What the Midterm Election Results Could Mean for Taxes Kiplinger Kiplinger is supported by its audience. When you purchase through links on our site, we may earn an affiliate commission. Here's why you can trust us.

What the Midterm Election Results Could Mean for Taxes

The 2022 midterm election results will drive-or stall-very different Democratic and Republican tax priorities. (opens in new tab) (opens in new tab) (opens in new tab) Newsletter sign up Newsletter (Image credit: Getty Images) By Kelley R. Taylor last updated 9 November 2022 Midterm election day 2022 was November 8. Voters across the country were considering significant issues ranging from inflation, immigration, and gun control to abortion, crime, and preserving democracy. And it probably comes as no surprise that the 2022 midterm election results will determine the balance of power in Congress when voters are starkly divided on many of those concerns. But the November midterm election results will also help decide which tax priorities Democratic and Republican lawmakers pursue in the next couple of years (if any). And those priorities could involve tax deductions and tax incentives that directly impact your finances.

How Inflation Can Impact Your Taxes So, here's an overview of some Midterms elections predictions and a few Democratic and Republican tax priorities that could gain momentum-or not-after the midterm election results are determined.

Subscribe to Kiplinger s Personal Finance

Be a smarter, better informed investor. Save up to 74%

Sign up for Kiplinger s Free E-Newsletters

Profit and prosper with the best of Kiplinger's expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail. Profit and prosper with the best of Kiplinger's expert advice - straight to your e-mail. Sign up

2022 Midterm Election

Going into the 2022 midterm elections, Democrats have control of both the House and the Senate by slim margins. Because of the 50-50 split in the Senate, Vice President Kamala Harris can cast a tie-breaking majority vote. Right now, ballots are still being counted, so the question of who will control the Senate after the 2022 midterm elections remains a toss-up. Right now, popular 538 2022 U.S. Senate polls, support the notion that control of the Senate remains a dead heat, but data also indicates that Republicans are favored to win control of the U.S. House of Representatives. The latter outcome is due in part to the fact that midterm elections are typically a referendum on the party in power. Some closely watched midterm elections state Senate races include Georgia (where incumbent Democratic Sen. Reverend Raphael Warnock is running against former football player, Herschel Walker. Lately, Georgia abortion rights have been in the spotlight. But that race could be headed for a runoff in December. The results of Senate races in Nevada, and Arizona will also be key to determining Senate control. But voter turnout has been key. There were high early voting numbers in many states, and more than 42 million ballots were reportedly cast before midterm election day.

Who Will Win the 2022 Midterm Elections this November?

Funding the Government in 2023

After the November midterm elections results are in, Congress will need to come to an agreement on FY 2023 spending. That creates an opportunity for a potential year-end tax package. There are several tax issues that Congress could address in such a package depending on their appetite for negotiation.

The Inflation Reduction Act and Taxes: What You Should Know For example, if Republicans gain control of the House of Representatives, or the Senate, they may not be quick to support so-called lame-duck spending. That reluctance could be enhanced by the fact that the Democratic-controlled Congress already passed the Inflation Reduction Act, which was signed into law by President Biden in August. The massive climate, energy, healthcare, and tax law provides about $270 billion in clean energy tax incentives that include everything from electric vehicle tax credits to tax credits for energy efficient home improvements. However, there are some tax provisions regarding R&D credits and bonus depreciation that need attention. Businesses who, beginning this year, must amortize their research and development costs over five years, would like to see R&D tax relief. Lawmakers on both sides of the aisle could have reason to come to the table on bipartisan R&D tax relief-despite the midterms elections results.

Child Tax Credit

Congress didn't pass tax extenders last year, and popular pandemic-related provisions like the expanded child tax credit expired. The expanded child tax credit was enacted with the American Rescue Plan Act (ARPA). ARPA allowed eligible families to in 2021, receive advanced payments of up to either $250 or $300 a month (per qualifying child), for six months, depending on the age of each child.

Stimulus Checks and Child Tax Credits Are Still Available Democrats and various advocacy organizations have pushed to reinstate the expanded credit, which some data show effectively helped to reduce the child poverty rate. But if the Democrats keep control of the House and the Senate and pick up a seat or two on the Senate side, they could have more votes to reinstate the child tax credit. That's because they wouldn't have to rely on a yes vote from Sen. Joe Manchin (D-W.Va), who opposed proposals to reinstate the expanded child tax credit. But, Democrats wouldn't have an easy legislative path to accomplish that without some Republican support. There's been some recent speculation that Democrats could agree to support R&D relief if Republicans agree to reinstate the expanded child tax credit.

Inflation Reduction Act Implementation

If Democrats keep control of the House and the Senate, implementing the tax credits and incentives in the Inflation Reduction Act would proceed full steam ahead. Currently, the Treasury Department and the IRS are seeking public input to propose regulations to implement the many clean energy tax incentives in the new law.

Is an Army of IRS Agents Coming for Your Tax Dollars? However, if Republicans take control of the House, Minority Leader Kevin McCarthy (R-Calif.) has vowed to block the $80 billion in funds allotted in the Inflation Reduction Act for the IRS. McCarthy and other Republican lawmakers have claimed that the funding will result in an "army" of 87,000 IRS agents coming to audit middle income Americans.

Retirement Savings

On the bright side, there appears to be bipartisan support for potentially major retirement legislation, no matter which party gains control of the House and Senate after the midterms. Senate Finance Committee Chair and Ranking Member, Senator Ron Wyden (D-Ore.), and Senator Mike Crapo (R-Idaho), recently introduced the bipartisan EARN Act. According to the release accompanying the legislation, the EARN Act is designed to encourage small businesses to adopt retirement plans and make it easier for part-time workers to participate in retirement plans.

Big Changes to the Saver's Credit Could Be on the Way The bill would also expand the saver's credit for low and middle-income workers and allow penalty-free withdrawals during certain emergencies. Congress will have to reconcile the EARN Act with the bipartisan House-passed SECURE 2.0, which would also make significant changes to retirement plans including raising the age for taking required minimum distributions (RMDs).

Trump Tax Cuts

If Republicans gain control of the U.S. House of Representatives after the 2022 midterm elections, they have pledged to propose legislation to make the so-called Trump tax cuts permanent. The individual tax cuts were enacted with the Tax Cuts and Jobs Act of 2017 and many of the tax breaks tied to individuals are set to expire after 2025.

What the Midterm Elections Mean for Stocks That proposal appears to be in line with a one-page GOP "Commitment to America." In a pillar in the document that concerns the economy, Republicans say they will fight inflation and lower the cost of living in part through what they describe as a "pro-growth tax economy." It's unclear at this time what specific tax policies the GOP would pursue if they gained control of the House or the Senate. But President Biden would still have veto power and Congressional override would be highly unlikely.

State Tax Initiatives Taxing the Rich

While your midterm vote can ultimately impact which federal tax policies are pursued by lawmakers, there are also tax initiatives on November midterm ballots in several states.

Proposition 30: Wealth Taxes ad EVs on California's 2022 Midterms Ballot For example, Bloomberg points out that California voters will be asked to consider Proposition 30--whether wealthy Californians should pay more tax, while Colorado voters will cast votes on whether proposed income tax cuts should limit tax deductions for wealthy residents. Similar proposals that would modify the way that states tax high earners, are also on the ballot in Massachusetts. These wealth tax proposals come at a time when the IRS is reporting an increase in the tax gap and a need for increased tax compliance focused in part on wealthy taxpayers. Notably, like many other states, California and Massachusetts are returning surplus revenue to their residents in 2022 through state "stimulus" checks. California's second round of tax stimulus checks are underway, and Massachusetts is returning nearly $3 billion to eligible taxpayers with its 2022 Massachusetts tax refund, beginning in November and continuing through mid-December.

Midterms 2022

So, what can you do? For now, you will have to wait for the results of the November midterm elections to see what your vote will mean for your federal and state taxes in 2023-and beyond. But, in the meantime, don't forget that midterm election day 2022 is Tuesday, November 8. Explore More Politics Tax Breaks Tax Tips Kelley R. TaylorTax Editor, Kiplinger.comWith more than 20 years experience as an in-house legal counsel and business journalist, Kelley R. Taylor has contributed to numerous national print and digital magazines on key issues spanning education, law, health, finance, and tax. Kelley particularly enjoys translating complex information in ways that help empower people in their daily lives and work. Latest 4 Ways You Can Take Advantage of a Down Market With markets down for the year, it may seem that all the news is bad. But now could be a good time to make some profitable moves. By Adam Grealish • Published 11 November 22 New, Used or Leased: Is Now the Time to Buy an Electric Vehicle? The Inflation Reduction Act created new tax breaks for electric vehicles. Here's a guide to which EVs count and the best time to buy. By Rivan V. Stinson • Published 11 November 22 You might also like 15 States That Tax Military Retirement Pay (and Other States That Don't) retirement Taxes on military retirement pay vary from state-to-state. How generous is your state when it comes to helping retired veterans at tax time? By Sandra Block • Published 10 November 22 $2.04 Billion Powerball Lottery Jackpot Winner Will Have a Massive Tax Bill The $2.04 billion-dollar Powerball jackpot has its big winner and the federal government will get a big chunk of the prize from taxes. By Kelley R. Taylor • Last updated 11 November 22 New "Stimulus" Check 2022: Massachusetts Tax Refund Money is Being Sent Now Massachusetts will return nearly $3 billion to eligible taxpayers beginning in November. By Kelley R. Taylor • Last updated 9 November 22 What's the Standard Deduction for 2022 vs. 2023? Tax Breaks Most Americans claim the standard deduction on their federal tax return instead of itemized deductions. How much can you claim on your 2022 and 2023 returns? By Rocky Mengle • Last updated 9 November 22 What Are the Capital Gains Tax Rates for 2022 vs. 2023? capital gains tax The capital gains tax rate that applies to a capital gain depends on the type of asset, your taxable income, and how long you held the property sold. By Rocky Mengle • Published 3 November 22 California Prop 30: Wealth Taxes to Fund EVs Fails California midterms voters have rejected Proposition 30-and won't raise taxes on millionaires to fund clean energy initiatives involving electric vehicles By Kelley R. Taylor • Last updated 9 November 22 Virginia 2022 "Stimulus" Tax Rebates Many eligible Virginians have received an up to $500 tax rebate check for 2022. By Kelley R. Taylor • Last updated 2 November 22 What Are the Income Tax Brackets for 2022 vs. 2023? tax brackets Depending on your taxable income, you can end up in one of seven different federal income tax brackets – each with its own marginal tax rate. By Rocky Mengle • Last updated 9 November 22 View More ▸ kiplinger About Us (opens in new tab) Terms and Conditions (opens in new tab) Privacy Policy (opens in new tab) Cookie Policy (opens in new tab) Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site.
© Future US, Inc. Full 7th Floor, 130 West 42nd Street, New York, NY 10036.