Andrew Lautz, tax expert, warns US businesses face ‘partisan tug-of-war’ over taxes and tariffs as midterm Election Day looms

US midterm elections could shape Trump tax policies, corporate taxes and tariffs, creating uncertainty for businesses and investors over future costs.

US businesses are facing uncertainty about future tax rules as the country prepares for the November midterm elections. The election results could affect decisions on taxes, tariffs, government spending and business rules. Andrew Lautz, Senior Director of Federal Policy at the Tax Foundation, said in an exclusive interview with HT.com that US businesses are caught in a political fight between Democrats and Republicans over future tax rules as the midterm elections approach.

Andrew Lautz, Senior Director of Federal Policy at the Tax Foundation, discusses US business tax uncertainty ahead of the 2026 midterm elections. (Andrew Lautz)

Businesses and investors are already dealing with high interest rates, rising prices, government debt and concerns about the economy.

US midterm elections could affect future tax rules

One of the biggest questions ahead of the elections is whether Democrats will win control of the US House of Representatives, the Senate or both.

The results will decide how much power Democrats have to question the Donald Trump administration and influence future government decisions. However, Lautz said the midterm elections could have a bigger impact on tax policies in 2028 and 2029 than in 2027.

Several tax benefits introduced under the One Big Beautiful Bill, a major tax law passed in 2025, are set to end on December 31, 2028.

The next Congress will have to decide whether to continue these tax benefits, add more benefits or let them end.

Democrats and Republicans may disagree over which tax deductions should continue and how much tax relief people should receive.

Lautz told HT.com that there will probably be political pressure from both parties to extend these benefits. He described the December 2028 deadline as a "must-pass deadline" because Congress will face pressure to act before the deductions expire.

Democrats may push to increase US corporate tax rate

Democrats may also try to reverse some tax cuts introduced under the One Big Beautiful Bill, including by increasing the corporate tax rate.

The current US corporate tax rate is 21%. Some Democratic proposals suggest raising it to between 25% and 28%. Others have discussed bringing back the previous 35% corporate tax rate that existed before 2018.

Trump tariffs could become a major issue after midterms

Tariffs are another issue that could create disagreements between the Trump administration and Democrats in Congress. Some Democrats support certain tariffs imposed by Trump, while others oppose them completely.

Trump, however, has strongly supported his tariff policy and does not want to remove the tariffs If Democrats win control of one or both chambers of Congress, they could try to challenge the administration's trade policies.

Lautz said tariffs are likely to remain an important issue in the coming years because Democrats and Republicans do not have a common position on them.

Democrats could make new tax laws harder to pass

If Democrats win the House but Republicans retain the Senate, major tax legislation could become difficult to pass. However, the biggest change would come in the House, where Democrats would gain control of committees and their leadership.

The House Ways and Means Committee, which handles tax policy, could get a new Democratic chairman. Representative Richard Neal could organize hearings, send letters to the Trump administration and question companies or other organizations.

Lautz described this situation as a three-way political battle that could make it difficult for Congress to pass anything beyond essential legislation.

Republicans may extend tax breaks for workers and seniors

If Republicans retain control of both the House and Senate, they could continue pursuing tax policies that have support within their party. Lautz said Republicans could revisit proposals that were removed from the One Big Beautiful Bill during negotiations.

They could also extend the existing deductions for tips, overtime, car loan interest and seniors. Republicans may even try to make these deductions larger or introduce new tax benefits. However, Lautz said it remains unclear which of these proposals Republicans would actually include in a new reconciliation package.

Businesses could have fewer concerns about future tax increases if Republicans retain control of the House and Senate. Lautz said Democrats have generally been more supportive of increasing taxes on businesses than Republicans in recent years.

Therefore, a Republican-controlled Congress could make business tax increases less likely in the near future.

Lautz said the political situation is not always as simple as Republicans supporting one position and Democrats supporting another.

US businesses face uncertainty over future tax changes

Lautz said businesses have faced uncertainty over US tax rules for many years because the tax code keeps changing. Whenever political control shifts between Democrats and Republicans, the direction of tax policy can change as well. This creates problems for companies trying to plan their investments, hiring and future business decisions.

Lautz told HT.com that the situation could turn into a "tug-of-war" over how the US tax system should treat businesses. If Democrats regain control of Congress, businesses could face uncertainty over possible tax increases and regulatory changes, particularly if Democrats win the presidency in 2029. However, political disagreements could also make it difficult for new laws to be passed.

Lautz pointed out that this political deadlock can sometimes give businesses a degree of certainty because companies know that existing rules are unlikely to change immediately.

Frequent changes make it difficult for companies to understand their future tax costs and plan long-term investments. Lautz said businesses would have more confidence to invest in the US if the country had a more stable tax system.

High interest rates and tariffs could affect US business investment

Lautz said he had not personally spoken to business owners about whether they were delaying hiring or investments because of election uncertainty. However, he pointed out that high interest rates and tariffs were already affecting companies.

These costs could put pressure on business profits and make some companies less willing to hire new workers or invest in expansion. Lautz said lower tariffs and fewer trade barriers could encourage companies to invest more and hire additional workers.

The US government's rising debt and budget deficit could make it harder for Congress to introduce or extend tax benefits.

Lautz said US debt held by the public has crossed $32 trillion, which is more than 100% of the country's gross domestic product. The government also recorded a budget deficit of around $2 trillion in the previous year.

When asked to identify one policy issue that businesses and ordinary Americans should watch after the midterms, Lautz pointed to tariffs and trade policy. He said tariffs are taxes and have become a major part of the Trump administration's economic strategy.

They have also affected US businesses and households. Some Democrats are campaigning on promises to repeal the tariffs if they gain control of Congress. However, their ability to make major changes would remain limited because Trump is still president and has the power to veto legislation.

Lautz expects Democrats to try to take some action on tariffs if they win control of Congress, even if those efforts are largely symbolic. He said tariffs have become an important economic issue in the midterm elections and could influence how Americans vote.