Closing out the 2022 midterm elections, last week Senator Raphael Warnock (D-GA) won the Georgia run-off election securing a 51 to 49 Democratic advantage in the Senate. That advantage was then called into question by Senator Kyrsten Sinema's (D-AZ) announcement that she is leaving the Democratic party and registering as an Independent. While the impact of this change is yet to be determined, it is unlikely that she will completely upend the composition of the Senate. Thus, Democrats next year will likely have significant governing and policymaking advantages compared to the current 50 - 50 split in the current Congress. Tax Take looks at the impact that greater Senate Democratic power will have on the tax policy landscape next year.

Senators Manchin and Sinema Will Have Less Power to Dictate Tax Legislation. During the last Congress, two centrists – Senator Joe Manchin (D-WV) and Senator Sinema – exercised tremendous influence in the development of the Inflation Reduction Act. The new one-vote advantage provides greater flexibility, as Democrats can pass legislation without needing support from every member of the caucus (support from one, but not both, of these moderate Senators will still be necessary going forward, however).

Changes to the Senate Committee on Finance. Although negotiations are currently underway regarding the number of members to add to the committee (particularly with the retirement of three current Republican members of the committee) and the ratio of Democrats to Republicans, Democrats will have a majority (likely one seat). Changes in the number of members and the ratio could result in the addition of new Democratic members and, although extremely unlikely, the potential loss of a seat by a sitting Republican.

Faster Processing of Tax Legislation and Tax-Related Nominations. The Democratic majority of the Senate Committee on Finance will allow them to process tax legislation and tax-related nominations much faster. While the expedited processing of tax legislation may have limited value given divided government, expedited processing of tax-related nominations may be particularly important given the recent nomination of Danny Werfel to be Commissioner of the Internal Revenue Service (IRS) and the anticipated nomination of Beth Kaufman to be IRS Chief Counsel.

Greater Subpoena Power in Tax-Related Investigations. Democrats will have stronger subpoena power as they no longer need bipartisan support to issue subpoenas. This will likely increase the number and scope of Democratic-led tax investigations by the Senate Committee on Finance. Such greater power will be particularly interesting if Chairman Ron Wyden (D-OR) pursues action with respect to former President Trump's tax returns.

Senate Democrats will have significantly greater power from a tax policy perspective in the new Congress. How this new power is exercised in the divided government context as Senate Democrats engage with the Republican majority in the House of Representatives will be interesting to see. #TaxTake

Upcoming Speaking Engagements and Events

Loren will moderate a panel titled "The OECD & Global Tax Policy: What's Next?" at the DC Bar 2023 Tax Legislative and Regulatory Conference on January 26.

In the News

Marc was name a 2022 Top Lobbyist by The Hill. Congrats, Marc!
 

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