Heading into the 3 November election, progressives in the United States were salivating over the overwhelming victory that the US media was predicting not only for Democrat Joe Biden in the presidential race, but also for Democrats in the US Senate and US House of Representatives races. One reason for the progressives’ pre-election excitement was that, if the predictions turned out to be accurate, it would mean that a Democrat-controlled Congress could pass, and a President Biden could sign, a tax bill that would result in wide-ranging changes to the US tax code.
These envisioned changes included substantially increased taxes on corporations and upper-income individuals; the elimination of the reduced statutory tax scheme for capital gains transactions; taxing capital assets on a mark-to-market basis; the closure of what Democrats characterised as corporate tax loopholes, particularly those for US multinational corporations; the reinstatement of what Republicans had previously characterized as tax loopholes favouring the so-called ‘blue states’ (i.e. those states controlled by the Democrats); and increasing estate and gift taxes. And for some progressives, their tax programme would even include a tax on securities transactions and a wealth tax on wealthy individuals.
However, during the campaign, Biden himself did not go as far in his proposed tax programme as his progressive supporters. Still, his proposals were dramatic enough and are estimated to raise tax revenues by about $3.3 trillion over the ten-year period beginning in 2021. His proposals included:
Although Biden’s proposed tax programme is not as aggressive a programme as many on the left would like, it would still undo much of the Republicans’ foremost legislative achievement of the past four years, the Tax Cut and Jobs Act of 2017 (‘the 2017 Act’).
On 3 November, Biden won the election for the presidency (even though his electoral victory was not confirmed until the electoral votes of the various states were counted in the Senate earlier this month). But just as important for the Biden administration’s tax programme, the Democrat candidates for Georgia’s two seats in the Senate managed to win run-off elections held on 5 January, thereby giving the Democrats 50 of the 100 seats in the Senate. Because tie votes in the Senate are broken by the vote of the vice president (who serves as the president of the Senate), a 50-50 split between the two parties provides the Democrats with control of the chamber’s business. It also gives them the opportunity to pass tax legislation pursuant to a special parliamentary process called budget reconciliation where only a simple majority is needed to move legislation forward, as opposed to the normal legislative process, sometimes referred to as regular order, where 60 votes are required. Consequently, by winning the two Georgia Senate seats, the Democrats have put themselves in the position to pass some – but not all – of Biden’s tax proposals.
However, in order to prevail in the Senate, all Democrats would have to stick together to make use of the vice president’s tie-breaking vote. While it is true that all Democrat senators voted against President Trump’s tax cuts, one Democrat Senator, in particular – Senator Joe Manchin from West Virginia – is unlikely to go along with any extreme measures. Manchin has a reputation as a moderate who has sought bipartisan compromise throughout his career. He also comes from a state in which Trump defeated Biden 69% to 30% and which is heavily dependent on energy (especially coal) production. Thus carbon taxes, for example, are very unlikely to obtain his support. On the other hand, some ‘old fashioned’, more centrist Republicans who oppose deficit spending may support some moderate tax increases to limit the federal budget deficit.
Although it would be quite controversial, there is another approach that the Senate Democrats could take in order to avoid the inconvenience of having to make use of the budget reconciliation process to push their program through. They could vote to completely overhaul the rules of the Senate and eliminate the so-called ‘filibuster rule’ which is the basis for the 60-vote requirement in regular order to move legislation forward – to do this would require all 50 Democrats to vote in favor of the rule change plus the vice president to vote to break the resulting 50-50 tie – which would then permit a simple majority vote on every bill that is considered by the Senate. However, Senator Manchin has stated publicly more than once that he will not vote to eliminate the filibuster rule and he could be joined in his opposition by at least two other moderate Democrats, Krysten Sinema of Arizona and Jon Tester of Montana, which means that, unless they succumb to the enormous amount of pressure that is certain to be put on them by the Senate Democrat leadership, most of their other Democrat colleagues and the US media, this option would not be available to the Democrats at this time.
The basic reason why not all of the progressives’ tax wishes can be granted, and perhaps even why some of Biden’s proposed tax changes may fall by the wayside as well, is that the use of the budget reconciliation process is limited to revenue items only, thus eliminating any non-revenue matters. Moreover, because in practice there can be only one such budget reconciliation bill during any session of Congress (although technically it is possible to have up to two more), the Democrats would have to take care to include in the budget reconciliation bills all the tax provisions that they would want; anything left out would need to be taken care of in regular order instead. In addition, because the House of Representatives has to agree to any budget reconciliation bill, the razor-thin margin the Democrats have in that chamber (due to the fact that Republicans, against all predictions, won back in the recent election a number of seats that the party lost in the 2018 midterm election), means that all it would take to derail any tax legislation favoured by the Democrats in the Senate is for a handful of Democrats in the House, which, because some seats are now or will be temporarily vacant (due to the death of one newly-elected representative before he could be sworn in, an election so close that it has not yet been certified, and vacancies that will occur when three members resign their seats in order to join the Biden administration), could be at the point in time the vote is taken, as few as four members to cross over and vote with the Republicans to defeat it.
What does this state of affairs mean for the Biden administration? In reality, it means the Biden administration may be somewhat or even substantially limited in enacting its overall legislative programme, including many of the specific programmes (such as enacting the so-called ‘green new deal’ and moving closer to a government-run healthcare system) that his progressive supporters dreamed of in the days right before the election. On the other hand, due to the special budget reconciliation process, the Democrats may want to try to satisfy some of the dreams of those same progressive supporters by raising federal corporate and individual income and other taxes (such as estate taxes). However, as much as the Democrats opposed the 2017 Act’s tax cuts, it might be a politically dangerous move on their part to pass a significant tax increase on a strict party-line vote. The reason is that it might not be wise politically for the Democrats to go into the 2022 midterm Congressional elections with a large tax increase as their signature achievement, particularly since historically a new president’s party almost always loses seats in the Congress in the next following midterm election. Thus, they could end up losing control of one or both houses of Congress with the result that further tax changes could then be totally blocked by the Republicans.
On the other hand, if the Biden turns out to be serious about his statements during the campaign that he wants to work with the Republicans ‘to get things done’, then a different scenario is certainly possible. In that case, the Biden Treasury department could work with Republicans in the Senate, and perhaps even with a combination of Republicans and more centrist Democrats in the House of Representatives, to come to an agreement on some sort of tax bill. In that case, a bipartisan tax bill could be developed through the use of old fashioned ‘give-and-take’ bargaining between the two parties where each side gets some things it wants while avoiding other things that it does not want. But even in this scenario, it is hard to imagine a situation where legislative tax policy does not move at least somewhat to the left.
There is also another set of issues that could be a part of any tax policy debate in the next Congress in that there are a number of tax changes scheduled to occur automatically over the next couple of years, because the 2017 Act included several tax increases that commence (or tax reductions that expire) during Biden’s term in office. These automatic tax increases were included in the 2017 Act in order to comply with the ‘balanced budget’ requirements of the budget reconciliation process (mentioned above). These tax increases include changes to the tax treatment of research and development costs, net interest expense rules, and bonus depreciation. In addition, there are some temporary tax changes to the tax code that were passed as part of last year’s covid-19 relief bill called the CARES Act that are also set to expire. A bipartisan effort could also result in the extension for a limited period of time of some of these provisions.
And looking a little further ahead, while the 2017 Act’s corporate tax cuts are permanent, the individual tax cuts disappear automatically over time and actually become net tax increases in 2026. Although not likely to happen during Biden’s term in office (assuming, because of his age, that he serves as president for only four years), there could be a bipartisan effort by lawmakers at some point to deal with these planned increases in individual taxes. But whatever happens in Congress with respect to tax policy, it will probably be at least somewhat different be far from Biden’s original tax platform.
In addition to tax legislation, there is another way for the Biden administration to have an impact on tax policy. Acting through its Treasury department, it will be able to look to existing legal authority, rather than legislation, to try to fulfill at least some of its campaign promises and also move administrative tax policy to the left. One thing a Biden administration can do on the tax regulatory front is to seek to limit the effect of the Republican-passed 2017 Act through the administrative rulemaking process. Because of Democrat control of the House of Representatives and a 50-50 split in the Senate, where tie votes are broken by the Democrat vice president, the Democrats could use the Congressional Review Act (‘the CRA’), which allows a new Congress to invalidate regulations issued toward the end of an outgoing administration by passing a joint resolution of disapproval in both the House of Representatives and the Senate to overturn any regulations that were finalised by the Trump Treasury department within a specified time period (60 legislative days) before the end of the 2020 Congressional session. Once that is done and President Biden signs the joint resolution, the Biden Treasury department would then potentially be able to propose new regulations to replace those that were overturned by the joint resolution. But there is a catch: any new regulations cannot be substantially the same as the overturned regulations unless Congress gives its express legislative authority to do so. Because the Trump Treasury department regulations that implemented the 2017 Act’s base erosion and anti-abuse tax (BEAT), which reduced deductions on intercompany payments (such as royalties and interest) if they were determined to be base-eroding, would be ‘in play’ under the CRA, the issuance of any new regulations to implement the BEAT would need express Congressional authorisation by legislation (which presumably would need to be done as part of a budget reconciliation bill).
In addition, the Biden Treasury department will almost certainly review other regulations of the Trump Treasury department that implemented the 2017 Act (i.e. beyond any that can be overturned outright under the CRA) and look for places where it can roll back some of what it may view as excessively benefiting corporate and high-income taxpayers. For example, the Biden Treasury department could focus on rolling back rules that allow companies to opt out of the 2017 Act’s GILTI tax on foreign corporate earnings that apply if some of that income is subject to high enough rates of foreign tax. (While the statute clearly provides for a high-tax opt-out for passive, so-called subpart F income, the existing regulations allow a high-tax opt-out for non-subpart F income as well.) While these regulatory rules adopted by the Trump Treasury department offered some relief to companies operating in high-tax countries, many Democrat lawmakers criticized this rule as a giveaway to ‘wealthy’ corporations, and others questioned whether the Trump Treasury department exceeded its legal authority in creating this additional high-tax exclusion from the GILTI.
The Trump Treasury department also generated controversy among critics when it created some carve-outs to the BEAT when it issued regulations that excluded interest payments required under US banking rules, and some foreign-currency hedging transactions. Here too some critics claimed these carve-outs to be too taxpayer-friendly. Thus, if the Congress decides not to overturn the BEAT regulations in total under the CRA, the Biden Treasury department could still revisit these particular rules, even though interestingly, these rules are not generally associated with clear profit-shifting to low-tax jurisdictions or other examples of tax avoidance which Biden criticised during the campaign.
In addition, there is also some thought that a Biden Treasury department will look at the Trump Treasury department rules that overturned regulations the Obama Treasury department had issued in order to restrict the use of interest deductions on intercompany debt. The Obama administration saw aggressive use of interest deductions as a major driver of so-called ‘inversions’ – leveraged transactions of various sorts in which a US-parented corporate group became a subsidiary of an offshore parent and debt (with the concomitant interest deductions) was ‘pushed down’ to the US group. The Trump Treasury department issued rules that repealed the most onerous parts of the Obama administration rules which required extensive transfer pricing documentation of loans between related parties. This Trump administration regulatory effort also provoked criticism from some Democrat lawmakers.
There are, however, two practical issues that will affect any effort by the Biden administration to make tax policy through the regulatory process. First, the likelihood and timing of major changes to tax regulations will depend on the priorities of the Biden administration in general and the Biden Treasury department in particular, as well as how much of its time will be consumed by more pressing work, such as implementing covid-19 safety measures. Second, any changes to regulatory rules require compliance with the formal Administrative Procedures Act (APA) ‘notice and comment’ process which puts the burden on the Biden Treasury department to provide strong explanations supporting changes from existing regulations. If it does not do this, or does so in a manner that is unconvincing, then attempted changes to existing Trump administration-era regulations could face challenges in court from affected taxpayers under the APA.
Finally, the Biden Treasury department will face one additional task: when and how it will react to the OECD-led effort to overhaul taxation of the digital economy? Will it change longstanding US opposition to changes to the international tax system that would single out large, predominantly US tech companies for specialised tax regimes permitting greater source-country taxation? It seems unlikely that even a Biden administration would agree to rules that would shift the profits of multinationals out of the US tax system if only tech companies are subject to those rules. But that opposition may disappear if a broader group of industries were included. This would represent a retreat from the negotiating position of the outgoing Secretary of the Treasury, Steven Mnuchin, who argued that, even if those broader rules were adopted, they should still be optional for companies. Moreover, given the difficulties in overcoming the procedural problems discussed above with respect to enacting tax legislation, it may be difficult for the Biden administration to agree to new international rules that would have to be implemented in the US either through legislation (which would require passage through both Houses of Congress) or amendment to tax treaties (which would require Senate ratification and this could be blocked at least temporarily by a single senator).
In conclusion, due to the surprising 50-50 split in the Senate and the reduced number of Democrat seats in the House, only one thing is sure when it comes to US tax policy in the near future – and that is nothing is sure.
Heading into the 3 November election, progressives in the United States were salivating over the overwhelming victory that the US media was predicting not only for Democrat Joe Biden in the presidential race, but also for Democrats in the US Senate and US House of Representatives races. One reason for the progressives’ pre-election excitement was that, if the predictions turned out to be accurate, it would mean that a Democrat-controlled Congress could pass, and a President Biden could sign, a tax bill that would result in wide-ranging changes to the US tax code.
These envisioned changes included substantially increased taxes on corporations and upper-income individuals; the elimination of the reduced statutory tax scheme for capital gains transactions; taxing capital assets on a mark-to-market basis; the closure of what Democrats characterised as corporate tax loopholes, particularly those for US multinational corporations; the reinstatement of what Republicans had previously characterized as tax loopholes favouring the so-called ‘blue states’ (i.e. those states controlled by the Democrats); and increasing estate and gift taxes. And for some progressives, their tax programme would even include a tax on securities transactions and a wealth tax on wealthy individuals.
However, during the campaign, Biden himself did not go as far in his proposed tax programme as his progressive supporters. Still, his proposals were dramatic enough and are estimated to raise tax revenues by about $3.3 trillion over the ten-year period beginning in 2021. His proposals included:
Although Biden’s proposed tax programme is not as aggressive a programme as many on the left would like, it would still undo much of the Republicans’ foremost legislative achievement of the past four years, the Tax Cut and Jobs Act of 2017 (‘the 2017 Act’).
On 3 November, Biden won the election for the presidency (even though his electoral victory was not confirmed until the electoral votes of the various states were counted in the Senate earlier this month). But just as important for the Biden administration’s tax programme, the Democrat candidates for Georgia’s two seats in the Senate managed to win run-off elections held on 5 January, thereby giving the Democrats 50 of the 100 seats in the Senate. Because tie votes in the Senate are broken by the vote of the vice president (who serves as the president of the Senate), a 50-50 split between the two parties provides the Democrats with control of the chamber’s business. It also gives them the opportunity to pass tax legislation pursuant to a special parliamentary process called budget reconciliation where only a simple majority is needed to move legislation forward, as opposed to the normal legislative process, sometimes referred to as regular order, where 60 votes are required. Consequently, by winning the two Georgia Senate seats, the Democrats have put themselves in the position to pass some – but not all – of Biden’s tax proposals.
However, in order to prevail in the Senate, all Democrats would have to stick together to make use of the vice president’s tie-breaking vote. While it is true that all Democrat senators voted against President Trump’s tax cuts, one Democrat Senator, in particular – Senator Joe Manchin from West Virginia – is unlikely to go along with any extreme measures. Manchin has a reputation as a moderate who has sought bipartisan compromise throughout his career. He also comes from a state in which Trump defeated Biden 69% to 30% and which is heavily dependent on energy (especially coal) production. Thus carbon taxes, for example, are very unlikely to obtain his support. On the other hand, some ‘old fashioned’, more centrist Republicans who oppose deficit spending may support some moderate tax increases to limit the federal budget deficit.
Although it would be quite controversial, there is another approach that the Senate Democrats could take in order to avoid the inconvenience of having to make use of the budget reconciliation process to push their program through. They could vote to completely overhaul the rules of the Senate and eliminate the so-called ‘filibuster rule’ which is the basis for the 60-vote requirement in regular order to move legislation forward – to do this would require all 50 Democrats to vote in favor of the rule change plus the vice president to vote to break the resulting 50-50 tie – which would then permit a simple majority vote on every bill that is considered by the Senate. However, Senator Manchin has stated publicly more than once that he will not vote to eliminate the filibuster rule and he could be joined in his opposition by at least two other moderate Democrats, Krysten Sinema of Arizona and Jon Tester of Montana, which means that, unless they succumb to the enormous amount of pressure that is certain to be put on them by the Senate Democrat leadership, most of their other Democrat colleagues and the US media, this option would not be available to the Democrats at this time.
The basic reason why not all of the progressives’ tax wishes can be granted, and perhaps even why some of Biden’s proposed tax changes may fall by the wayside as well, is that the use of the budget reconciliation process is limited to revenue items only, thus eliminating any non-revenue matters. Moreover, because in practice there can be only one such budget reconciliation bill during any session of Congress (although technically it is possible to have up to two more), the Democrats would have to take care to include in the budget reconciliation bills all the tax provisions that they would want; anything left out would need to be taken care of in regular order instead. In addition, because the House of Representatives has to agree to any budget reconciliation bill, the razor-thin margin the Democrats have in that chamber (due to the fact that Republicans, against all predictions, won back in the recent election a number of seats that the party lost in the 2018 midterm election), means that all it would take to derail any tax legislation favoured by the Democrats in the Senate is for a handful of Democrats in the House, which, because some seats are now or will be temporarily vacant (due to the death of one newly-elected representative before he could be sworn in, an election so close that it has not yet been certified, and vacancies that will occur when three members resign their seats in order to join the Biden administration), could be at the point in time the vote is taken, as few as four members to cross over and vote with the Republicans to defeat it.
What does this state of affairs mean for the Biden administration? In reality, it means the Biden administration may be somewhat or even substantially limited in enacting its overall legislative programme, including many of the specific programmes (such as enacting the so-called ‘green new deal’ and moving closer to a government-run healthcare system) that his progressive supporters dreamed of in the days right before the election. On the other hand, due to the special budget reconciliation process, the Democrats may want to try to satisfy some of the dreams of those same progressive supporters by raising federal corporate and individual income and other taxes (such as estate taxes). However, as much as the Democrats opposed the 2017 Act’s tax cuts, it might be a politically dangerous move on their part to pass a significant tax increase on a strict party-line vote. The reason is that it might not be wise politically for the Democrats to go into the 2022 midterm Congressional elections with a large tax increase as their signature achievement, particularly since historically a new president’s party almost always loses seats in the Congress in the next following midterm election. Thus, they could end up losing control of one or both houses of Congress with the result that further tax changes could then be totally blocked by the Republicans.
On the other hand, if the Biden turns out to be serious about his statements during the campaign that he wants to work with the Republicans ‘to get things done’, then a different scenario is certainly possible. In that case, the Biden Treasury department could work with Republicans in the Senate, and perhaps even with a combination of Republicans and more centrist Democrats in the House of Representatives, to come to an agreement on some sort of tax bill. In that case, a bipartisan tax bill could be developed through the use of old fashioned ‘give-and-take’ bargaining between the two parties where each side gets some things it wants while avoiding other things that it does not want. But even in this scenario, it is hard to imagine a situation where legislative tax policy does not move at least somewhat to the left.
There is also another set of issues that could be a part of any tax policy debate in the next Congress in that there are a number of tax changes scheduled to occur automatically over the next couple of years, because the 2017 Act included several tax increases that commence (or tax reductions that expire) during Biden’s term in office. These automatic tax increases were included in the 2017 Act in order to comply with the ‘balanced budget’ requirements of the budget reconciliation process (mentioned above). These tax increases include changes to the tax treatment of research and development costs, net interest expense rules, and bonus depreciation. In addition, there are some temporary tax changes to the tax code that were passed as part of last year’s covid-19 relief bill called the CARES Act that are also set to expire. A bipartisan effort could also result in the extension for a limited period of time of some of these provisions.
And looking a little further ahead, while the 2017 Act’s corporate tax cuts are permanent, the individual tax cuts disappear automatically over time and actually become net tax increases in 2026. Although not likely to happen during Biden’s term in office (assuming, because of his age, that he serves as president for only four years), there could be a bipartisan effort by lawmakers at some point to deal with these planned increases in individual taxes. But whatever happens in Congress with respect to tax policy, it will probably be at least somewhat different be far from Biden’s original tax platform.
In addition to tax legislation, there is another way for the Biden administration to have an impact on tax policy. Acting through its Treasury department, it will be able to look to existing legal authority, rather than legislation, to try to fulfill at least some of its campaign promises and also move administrative tax policy to the left. One thing a Biden administration can do on the tax regulatory front is to seek to limit the effect of the Republican-passed 2017 Act through the administrative rulemaking process. Because of Democrat control of the House of Representatives and a 50-50 split in the Senate, where tie votes are broken by the Democrat vice president, the Democrats could use the Congressional Review Act (‘the CRA’), which allows a new Congress to invalidate regulations issued toward the end of an outgoing administration by passing a joint resolution of disapproval in both the House of Representatives and the Senate to overturn any regulations that were finalised by the Trump Treasury department within a specified time period (60 legislative days) before the end of the 2020 Congressional session. Once that is done and President Biden signs the joint resolution, the Biden Treasury department would then potentially be able to propose new regulations to replace those that were overturned by the joint resolution. But there is a catch: any new regulations cannot be substantially the same as the overturned regulations unless Congress gives its express legislative authority to do so. Because the Trump Treasury department regulations that implemented the 2017 Act’s base erosion and anti-abuse tax (BEAT), which reduced deductions on intercompany payments (such as royalties and interest) if they were determined to be base-eroding, would be ‘in play’ under the CRA, the issuance of any new regulations to implement the BEAT would need express Congressional authorisation by legislation (which presumably would need to be done as part of a budget reconciliation bill).
In addition, the Biden Treasury department will almost certainly review other regulations of the Trump Treasury department that implemented the 2017 Act (i.e. beyond any that can be overturned outright under the CRA) and look for places where it can roll back some of what it may view as excessively benefiting corporate and high-income taxpayers. For example, the Biden Treasury department could focus on rolling back rules that allow companies to opt out of the 2017 Act’s GILTI tax on foreign corporate earnings that apply if some of that income is subject to high enough rates of foreign tax. (While the statute clearly provides for a high-tax opt-out for passive, so-called subpart F income, the existing regulations allow a high-tax opt-out for non-subpart F income as well.) While these regulatory rules adopted by the Trump Treasury department offered some relief to companies operating in high-tax countries, many Democrat lawmakers criticized this rule as a giveaway to ‘wealthy’ corporations, and others questioned whether the Trump Treasury department exceeded its legal authority in creating this additional high-tax exclusion from the GILTI.
The Trump Treasury department also generated controversy among critics when it created some carve-outs to the BEAT when it issued regulations that excluded interest payments required under US banking rules, and some foreign-currency hedging transactions. Here too some critics claimed these carve-outs to be too taxpayer-friendly. Thus, if the Congress decides not to overturn the BEAT regulations in total under the CRA, the Biden Treasury department could still revisit these particular rules, even though interestingly, these rules are not generally associated with clear profit-shifting to low-tax jurisdictions or other examples of tax avoidance which Biden criticised during the campaign.
In addition, there is also some thought that a Biden Treasury department will look at the Trump Treasury department rules that overturned regulations the Obama Treasury department had issued in order to restrict the use of interest deductions on intercompany debt. The Obama administration saw aggressive use of interest deductions as a major driver of so-called ‘inversions’ – leveraged transactions of various sorts in which a US-parented corporate group became a subsidiary of an offshore parent and debt (with the concomitant interest deductions) was ‘pushed down’ to the US group. The Trump Treasury department issued rules that repealed the most onerous parts of the Obama administration rules which required extensive transfer pricing documentation of loans between related parties. This Trump administration regulatory effort also provoked criticism from some Democrat lawmakers.
There are, however, two practical issues that will affect any effort by the Biden administration to make tax policy through the regulatory process. First, the likelihood and timing of major changes to tax regulations will depend on the priorities of the Biden administration in general and the Biden Treasury department in particular, as well as how much of its time will be consumed by more pressing work, such as implementing covid-19 safety measures. Second, any changes to regulatory rules require compliance with the formal Administrative Procedures Act (APA) ‘notice and comment’ process which puts the burden on the Biden Treasury department to provide strong explanations supporting changes from existing regulations. If it does not do this, or does so in a manner that is unconvincing, then attempted changes to existing Trump administration-era regulations could face challenges in court from affected taxpayers under the APA.
Finally, the Biden Treasury department will face one additional task: when and how it will react to the OECD-led effort to overhaul taxation of the digital economy? Will it change longstanding US opposition to changes to the international tax system that would single out large, predominantly US tech companies for specialised tax regimes permitting greater source-country taxation? It seems unlikely that even a Biden administration would agree to rules that would shift the profits of multinationals out of the US tax system if only tech companies are subject to those rules. But that opposition may disappear if a broader group of industries were included. This would represent a retreat from the negotiating position of the outgoing Secretary of the Treasury, Steven Mnuchin, who argued that, even if those broader rules were adopted, they should still be optional for companies. Moreover, given the difficulties in overcoming the procedural problems discussed above with respect to enacting tax legislation, it may be difficult for the Biden administration to agree to new international rules that would have to be implemented in the US either through legislation (which would require passage through both Houses of Congress) or amendment to tax treaties (which would require Senate ratification and this could be blocked at least temporarily by a single senator).
In conclusion, due to the surprising 50-50 split in the Senate and the reduced number of Democrat seats in the House, only one thing is sure when it comes to US tax policy in the near future – and that is nothing is sure.
