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Senate Finance Chairman Ron Wyden and House Ways and Means Chairman Jason Smith on Tuesday announced a nearly $78 billion package that would restore three business tax credits, expand the child tax credit and promote low-income housing. announced a tax agreement.
Mr. Wyden, R-Ore., and Mr. Smith, R-Missouri, aim to pass their tax proposals by Jan. 29 to avoid chaos during tax filing season. Both parties will need to find a legislative vehicle for the measure, which has shored up support amid criticism of the deal from the right and the left, and as the tax law looks set to fall behind a stopgap spending bill announced over the weekend. .
“15 million children from low-income families will be better off as a result of this plan. Given today’s dire political climate, pro-family policies that will help so many children get ahead It is a great deal to have the opportunity to pass this,” Wyden said in a statement.
The deal’s expansion of the child tax credit means low-income families with multiple children will qualify for more tax credits more quickly. Other changes include making more credits available as refunds. The current limit of $1,600 per child will increase to $1,800 in 2023, and in 2025 he will increase in stages to $2,000. This indexes the total credit, which is currently limited to $2,000 per child. Inflation will start in 2024.
The agreement would also allow families to use their previous year’s income to qualify for relief, according to a summary of the package, which has not yet been introduced into legislative text.
disaster relief, housing loan
Expanding low-income housing tax credits and tax breaks for individuals affected by natural disasters and the train derailment in East Palestine, Ohio, are new additions since a preliminary outline of the agreement was reported earlier this month. The content was as follows. The House Ways and Means Committee approved a nearly $5 billion standalone disaster relief bill in November.
The policy reinstates the 12.5% cap on the low-income housing tax credit that was in place from 2018 to 2021 and allows states to allocate more of the credit to affordable housing projects. Become. Senate Democrats had urged Wyden to include a housing clause in the deal. Wyden said the expansion will support the construction of more than 200,000 units of affordable housing.
The bill would also extend tax treaty benefits to U.S. companies doing business in Taiwan, and vice versa. And for the first time since the 1950s, the measure would raise the threshold for companies to report payments to subcontractors from an initial $600 to $1,000, which would then be indexed to inflation.
Mr. Smith touted the business provisions included in the package.
“American families will benefit from this bipartisan agreement that provides greater tax relief, strengthens Main Street businesses, improves our competitiveness with China, and creates jobs,” he said in a statement. Stated. “This legislation locks in more than $600 billion in proven, pro-growth, pro-American tax policy with key provisions that support more than 21 million jobs. Colleagues to pass this bill We look forward to working with you.”
The policy would reinstate corporate tax breaks that were phased out to lower prices in the 2017 tax law. The package will allow companies to deduct domestic R&D investments all at once, instead of having to deduct them over five years. The foreign R&D investment deduction would be amortized over 15 years.
The package would also reinstate a more generous cap on interest deductions introduced by the 2017 tax law and phased out in 2022. It extends a provision in a 2017 law that allows companies to fully deduct investments in short-term assets. such as machinery and other equipment. Last year, this deduction was reduced to 80% of the purchase price and is scheduled to be completely phased out by 2027 unless Congress acts.
The agreement will allow small and medium-sized enterprises to deduct investments up to $1.29 million from $1 million.
Tax managers plan to end the pandemic-era employee retention tax credit program early to help pay for the deal. They estimated that ending the program would offset more than $70 billion of the package’s costs.
Business tax breaks and an expansion of the child credit make up the bulk of the deal’s price tag, which would cost about $33 billion each, aides said.
The bill would not raise the $10,000 cap on state and local earned income tax deductions, potentially undermining support among lawmakers in high-tax, high-cost-of-living states like California, New York and New Jersey.
group considers
The policy received a positive response Tuesday from businesses and some, but not all, center-left policy groups.
Joshua Bolten, CEO of the Business Roundtable, a group of leaders from major U.S. companies, said restoring business incentives would encourage domestic investment and create jobs. Ta.
“All three tax policies have a long history of bipartisan support and are critical to strengthening America’s global competitiveness,” Bolten said in a statement.
The Center on Budget and Policy Priorities similarly praised the deal, saying in a report that expanding the child tax credit would have a “significant impact” by targeting households that do not qualify for the full amount. Ta. The policy group said the proposed deal would lift up to 400,000 children out of poverty.
“The top priority of this proposal is to provide more support to most of the approximately 19 million children who currently receive only partial credit or no credit at all because their family incomes are too low,” the group said. Give it a lot of credit.” “In the first year, more than 80% of the approximately 19 million children under the age of 17 in low-income households who currently do not receive full financing, or approximately 16 million children, will benefit.”
Patriotic Billionaires, a group of wealthy people who push for higher taxes on people like them, called the child credit expansion an “undeniable benefit” brought about by the deal.
But the same does not apply to business breaks, they said.
“At the same time, I am fed up with those who saw the obvious need to extend these benefits as an opportunity to extract tax breaks for companies that have made record profits and artificially pushed up inflation. did not need benefits,” Erica Payne, the group’s founder and president, said in a statement. She “didn’t have to trade horses at the racetrack.” [child credit]”
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