Biden’s Tax Plan: Democrats Have Control, But Tax Reform Details Remain Unclear

With the victories of Jon Ossoff and Raphael Warnock in the Georgia Senate runoff elections, Democrats now control the Presidency, the House of Representatives, and the Senate. Although the Georgia results had not yet been officially certified at the time of writing, this political shift provides the Biden administration with a narrow governing majority.

During his campaign, President Biden outlined a framework for tax reform focused on increasing taxes for corporations and high-income individuals. While broad in scope, many specifics remain uncertain. Areas of potential reform include:

• Corporate and individual income tax rates

• Capital gains tax treatment

• Estate and gift tax exemption levels

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How Tax Changes Could Take Shape

1. Part of a COVID-19 Relief Package

Tax changes may first appear in a broader COVID-19 relief bill. These could include:

• Temporary tax cuts or credits

• Expanded retirement contributions

• Measures targeting small businesses

Such provisions would likely be effective immediately and aimed at supporting recovery from the pandemic.

2. Repeal and Replace the TCJA

Biden could attempt a full rollback and replacement of the 2017 Tax Cuts and Jobs Act (TCJA). However, given the narrow Senate majority, this would be difficult unless Democrats eliminate or amend the legislative filibuster. This option is unlikely in the near term as the administration’s focus is on pandemic response.

3. Modify the TCJA

Rather than repeal the TCJA, Biden may pursue targeted changes. These could include:

• Raising the corporate tax rate from 21% to 28%

• Adjusting individual tax brackets

• Modifying specific provisions such as deductions and credits

This incremental approach is more politically viable and may be prioritized once the public health crisis is under control.

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Factors Influencing Tax Policy Direction

Legislative Filibuster

Without changes to Senate rules, most major tax legislation would require 60 votes. Budget reconciliation—which requires only a simple majority—may be used, but changes passed through this method typically expire after 10 years.

Key Treasury Appointments

Treasury appointees will shape the administration’s tax strategy. Critical positions include:

• Assistant Secretary for Tax Policy

• Deputy Assistant Secretary for Tax Policy

• Tax Legislative Counsel

Until these roles are filled, major legislative activity may be delayed.

Bipartisanship Outlook

Biden has expressed a desire to govern in a bipartisan manner. A compromise—such as a corporate tax rate increase to 28% instead of restoring the 35% pre-TCJA rate—may appeal to both parties.

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Business Implications

While tax reform is not the administration’s immediate priority, some short-term tax changes could be included in pandemic relief legislation. More significant reforms, especially tax increases, are unlikely before 2022.

Businesses should monitor:

• COVID-related relief bills for immediate tax implications

• Treasury appointments and Senate dynamics for timing and scope of future reforms

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Current vs. Proposed Tax Policy Overview