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WASHINGTON — A plan to temporarily expand the child tax credit and restore tax breaks for businesses received overwhelming bipartisan support in a committee vote Friday. It was a rare moment of compromise in a divided Congress heading into an intense election year.
Tax policymakers on the Republican-led U.S. House Ways and Means Committee voted 40-3 to send the American Families and Workers Tax Relief Act (HR 7024) to the House of Representatives for a vote.
White House press secretary Karine Jean-Pierre said Friday that the Biden administration is “encouraged” and “pleased” by the committee’s vote.
The framework, co-led by House Ways and Means Chairman Jason Smith of Missouri and Senate Finance Committee Chairman Ron Wyden (D-Ore.), includes efforts to address child poverty and expired Trump-era tax cuts. It has been included as a priority for both parties.
After four and a half hours of debate and several attempts by Democrats to at least partially restore more generous pandemic-era child tax credit benefits, the committee gave the major tax deal a nearly unanimous stamp of approval. Ta.
Washington Democrat Susan DelBene said after the vote that the bill is “in many ways an incomplete bill, but that’s the reality of divided government.”
“Nonetheless, this bill contains several provisions that I have advocated for years to support workers and families and grow the economy. That is why I am moving forward with this package. We voted, but there’s still much we can do,” she said in a statement.
More information on child tax credit changes
If ultimately passed, the bill would phase in the child tax credit for tax years 2023 through 2025, adjusting the credit for inflation.
The amount increases from $1,800 in 2023 to $1,900 in 2024 and $2,000 in 2025.
Under current tax law, parents can receive up to $1,600 per child.
The bill also aims to restore tax credits for the construction of low-income housing.
Regarding reinstatement of expired business tax incentives, the bill would restore full expensing of domestic R&D costs, 100% bonus depreciation on equipment purchases, and shorten the period during which businesses can deduct certain expenses. .
Other incentives include tax relief for eligible wildfire victims since 2014 and those who suffered losses as a result of the February 2023 train derailment in East Palestine, Ohio .
The bill also aims to establish tax incentives to encourage business expansion between the United States and Taiwan.
Smith said Friday that the bill is the culmination of more than a decade of discussions about how to “reform the tax code in a way that supports workers, families and small businesses.”
“The legislation we have before us today is a proven, effective, bipartisan package of common-sense tax legislation that rebuilds communities, supports job and wage growth, and grows our economy.” “Many members on both sides of this committee are co-sponsors of various policies in this bill,” Smith said in his opening remarks.
paid by ending another tax cut
The cost of the three-year contract is expected to be fully covered by the end of COVID-19 tax breaks for companies that retained employees during the pandemic.
Businesses were originally supposed to be able to claim the tax credit until April 15, 2025, but the new law will end the program on January 31 of this year, effectively halting the flow of applications that have become particularly popular in recent years. It turns out.
In his remarks, Smith said the plan was “rife with fraud and costs have ballooned six times higher than the (Congressional Budget Office’s) original estimates.”
The changes are expected to save the government an estimated $79 billion, according to an analysis by the Committee for a Responsible Federal Budget.
The Business Roundtable, an organization representing U.S. CEOs, has lobbied for the bill, calling for a “strong bipartisan vote” to “save three pro-growth tax policies essential to America’s competitiveness.” It was hailed as an important step towards recovery.
Rep. Vern Buchanan of Florida, a business owner, said it would be “huge” to not only ease interest deduction rules, but also restore the ability for businesses to deduct the entire amount as expenses.
“What I can tell you for small businesses is that deductions make a big difference and allow (owners) to grab a little more of the money they make and use it to expand and grow their businesses,” the Florida Republican said. Stated.
Fellow Florida resident Greg Steube said he is “working tirelessly” to reduce taxes on disaster payments, with a particular focus on Hurricane Ian, which caused extensive and costly damage to the Sunshine State in 2022. Stated.
“Today we can move one step closer to real relief,” said Steube, a Republican.
warning and opposition
The organization praised the bipartisan, bicameral bill constructed to offset its costs, but the bipartisan Committee for a Responsible Federal Budget said the policy would be extended beyond its 2025 deadline. “This would significantly increase the already large federal debt,” he warned.
If extended, it would cost $180 billion for child tax credits and $525 billion for business tax breaks by 2033, according to CRFB’s analysis.
And while most of the committee’s minority members supported the bill, more than a dozen expressed concern during the bill’s hike that the child tax credit expansion still does not meet the needs of low-income families. .
DelBene’s amendment to make the tax credit fully refundable failed because it was under temporary changes due to COVID-19.
Full refundability means the earned income threshold of $2,500 drops to $0, giving access to the poorest families.
DelBene also proposed returning the tax credit payments to monthly installments, as they were during the pandemic, and increasing the amount to $3,000 per child and $3,600 per child under 6.
The amendment was rejected by several of her colleagues, 18-25.
Democrats are pushing for expansion, especially permanent loans, after temporary pandemic-era increases showed they significantly reduced child poverty.
Several Republicans opposed DelBene’s amendment, preferring instead to “stick to the agreements that were made,” said Nebraska Rep. Adrian Smith.
“The amendments would undermine or destroy hard-won compromises,” he said.
Rep. Gwen Moore, D-Wis., said the increase was a “missed opportunity” to change the child tax credit. The committee rejected her amendment to increase the percentage at which credits would be earned to 40%.
The child tax credit is phased in at 15% of household income, so low-income earners may not reach the credit limit in a year, depending on their wages and hours worked.
“This shouldn’t be a labor program. We recognize the high cost of raising children and want to make sure they have the proper development, health and education,” Moore said. Told.
Moore was one of three non-voters, along with Representatives Lloyd Doggett of Texas and Linda Sanchez of California.
The House returns on January 29th.
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