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We now know the results for the White House (pending the final vote count and resolution of legal challenges) and House of Representatives races, which possibly narrow the tax legislative scenarios discussed. The Senate, however, remains in play pending two runoff elections in Georgia that are to be held on January 5, 2021.

If the Republican party retains at least one of Georgia’s Senate seats, then the Senate will remain under GOP control (51-49). While the House of Representatives may pass substantive tax legislation, if the Senate does as well, the two versions of a bill will likely look very different from one another and might not be reconciled. In such a case, we’d be left with the status quo: Most provisions contained in the 2017 Tax Cuts and Jobs Act (TCJA) would generally expire in 2025, except for the permanent provisions.

If both of Georgia’s Senate seats are won by Democrats, the Senate would effectively flip to Democratic control, because the vice president could break any tie (51-50). As we described in scenario 4 of the four possible election scenarios, both the House and the Senate would likely pass substantive tax legislation, but how the Senate would pass that legislation depends on whether it would maintain or abolish the legislative filibuster. If the Senate preserves the legislative filibuster, any tax legislation it passes would 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 the TCJA. 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, Senator Joe Manchin (D-WV) tweeted that he would not vote to end the filibuster. Therefore, even if the Democrats control the Senate after January 5, 2021, a more comprehensive tax package may have to be passed through the budget reconciliation process. If the Republicans control the Senate, a broader package cannot be ruled out—but it would need bipartisan support.

After Georgia’s Senate runoff elections, the Senate’s party split will be razor thin. While we envision the possible tax legislative paths as described above, it is also possible that, regardless of which party controls the Senate, they will work together to pass more modest tax law changes rather than a comprehensive package.

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