Last week’s release of new Tax Gap estimates continued the recent spate of good news on the tax front.  Recall that Treasury’s end-of-fiscal year results earlier this month showed collections rose 21 percent to a whopping $4.9 trillion.  As measured against GDP, that’s the third highest tax take in our history.

Individual receipts, including pass-through payments, were a key part of that growth. They accounted for most of the increase, rising by $593 billion, or 29 percent, in just one year. So much for the TCJA or a lack of IRS funding gutting our finances. Obviously, neither of those …

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Last week we previewed the Midterm elections and shared our thoughts about how things will likely shake out. Today we’ll take a look at how those results will impact tax policy in the lame duck and beyond, with a focus on what it all means for the S corporation community.

Lame Ducks Tend to be Lame

Let’s begin with the bottom line – we don’t expect much from this lame duck.  There’s been lots of chatter about a litany of bills and other priorities that could move in the weeks following the midterms, but that always seems to be case and …

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The elections are less than a month out, and the implications for S corporations are huge.  If Democrats retain control, we can expect two more years of policy risk, with the threat of higher rates and increased estate tax levies looming large. If Republicans take either the House or the Senate, we can expect two years of divided government, with limited opportunities for tax policy to move and the focus shifting to the policy cliff taking place at the end of 2025.

So what will it be?  Here’s how we think things will play out.

Macro Trends

Let’s start with macro trends. Earlier …

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