It’s 6:00 a.m. on Wednesday, November 4; the day after the theoretical election day. Two critical national election outcomes are still unknown:
Who won the presidency?
Which party controls the Senate?
The outcome may not be known for days (particularly in Pennsylvania, where votes postmarked Tuesday but not delivered until Friday could still be counted). It could be weeks, or worse for the country, if either or both parties decide to litigate election outcomes.
As of Wednesday morning, it appears that there are still six to seven states (Arizona, Georgia, Michigan, Nevada, Pennsylvania and Wisconsin) that do not have a clear presidential winner.
Just as important, key races in the Senate have yet to be decided. Going into the election, the Republican party held a 53-47 majority. Democrats would need to win four additional seats to take a clear majority. An NBC News voting map appears to show that Republicans may maintain control of the Senate with a total of 52 or 53 seats.
If that is the case, the large “blue wave” of control Democratic supporters were hopeful for appears unlikely, leaving their proposed tax policy unlikely to be achievable in the current election cycle. Their agenda included:
Increasing the corporate tax rate from 21% to 28%; increasing the highest individual marginal tax rate to 39.6%; and repealing other Tax Cuts and Jobs Act provisions;
Establishing a 15% corporate minimum tax rate on book income exceeding $100 million;
Removing the ceiling on income subject to social security taxation by proposing taxation on individuals with compensation and self-employment income over $400,000 at 6.2% and subjecting the employer to an equal tax;
Doubling the capital gains tax rate on taxpayers with income exceeding $1 million;
Increasing taxes on decedents estates by lowering the exemption from $11.5 million to $5.5 million; increasing the estate tax rate; and ending the stepped-up basis on inherited assets;
Eliminating the like-kind exchange deferral on exchanges of real estate;
Eliminating the ability to deduct losses on real estate against other income; and
Increasing earned income tax credits and child tax credits.
Likewise, the general Republican tax policy, as advocated by President Trump, for further tax reductions and extension of sunset provisions in the Tax Cuts and Jobs Act is still at risk without a presidential win. These future tax agenda items included:
Providing a middle-class tax cut;
Seeking additional capital gain tax enhancements, including rate reductions and indexing for inflation; and
Expanding Qualified Opportunity Zone benefits.
Both parties have been advocating for an expansion of credits for improving or expanding U.S. manufacturing jobs.
Without a clear outcome by either party, bipartisan support will be required for passage of additional COVID-19 economic stimulus, which many on both sides of the aisle support. Bipartisanship necessary for significant overall tax policy changes would seem unlikely at this point as well.
With no clear outcome, taxpayers should continue to monitor the situation.
We will certainly continue to monitor federal, state and local election results (and proposed legislation) and their related tax planning opportunities (or risks).
In times of uncertainty, Schneider Downs tax, investment and business advisors are always available to discuss your personal situation and help you plan to achieve your uniquely individual needs and goals.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.