Key Takeaways:

• Congress Controls the Purse, Not the IRS: The IRS does not create or change tax policy. The U.S. Congress directly sets tax rates, credits (like the Child Tax Credit), and deductions by passing federal laws. Senate and House of Representatives.
• Executive Orders direct how agencies enforce laws, but Presidents cannot bypass Congress to raise or cut tax rates.
• Why Midterm Elections Shift Power: If an opposition party wins a majority in the U.S. Midterm majorities empower lawmakers to reject executive proposals, block pending tax bills, or pass bipartisan tax modifications.
• Elections do not guarantee tax cuts; congressional majorities dictate whether taxes decrease or rise, regardless of economic figures.

U.S. non-residents are wondering how political shifts will affect federal tax rates, credits, and deductions.

People believe that IRS sets that policy, however, The IRS does not set tax policy.

Before diving into the discussion, understand how the U.S. implements policy and which legal bodies manage the process.

Under the U.S. Constitution, Congress holds the “power of the purse”. Congress must pass legislation through both chambers to set tax brackets, corporate rates, or child tax credits.

The Impact of Midterm Elections: Opposition majorities in Congress can block executive directives, forcing compromise to pass tax bills.

Key Tax Policies Dependent on Congressional Action

Congressional decisions dictate key tax variables for domestic taxpayers, expats, and non-residents with U.S.-sourced income alike.

What This Means for the Upcoming Tax Year

An election outcome does not automatically make the upcoming tax year more “public-friendly.” Any tax legislation currently pending in the House or Senate must be reviewed and accepted by both chambers.

• If a majority accepts tax cuts or extended credits, taxpayers could see lower obligations.
• If majorities raise rates or let tax relief expire, taxpayers face higher obligations regardless of political party.

Until new legislation is officially passed by Congress and signed into law, existing IRS guidelines remain in effect.

Tax Preparer POV:

If Republicans win Senate elections and fulfill campaign promises, lower tax rates could increase tax relief for U.S. residents. As for non-US residents, it totally depends on how the US and their country’s tax treaty work. 

Ahmed Raza.

Citations:

https://tax.thomsonreuters.com/news/tax-pros-gauge-midterm-elections-impact-on-policy-outlook/ 

https://www.france24.com/en/americas/20261102-what-changes-if-democrats-win-a-majority-in-congress