Now that the Georgia Senate runoff results are in and we know definitively that the White House, House of Representatives and Senate will be under Democratic control, we have a better idea of what tax policy may look like in 2021 and beyond.
We can expect the House and Senate to pass substantive tax legislation, possibly during 2021. How such legislation will pass through Congress, however, likely depends on whether the Senate maintains or abolishes the legislative filibuster. If the Senate preserves the legislative filibuster, any tax legislation it passes will likely be through the budget reconciliation process. In such a case, tax law changes that were not paid for (i.e., offset with revenue) would expire during the 10-year budget window, similar to provisions in the 2017 “Tax Cuts and Jobs Act.” If, however, the Senate abolishes the legislative filibuster, it could likely pass a more permanent standalone tax bill that would not be required to expire, irrespective of whether it is paid for.
The Future of the Legislative Filibuster
In a 51-50 Democratic-majority Senate, the loss of a single Democratic vote would make abolishing the legislative filibuster virtually impossible. Notably, on November 9, 2020, Senator Joe Manchin (D-WV) tweeted that he would not vote to end the filibuster. With the legislative filibuster intact, a more comprehensive tax package may have to be passed through the budget reconciliation process.