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File photo: August 15, 2023, US Capitol Building in Washington, USA. Photo: Kevin Wurm/REUTERS
WASHINGTON (AP) — The House accomplished something unusual Wednesday with broad bipartisan support. The tax cut package combines about $79 billion in tax cuts that strengthen child tax credits for millions of low-income families and strengthen three tax cuts for businesses. Delivering much-needed policy wins to legislators on both sides of the political aisle.
The bill’s prospects for passage are uncertain as it remains in the Senate, but the tax bill could represent a rare breakthrough for the House, which has struggled to pass final legislation. The bill passed by a vote of 357-70.
House Speaker Mike Johnson (R-Louisiana) announced his support for the bill Wednesday morning. He spent part of the previous day meeting with Republican lawmakers concerned about a particular feature of the bill: the expansion of the child tax credit. Others complained that the bill failed to address a $10,000 cap on the total amount of property, state and local taxes that consumers can deduct on their federal returns. Raising the cap has been a top priority for Republicans in New York’s congressional delegation, and their 2022 victory helped give the party a majority.
Prime Minister Johnson has promised to introduce legislation to address the cap, but there is no text for the bill yet and the bill still needs to pass through the House of Commons Rules Committee, the timing of which is very fluid. Johnson’s press secretary, Athina Lawson, said he and Rep. Jason Smith (R-Missouri), chairman of the House Ways and Means Committee, agreed to work with lawmakers to “find a path forward.” He said he did.
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Prime Minister Johnson said the House of Commons tax cut bill was an important bipartisan piece of legislation that would restore a “conservative, pro-growth tax system.” He also said it would bring an early end to a “wasteful program of the coronavirus era” that has been plagued by fraud. Accelerating the deadline to apply for employee retention tax credits is expected to significantly offset the cost of the bill’s tax cuts.
Mr Johnson also stressed the importance of the bill passing the House of Commons Ways and Means Committee before it goes to the House of Commons for a vote, saying it was a good example of how Parliament should work.
House Republicans wanted to immediately restore full credits to businesses for purchasing new equipment and machinery and spending on domestic research and development. They argue that such investments will grow the economy and incentivize American companies to keep manufacturing facilities and operations in the United States. The bill would give businesses more flexibility in determining how much they can deduct from their borrowings.
“Each of these policies will help American businesses grow, create jobs, and increase their competitive advantage against China,” Smith said as the House debate began.
Democrats focused on expanding the child tax credit. The tax credit is $2,000 for each child, but it is not fully refundable. The bill would gradually increase the amount of the credit available as a refund, increasing it to $1,800 on a 2023 tax return, $1,900 on next year’s tax return, and $2,000 on a 2025 tax return. . The bill would also adjust the topline credit amount to temporarily increase in line with inflation.
The nonpartisan Tax Policy Center estimates that households that benefit from changes to the child tax credit will receive an average tax cut of $680 in the first year.
Democrats pushed to restore a more generous tax credit, with monthly payments, passed in 2021 during President Joe Biden’s first year in office. The loan was $3,600 per year for children under age 6 and $3,000 for children ages 6 to 17. However, most members were willing to accept the benefits of the compromise.
“You know how they say half a loaf of bread is better than nothing,” said Democratic Rep. Danny Davis. “It’s less than half a loaf of bread, but our families and businesses need help, so I’m going to vote yes.”
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“What we have in front of us tonight is very simple: 16 million children will benefit from improvements to the Child Tax Credit. It’s a fact.”
But that wasn’t enough for some Democrats.
“This bill provides billions of dollars in tax cuts for the rich and pennies on the poor,” said Democratic Rep. Rosa DeLauro. She said, “Big business has never been richer. There is no equal divide.”
And for some Republicans, it was too much. Key critics of the child tax credit expansion likened it to “welfare.”
“What is a refundable tax credit? It’s welfare by a different name. We’re going to give cash, checks to people who don’t pay taxes,” said Rep. Thomas Massie (R-Ky.). Ta.
Georgia Republican Rep. Drew Ferguson took offense to that characterization, saying, “On this side of the aisle, we all believe that you have to work to receive federal benefits. That’s what this bill does. This is the purpose of
Despite complaints about the tax bill from some of the House’s most conservative and liberal members, sizable majorities from each party voted in favor of it. Supporters hope a strong show of support will spur action in the Senate.
The bill maintains the threshold of households with $2,500 in income to qualify for the refundable child tax credit.
The bill also strengthens tax credits for building or renovating rental housing for low-income households, resulting in an estimated 200,000 additional housing units nationwide. This was a key priority for lawmakers in a state grappling with a severe housing shortage and rising prices. Victims of certain natural disasters and the train derailment in East Palestine, Ohio, would also no longer be charged large taxes on payments they receive to compensate for their losses.
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