On February 24, 2026, President Trump will deliver the first State of the Union (SOTU) address of his second term. As he prepares, it's a sure bet that retaining Republican control of the House and Senate will be the throughline of the president's remarks.

The president's speech is the starting gun for the midterm campaign season. And Republicans know they are diving into a marathon swim against the tide of history. With rare exceptions, a president can expect to lose more than a dozen House seats in a midterm election, even if their voter approval rating is above 50 percent. If a president's approval rating is in negative territory, average House losses for the president's party approaches 40 seats. President Trump himself weathered a 40-seat loss in the House two years into his first term.

Republicans currently control the House with a precarious 218-214 majority (with three seats currently vacant). In the Senate, Republicans control the chamber with a more solid 53-47 majority (and the extra cushion of Vice President J.D. Vance). The election map for the Senate this year is also favorable for Republicans, with many contested seats in states won by the president in 2024. 

With all this in mind, it's safe to predict that the SOTU address will look 12 months back for reminders of policy victories and nine months forward to the midterms, possibly with new voter-friendly ideas in hopes of increasing the GOP's chances of retaining both the House and Senate.

On tax policy, the president will undoubtedly take a long victory lap, reminding voters that much of the populist tax relief in the One Big Beautiful Bill Act (OBBBA) is now stoking larger individual refunds in the current tax-filing season. The inevitable policy name-checks for lower taxes on tips, overtime, and seniors, as well as a deduction for interest on domestic car purchases, will likely bring GOP lawmakers to their feet for standing ovations. Late last month, the president previewed this approach with a lengthy two-and-a-half-hour press conference highlighting the administration's policy victories and progress in his first year in office. 

As for potential new tax proposals, the president has discussed a number of ideas in the months following enactment of the OBBBA that could find their way into the SOTU address. For example, he has frequently mused in public about ways to refund a portion of the revenue raised under his tariff regime through a "dividend" to taxpayers. The idea of tariff refunds (and tariffs in general) could be solidified or thrown into disarray by a ruling from the Supreme Court that could be released shortly before the SOTU. 

The president also urged Congress to reduce capital gains taxes on sales of single-family homes as a means to increase inventory and reduce prices. More broadly on capital gains, he has also expressed support for the concept of indexing stocks and other assets to inflation so that investors do not pay taxes on inflationary gains.

On healthcare, the president asked Congress to reroute revenue for the enhanced Affordable Care Act (ACA) premium tax credit (PTC) to individual health savings accounts (HSAs) for the purchase of insurance and other medical expenses. A version of this proposal was endorsed by the House late last year. 

It's not certain what tax proposals the president may bring to the table in his SOTU address, but these and other new ideas are certainly possible as Republicans seek to beat the electoral odds in November. 

Soon after the address, the administration will present a budget for the 2027 fiscal year that will formally incorporate the president's proposals. Last year, it was all about extending the Tax Cuts and Jobs Act (TCJA) and enacting the president's campaign proposals. This year, look for smaller, targeted proposals aimed at addressing affordability issues and preserving GOP control of the House. #TaxTake

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Rocco will speak at PLI's International Tax Issues 2026 conference on February 25.

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