How the Recent Elections will Impact Future Tax Policy

The 2014 mid-term elections are now in the history books, and one thing analysts from all ends of the political spectrum agree on; the Republican Party had a good night. The GOP not only took control of the U.S. Senate (their primary goal for this election cycle), they also expanded their majority in the House to historic levels and made major gains on the state level as well. Tax Laws

When you add it all up, the GOP now controls both houses of the U.S. Congress, 32 out of 50 state governorships, 68 of 99 state legislative chambers (an all-time high), and have complete control (the governorship and both legislative chambers) in 24 states. The Democrats have total control in only seven.

Taxes were an issue in elections on the federal, state, and local level. And since the GOP generally tends to favor a policy of lower taxes, the results seem favorable for those who believe Americans pay too much of their hard-earned money to the government. Here are some of the ways the 2014 elections may impact tax policy.

Federal Tax Laws

One of the first moves made by House Speaker John Boehner after the elections was to kill a bill which passed the Senate last year that would have allowed states to impose sales taxes for online purchases. There had been speculation that this bill would be taken up in the House during the lame duck session, but apparently the Speaker decided that given the results of the elections, it would be unwise to push what many perceive as a tax increase before the new Congress is seated.

In the new Congress that will be sworn in January 2015, do not expect any more increases in taxes at the federal level. Do not expect any tax cuts either as the congressional majorities are still not enough to override a presidential veto. Expect the GOP to move to repeal unpopular portions of the Affordable Care Act of 2010, including the medical device tax. But most likely these bills will be vetoed by the President and will not become law. As for the IRS, expect their funding levels to remain the same or be reduced in the next Congress, which will likely draw complaints from the agency’s commissioner but little sympathy from the public.

State and Local Tax Laws

Most of the Republican governors that were elected in the wave of 2010 were re-elected (the only exception was in Pennsylvania). Many of these governors have pushed tax cuts on the state level. With 24 states now in complete GOP control (including Arizona), expect more state and local tax reductions in these states over the next couple years. In particular, these states will likely continue offering tax breaks and incentives for businesses to relocate there in hopes of creating more jobs and a stronger economy.

The recent elections will likely mean the same or lower taxes on both the federal and state levels. But the specific changes that occur are difficult to predict. As always, keep in touch with your small business accounting firm to stay up to date on recent changes in tax law and receive the best guidance for taking advantage of all the deductions and credits available to you.

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