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Accountancy Slice
USA
4th November 2026
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THE HOT STORY

Food prices and inflation drive voter backlash as Democrats take control of Congress

Rising food prices, fuel costs, and persistent inflation emerged as decisive factors in the U.S. midterm elections, with Democrats winning control of both the House and Senate amid widespread dissatisfaction with President Donald Trump's economic policies. At 09:00 EST, the Democrats had 54 Senate seats, compared to 44 for the Republicans, and 228 against 139 in the House. A national survey of more than 79,000 registered voters for the Asssociated Press and all the major TV and cable news networks found that approximately 90% considered the cost of living a crucial or major factor in their congressional vote, while roughly 60% were very concerned about food prices and a similar proportion about gasoline and diesel costs. Nearly two-thirds blamed Mr. Trump's policies for worsening inflation, while 75% described the economy as poor or not particularly good. Almost two-thirds believed Mr. Trump's tariffs had damaged economic conditions. In interviews as the results came in, the president said he believed the war with Iran had public support, but acknowledged that voters were unwilling to tolerate the short-term impact of higher gasoline prices.

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TAX

California billionaire tax faces defeat

California's proposed billionaire wealth tax has fallen behind in early election results. Proposition 40 would introduce a one-time 5% tax on billionaires' assets, raising an estimated $100bn to offset federal healthcare funding cuts, with 90% allocated to healthcare and the remainder supporting education and food assistance. The proposal has divided Democratic leaders, with Gov. Gavin Newsom opposing it despite support from the state Democratic Party. Two competing measures designed to undermine the tax, Propositions 41 and 42, remained too close to call, following a campaign that attracted approximately $425m in contributions across the three initiatives. Meanwhile, voters approved Proposition 3, making permanent an existing 1%–3% additional income tax on high earners that primarily funds education. Supporters of the billionaire tax have indicated they could pursue another ballot initiative in 2028 if the measure fails.

Florida voters approve major property tax cuts

Florida voters have approved Amendment 3 with approximately 62% support, introducing substantial property tax reductions for homeowners while raising concerns about significant cuts to local government services. The constitutional amendment will increase the homestead exemption for non-school property taxes to $150,000 in 2027 and $250,000 in 2028, potentially saving eligible homeowners thousands of dollars annually. It also caps annual assessment increases for non-homesteaded properties, including businesses, rental properties, and second homes, at 5%. However, state estimates suggest local governments could lose $12bn in annual revenue by 2031, potentially forcing reductions in public services, including emergency response and park maintenance, or prompting new taxes and fees. The measure represents a major policy victory for Gov. Ron DeSantis, despite opposition from local officials, law enforcement groups, and firefighters. State lawmakers are expected to consider implementing legislation during a special session.

Washington voters back 9.9% income tax on millionaires

Washington voters have signaled strong support for retaining the state's new 9.9% income tax on annual earnings above $1m, with Initiative 645, which sought to repeal the levy, trailing by 58% to 42% in early election results. The tax, scheduled to take effect in January 2028, is projected to generate $3.5bn annually from approximately 25,000 taxpayers when collections begin in 2029. Revenue will support public services, expand tax credits for lower-income families, and fund sales tax exemptions on essential goods, including diapers, hygiene products, and certain medications. Gov. Bob Ferguson and Democratic lawmakers have defended the measure as a way to address Washington's reliance on sales taxes and protect government funding. Opponents argue that the tax could discourage investment, drive businesses out of the state, and eventually extend to lower-income households. A constitutional challenge remains pending, leaving some uncertainty over implementation.

DEA potentially unlocks federal tax benefits for medical marijuana dispensaries

The U.S. Drug Enforcement Administration (DEA) has issued its first federal registrations to more than 900 state-licensed medical marijuana dispensaries across seven states, potentially allowing businesses to claim previously unavailable federal tax deductions. The move follows the Trump administration's April 2026 decision to reclassify state-licensed medical marijuana from Schedule I to Schedule III, easing federal restrictions. Registered businesses could benefit from deductions for operating expenses, including rent, advertising, and labor costs, which have historically been restricted under federal tax rules. Nearly 7,000 additional cannabis businesses have applied for registration. However, uncertainty remains over future DEA compliance requirements, the treatment of businesses selling both medical and recreational marijuana, and how federal oversight will interact with existing state regulations.

INDUSTRY

AICPA proposes stricter ethics rules for accounting firms backed by private equity

AICPA has proposed revised ethics guidance to strengthen auditor independence and address potential conflicts of interest in accounting firms operating under alternative practice structures, particularly those involving private-equity investment. The Professional Ethics Executive Committee (PEEC) has approved an exposure draft clarifying how existing independence requirements apply when audit firms operate alongside investor-backed entities. Key proposals include classifying controlling investors as network firms, expanding the individuals subject to independence rules, and prohibiting attest services for businesses over which investors exercise significant influence. The exposure draft is expected to be published later in November, opening a 120-day public consultation. If approved in 2027, the changes would take effect one year after adoption, although firms could implement them earlier.

PCAOB proposes changes to auditor comfort letter rules

The PCAOB has proposed amendments to its auditing standards to modernize requirements for auditor comfort letters and remove potential barriers to corporate fundraising. The proposed changes to AS 6101 would eliminate the existing 135-day limit on auditors providing negative assurance about changes in selected financial statement items, replacing it with requirements linked to companies' SEC reporting obligations. Under current rules, auditors can be prevented from providing such assurance even when companies are up to date with their regulatory filings, potentially delaying capital-raising activities. The PCAOB said the revisions would better align auditing standards with modern reporting deadlines, support efficient capital formation, and maintain investor protections. Auditors would retain professional discretion over whether to provide negative assurance. The proposals are open for public comment until January 4th 2027.

FIRMS

Block raises 2026 profit guidance despite $964m DOJ settlement

Block has reported a 22% increase in third-quarter gross profit to $3.2bn, ahead of analyst expectations of $3.1bn, prompting the Square and Cash App owner to raise its full-year gross profit guidance to $12.6bn from $12.5bn. The company has also reached a $964m deferred prosecution agreement with the U.S. Department of Justice relating to alleged customer abuses, representing a net cost of $764m, significantly above the $526m previously reserved. The stronger performance follows a major restructuring program involving workforce reductions, cost efficiencies and investment in artificial intelligence products, alongside efforts to expand Square's merchant services and increase engagement with Cash App. However, third-quarter operating expenses rose to $2.8bn, and the company recorded a loss of approximately $230m on Bitcoin investments. 

ECONOMY

Job openings reach four-month high as layoffs fall to lowest level in over a year

The U.S. labor market showed signs of renewed strength in September, with job openings increasing by 333,000 to 7.52m, their highest level in four months and above all economists' forecasts in a Bloomberg survey, according to the Labor Department. Layoffs declined to their lowest level since March 2025, while the voluntary quits rate rose to 2.1%, its highest in more than a year, suggesting improving worker confidence. Job vacancies increased across professional and business services, manufacturing, construction, government, trade, and transportation, with manufacturing openings reaching their highest level since late 2023. Hiring also accelerated, particularly in accommodation and food services, while the West recorded the largest regional increase in vacancies. The ratio of job openings to unemployed workers remained at approximately 1.1, indicating a relatively balanced labor market, compared with a peak of 2 to 1 in 2022.  

Factory order growth driven by aircraft demand and business investment

The Commerce Department reported Tuesday that U.S. factory orders rose 1.8% in September, exceeding economists' expectations of a 1.2% increase and accelerating from an upwardly revised 0.3% gain in August. Orders increased 7.2% year over year, supported by strong demand for aircraft, machinery, and technology-related equipment. Civilian aircraft and parts orders surged 28.3%, while machinery orders climbed 1.5%, and computer and electronic product orders increased 0.8%, bringing their annual growth to 14.9%. Orders for nondefense capital goods excluding aircraft, a key indicator of business investment, rose 0.6%, while shipments increased 1.2%. Manufacturing activity continues to benefit from substantial artificial intelligence infrastructure investment and resilient consumer spending, although economists warn that higher interest rates and declining inflation-adjusted household incomes could weaken demand next year.

LEGAL

Supreme Court to review 158-year-old federal ban on home whiskey distilling

The U.S. Supreme Court has agreed to examine whether a 158-year-old federal prohibition on home distilling exceeds Congress's constitutional taxing authority. The case, Department of Justice v. McNutt, follows conflicting federal appeals court rulings, with the 5th Circuit finding the ban unconstitutional and the 6th Circuit upholding it. Established in 1868 to prevent liquor tax evasion, the law prohibits distilling spirits in residential properties, with violations carrying penalties of up to five years in prison and a $10,000 fine. Challengers argue that the restriction exceeds federal authority over private, noncommercial activities, while the government maintains that it is necessary for effective tax enforcement. The Court is expected to hear arguments in early 2027 and issue a ruling by late June or early July, potentially clarifying the limits of Congress's taxing powers.

PRIVATE CREDIT

Private credit investors reconsider alternatives as tax complexity and liquidity risks mount

Private credit investors are increasingly questioning the benefits of alternative investments as unexpected tax obligations, administrative costs, and liquidity restrictions create additional challenges. Wealth advisors warn that delayed Schedule K-1 forms often force investors to extend tax filings, while investments operating across multiple states can trigger additional tax returns and higher preparation fees. Investors may also face liabilities on undistributed income, known as “phantom income,” alongside restrictions on withdrawing funds. Samuel Diarbakerly of Generation Capital Advisors and David Askew of Mercer Advisors report growing frustration among clients who were unaware of these complications before investing. Advisors recommend working closely with tax professionals, reviewing tax projections throughout the year, and maintaining sufficient liquidity to cover unexpected liabilities. Despite these concerns, alternative investments may remain appropriate for certain investors, particularly through tax-advantaged or tax-exempt accounts.

FRAUD

IRS urged to rethink fraud screening based on high refund rates

Tax law professor Andrew Leahey has questioned whether the IRS should treat tax preparers who exclusively file refund claims as higher-risk, warning that such screening could unfairly target legitimate taxpayers. A TIGTA report found that more than 38,000 preparers using noncompliant identification numbers filed over 2m returns in 2025, including nearly 12,000 preparers who submitted approximately 95,000 returns seeking almost $600m in refunds. Mr. Leahey argues that high refund rates do not necessarily indicate fraud, particularly among preparers serving lower-income households and wage earners. He recommends that the IRS assess preparers against comparable taxpayer groups, validate fraud indicators using evidence of actual noncompliance, and consider whether enforcement practices disproportionately burden vulnerable taxpayers.

TOOLS

AICPA launches AI-powered Rise Navigator

AICPA and CIMA have introduced Rise Navigator, an AI-powered strategic planning tool designed to help accounting professionals adapt to technological change and evolving industry demands. Developed from the Rise 2040 initiative, the platform draws on insights from 7,500 participants across 25 countries to provide personalized guidance on business strategy, workforce development, and career planning. Available to members and nonmembers through free registration, the tool allows users to assess strategic plans, identify emerging skills, and explore opportunities created by artificial intelligence. Tom Hood, AICPA and CIMA's executive vice president of business engagement and growth, emphasized the profession's shift toward higher-value advisory services while maintaining human judgment, trust, and integrity. The platform will be continually updated with new research and industry insights, providing an evolving resource to support accountants and firms navigating the future of the profession.

INTERNATIONAL

Euro zone countries 'integrating faster with the U.S. than with each other'

European Central Bank (ECB) ​Vice President Boris Vujcic has said countries in the euro zone are integrating faster with the United States than with each other. Referencing ECB research, Vujcic said estimated barriers to cross-border equity investment between the euro zone and the U.S. have fallen by a quarter ​since 2014, more than twice as much as barriers ​within the euro area, and suggested that Europe's fragmented capital markets make the continent less resilient. "In a fragmented Europe, investment becomes the margin of ⁠adjustment ​whenever a shock hits," he said. "That ​is a resilience problem before it is a growth problem."

Italy approves 2027 budget setting out tax hikes

Italy's 2027 budget will increase taxes ​on financial firms, insurers, energy companies and the gaming sector. The package sets out tax cuts and spending hikes worth €26bn ($28.91bn) in a bid to to lessen the fiscal burden ​for middle earners and the self-employed. Banks will have to contribute more than €5bn to help finance the measures. "There was no opportunity to reach a prior agreement with the financial sector, which I would nevertheless like to thank," Prime Minister Giorgia Meloni said.
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