Article
2024 election insights: Election details and possible outcomes
Sep 04, 2024 · Authored by Kasey Pittman
The upcoming election will determine control of the White House and both chambers of Congress, which in turn will influence the course of any potential tax reform. There’s a lot on the line for taxpayers this year with the pending expiration of many Tax Cuts and Jobs Act (TCJA) of 2017 provisions scheduled for 2025. With Republicans and Democrats deeply divided in their priorities and approach, who winds up in power will impact the ultimate resolution.
Outlined below are considerations for the White House and Congressional elections and a discussion on how each affects the financial legislative process, as well as an outline of the consequences of potential outcomes.
Jump to:
White House
Former President Donald Trump, the Republican nominee, and Vice President Kamala Harris, the Democratic nominee, are locked in a tight battle for the White House. The two candidates have vastly differing visions on how to approach the economy, including tax policy.
As of Aug. 29, 2024, neither candidate is leading the other by a large margin and both have a potential path to the 270 electoral votes needed to claim victory.
Congress, not the president, has the power to tax. The president develops an annual budget proposal and associated Green Book, detailing their federal funding and tax recommendations. Congress is not required to consider or enact anything from the proposal, but it often influences the congressional budget process. How successful a president is at achieving their policy goals depends largely on the composition of Congress. The president also possesses the power to veto, or block legislation; an action that can only be overridden by a two-thirds vote in both chambers of Congress.
Senate
Senators are elected to six-year terms, with approximately one-third of the Senate up for re-election every two-year cycle. In 2024, there are 34 seats up for grabs. The Senate can have split party control, where each party occupies 50 seats; however, in this case, control effectively belongs to the party in the White House as the vice president provides any necessary tie-breaking vote.
Democrats currently control the Senate by a 51-49 margin, which includes four independents who caucus with them. They face an uphill battle in trying to maintain their slim majority in 2024 with 23 of the 34 seats up for election currently held by Democrats and only 11 held by Republicans. Making matters more complicated, the seat held by Sen. Joe Manchin (I-WV) is all but assured to flip and the most competitive races, considered toss-ups, are all seats held by Democrats.
When one party controls the Senate, they also benefit from a majority on Senate committees, including the Senate Finance Committee, which has jurisdiction over matters relating to taxation.
While the Senate only needs a simple majority in the final vote to pass a bill, most legislation is subject to filibuster, meaning a 60-vote threshold must be reached just to end debate, which can go on indefinitely, and bring about a final vote. There is a budgetary process called reconciliation that allows the chamber to bypass the filibuster rules, which is discussed in more detail below.
House of Representatives
Every two years, all 435 seats in the House of Representatives are up for election. 218 seats are needed for control of the chamber. Today, Republicans have a slim majority in the House with 220 Republicans, 212 Democrats, and three vacant seats.
As of Aug. 29, 2024, the battle for control of the House for the upcoming 119th Congress is competitive and either party has a chance of winning. Republicans have a slight edge due to their higher number of “safe” seats, but presidential elections often have down-ballot effects and Democrats have been capitalizing on their party’s enthusiasm surrounding Harris’s entry into the race.
Republicans have between 185 and 195 solid seats while Democrats only have 170 to 180. However, Democrats have a larger number of seats, 30 to 35, leaning in their direction than Republicans, who have 15 to 25. The remaining 15 to 25 seats are considered a toss-up, meaning either party has a reasonable chance of winning.
Similar to the Senate, the party in control of the House of Representatives also controls the House committees. Ways and Means is the main tax writing committee in the House.
The Constitution’s origination clause requires bills for raising revenue, including tax bills, originate in the House; however, the Senate can propose or concur with amendments to any bill. In the past, the Senate has successfully used “shell bills” to introduce fiscal legislation, effectively working around the limitation. Bills only need a majority vote to pass in the House of Representatives.
Possible outcomes
The outcome of the election will result in either a unified or divided government:
Unified government
A unified government exists when one party controls the White House and both chambers of Congress. When this occurs, the controlling party may attempt to use budget reconciliation to pass a tax reform bill, which is discussed in more detail below. Passing legislation in a unified government, when the only votes from a single party are needed, may seem simple, but finding consensus among party members can prove difficult. This is particularly true when the controlling party has slim majorities, as it allows individual lawmakers to exert considerable influence.
Divided government
A divided government occurs when the White House and at least one chamber of Congress are controlled by different parties. Under these circumstances, any legislation must be a bipartisan effort. Finding consensus among parties, especially in the current political climate, can be a daunting task for lawmakers.
Bipartisan tax legislation has not been common in recent years – both the TCJA (2017) and the Inflation Reduction Act (2022) were passed using reconciliation by Republicans and Democrats, respectively. And the recent bipartisan, bicameral tax deal that passed the House with overwhelming support, recently failed in the Senate.
If the 2024 election results in a unified government, it’s expected that the controlling party will attempt to use reconciliation to pass a tax reform bill. Reconciliation bills can be passed quickly, as they are not subject to Senate filibuster rules, but they come with significant restrictions, including:
- Do not allow any provisions unrelated to revenue and spending or that have “merely incidental” budgetary effects;
- Can only increase or decrease the deficit by the amount specified in the budget resolution and over the budget window;
- Prohibit an increase to federal budget deficits outside of the budget window; and
- Cannot change Social Security.
When using reconciliation, in order to comply with budgetary restrictions, policymakers sometimes enact provisions on a temporary basis, which leads to expiring provisions. This was the case with the TCJA, as Republicans were not able to enact all their priorities permanently and also meet reconciliation revenue targets. Unfortunately, this strategy often creates tax instability.
Regardless of the outcome of the 2024 elections, the 119th Congress will have to face this looming tax cliff. Negotiations are likely to be challenging, as policymakers will need to decide:
- What provisions can be extended? What provisions can policymakers allow to lapse?
- How much of a potential tax package should be paid for? How much should be deficit-funded?
- What revenue raisers, if any, will be effective and garner enough support to pass both chambers?
While the fast-approaching TCJA expirations should force action, the possibility that Congress will not be able to come to a resolution before the sunsets go into effect must also be considered.
Learn more about party platforms on our tax policy platforms page.
We will continue to monitor updates throughout the election cycle. If you have questions, please contact your Baker Tilly tax advisor.
Explore additional 2024 election insights
Tax policy and the 2024 election
Tax policy can have significant economic implications and is often a key driver of decision-making for business and individual taxpayers alike. An understanding of tax policy is critical to navigating uncertainty and planning for changes in the tax landscape. With that in mind, Baker Tilly is pleased to provide details and insights on tax policy and the 2024 election.
2024 election insights: Tax Cuts and Jobs Act and its impact
Explore the impact of expiring Tax Cuts and Jobs Act (TCJA) provisions. Learn about key changes, financial implications and the effect on U.S. taxpayers.
2024 election insights: Comparing tax policy platforms
Explore tax policy party platforms of Republicans and Democrats in the 2024 election. Understand proposed tax changes and their potential impact on tax policy.
Related tax content
Last updated Oct. 4, 2024
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
