. Politico reported the NDAA "cleared easily Thursday in a blowout vote, after Senate leaders struck a deal to break a monthlong impasse on the measure. Leaders of the Senate and House Armed Services committees will now attempt to negotiate a compromise bill that can pass by the end of the year."

Tax — The Senate Finance Committee on October 8 approved, mostly along party lines, the nominations of:

• Donald Korb to be IRS Chief Counsel 15-12, with Democrat Sheldon Whitehouse (D-RI) voting in favor;
• Derek Theurer to be Deputy Under Secretary of the Treasury for Legislative Affairs, 14-13; and
• Jonathan Greenstein to be a Deputy Under Secretary of the Treasury, 14-13.

Derek Theurer has also been tapped to perform the duties of Deputy Secretary of the Treasury.

Budget - On October 8, the Congressional Budget Office (CBO) released its regular report on the budget deficit, which found that the government ran a $1.8 trillion deficit for the 2025 fiscal year. That figure is similar to the 2024 deficit despite a surge in tariff revenues, CBO said, with the shortfall for the year ending September 30 just $8 billion less than the 2024 deficit. "Receipts from corporate income taxes decreased 15% compared to 2024, in part due to [President] Trump's signature tax and spending plan passed by Congress this summer," Bloomberg reported, noting that the One, Big Beautiful Bill Act allows corporations to take larger deductions for certain investments in 2025, which reduced some estimated payments. "A deferral of some revenue from 2023 to 2024 also accounted for some of the relative drop in corporate receipts for 2025, CBO said."

Trade — On October 7, Senate Finance Committee Ranking Member Ron Wyden (D-OR) introduced S.J. Res. 88, a joint resolution terminating the national emergency declared to impose global tariffs.

IRS — The IRS October 9 announced the tax year 2026 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.

The EY Center for Tax Policy's "Tax in a time of transition" webcast series continues on Friday, October 17, at 12 p.m. ET. Register.