A Republican-led House and GOP gains in the Senate also mean that Congress is likely to be less receptive to business or industry tax increases, including administration budget proposals to increase taxes on the foreign earnings of US multinationals. In addition, there are indications that Republicans may be receptive to a new foreign repatriation tax incentive and a corporate tax rate reduction.
In the near term, the midterm election is likely to influence bipartisan negotiations on legislation to address the scheduled expiration of 2001 and 2003 individual tax cuts, and 2009 expired tax provisions, such as the research credit and "look-through" treatment for payments between related controlled foreign corporations (CFCs). At a minimum, Republicans are insisting on a temporary extension of all 2001 and 2003 tax cuts, including the maximum tax rates on capital gains and dividends. Longer-term efforts to extend and expand the research credit may receive a boost from Senator Orrin Hatch (R-UT), who is expected to become the ranking Republican on the Senate tax-writing committee.
Of course, Republicans will face political and budget constraints as they attempt to move forward on their legislative priorities. Democrats still will have the ability to influence legislation through their control of the Senate and the president's veto pen. In addition, federal budget deficits were a major issue during midterm election. Republicans campaigned on spending cuts and generally oppose tax increases; however, a bipartisan compromise that includes a combination of spending cuts and tax increases may be necessary to enact deficit reduction legislation and address long-term fiscal challenges.
In short, companies might see delayed implementation of health reform, but the retention of Democratic control of the Senate, combined with the presidential veto, should temper any wholesale changes or repeal.