Democrats control Congress in 2027. Here’s what their proposed tax changes for high earners, corporations, and data centers mean for your wallet and the economy.
Based on reporting by Kevin Kaufman (Tax Foundation).
What happened
Following the 2026 midterm elections, Democrats have retaken control of both the U.S. House of Representatives and the U.S. Senate, setting the stage for a new legislative agenda in the 120th Congress, which begins on January 3, 2027. According to the Tax Foundation, this shift in power will fundamentally alter the federal tax policy landscape, with Democrats prioritizing the restoration of major tax credits and the implementation of new revenue measures to fund them.
The new Democratic leadership aims to restore larger tax credits for health insurance purchases, as well as expand the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC). To pay for these expansions and other new spending, the party plans to increase taxes on high-income individuals and corporations. However, the Tax Foundation notes that Democrats will face limited maneuvering room in 2027 due to continued Republican control of the White House, meaning many proposals may serve as messaging vehicles rather than immediate law.
Key tax proposals on the table
Several specific tax changes are expected to dominate congressional debate in 2027. The Tax Foundation identifies the following as top priorities for Democratic lawmakers:
Corporate Tax Rate Hike: Proposals to raise the corporate tax rate from the current 21 percent are a central focus. Lawmakers are debating how high the rate should go, whether it should be graduated, and what changes to the corporate tax base should accompany the increase.
Millionaire Surtax: Senator Chris Van Hollen (D-MD) has proposed a surtax on taxpayers earning over $1 million, with a top rate of 12 percent. Similar income surtaxes are being discussed in both chambers.
Capital Gains and Wealth Taxes: Democrats are considering raising capital gains tax rates, ending the step-up in basis for inherited assets, and taxing unrealized capital gains annually for very-high-net-worth individuals. Some proposals go further, suggesting an annual wealth tax on billionaire assets.
Data Center and AI Taxes: There is significant interest in revising the tax treatment of data center and AI investments. Proposals include disallowing bonus depreciation for these sectors, enacting a new tax on "bits," and imposing an excise tax on data center electricity use.
What this means for you
For most middle-class readers, the immediate impact of these 2027 proposals is likely to be minimal, as many of the significant changes target high earners and corporations. However, the restoration of larger health insurance credits and expanded child tax credits could provide direct financial relief to households that rely on these benefits. If passed, these credits would reduce final tax bills dollar-for-dollar, effectively increasing take-home pay for eligible families.
For investors and business owners, the proposed changes to corporate taxation and data center incentives could influence investment decisions. A higher corporate tax rate might reduce after-tax profits for companies, while new taxes on data center electricity or AI infrastructure could increase operational costs for tech firms. The debate over bonus depreciation is particularly relevant for businesses planning significant capital expenditures in technology and infrastructure.
It is important to note that because President Trump retains veto power, many of these proposals may not become law in 2027. The Tax Foundation warns that the current debt limit and spending commitments limit the ambitions of new tax cuts or spending programs. Therefore, while the proposals signal a direction for future policy, their immediate implementation is uncertain.
Why it matters for the economy
The Tax Foundation argues that the proposed tax increases will dampen long-term U.S. economic growth. The organization highlights that Democrats face difficult trade-offs between raising revenue and maintaining economic momentum. The debate is not just about the size of the tax hike, but also about the administrative, legal, and economic risks of novel tax ideas, such as wealth taxes or taxes on unrealized gains.
International tax rules for corporations are also expected to be revisited, including changes to how foreign earnings are taxed and stricter guardrails against profit shifting to low-tax jurisdictions. These changes could affect the global competitiveness of U.S. companies and the flow of international investment.
What happens next
As the 120th Congress convenes in January 2027, expect intense debate over the specifics of these tax proposals. Democrats will need to navigate internal disagreements over whether to adjust existing tax code levers or enact new, untested tax ideas. The outcome of these debates will shape the direction of U.S. tax policy for the next two years and beyond, even if many proposals are blocked by the White House in the short term. Readers should watch for final legislative text and potential veto overrides, though the latter is unlikely given the current political balance.
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