by Top Democrats and Republicans in Congress on Tuesday released a $78 billion compromise they reached to expand the child tax credit and restore three popular expired tax breaks for businesses, but the package faces a challenging path to enactment. in an election year.
He The plan includes 33 billion dollars. partially extend a major expansion of the child tax credit that was initially bolstered for a year as part of the sweeping 2021 pandemic relief law, and another $33 billion to restore a set of expired business tax benefits related to research, deductions commercial and capital. . Both would last until 2025.
It would also include an increase in a tax credit to encourage the development of low-income housing, tax relief for disaster victims and Tax reductions for Taiwanese workers and companies. operating in the United States. The package would be financed by curbing the employee retention tax credit, a pandemic-era program to encourage employers to keep workers on the payroll that has become a hotbed of abuse.
The deal represents a rare bipartisan deal spanning both chambers, negotiated by Congress’ two top tax writers: Rep. Jason Smith, R-Mo., chairman of the Ways and Means Committee, and Sen. Ron Wyden, D-Ore. Chairman of the Finance Committee. They have led an intense round of discussions aimed at reaching a compromise and signing it into law in time for the start of tax filing season this month.
But the package faces major obstacles in a Congress that is struggling to address even the basic job of funding the government.
“Fifteen million children from low-income families will be better off as a result of this plan, and given the current miserable political climate, it is so important to have this opportunity to pass a pro-family policy that will help so many children get ahead.” Wyden said in a joint statement Tuesday with Smith. “My goal remains to pass this in time for families and businesses to benefit this upcoming tax filing season, and I will do everything I can to achieve that.”
Smith defended what he said would be “more than $600 billion.” on proven pro-growth, pro-America fiscal policies with key provisions supporting more than 21 million jobs.”
Proponents expressed optimism about the plan’s chances, noting how unlikely a bipartisan fiscal package seemed to come to fruition.
“It’s — I don’t want to say a legislative miracle, but it almost is,” said Sen. Sherrod Brown, an Ohio Democrat and a leading proponent of the child tax credit. “Six months ago, there was no chance of getting the child tax credit.”
Still, significant obstacles remain. Congress remains focused primarily on funding the government ahead of Friday’s government shutdown deadline, and House Republican rebels continue to embarrass Speaker Mike Johnson of Louisiana.
The deal also faces resistance from many Senate Republicans, and House Democrats have argued that it should do more to expand the child tax credit. Smith and Wyden’s top tax-writing counterparts — Rep. Richard E. Neal of Massachusetts, the ranking Democrat on the Ways and Means Committee, and Sen. Michael D. Crapo of Idaho, the ranking Republican on the Finance Committee) have notably not endorsed the package.
In a statement Tuesday, Crapo called it “a thoughtful starting point.”
The White House was also noncommittal, with a spokesperson suggesting President Biden would prefer a broader expansion of the child tax credit.
“The president is proud that the expanded child tax credit he fought for and signed into law cut child poverty nearly in half in 2021 and provided respite for tens of millions of families with children,” said spokesman Michael Kikukawa. “He remains committed to fighting for the full expansion of the child tax credit.”
The effort is a test of whether Congress can pass meaningful legislation during an election year. Beyond funding the government, lawmakers have largely focused on politically contentious negotiations over a new immigration policy in exchange for additional military aid to Ukraine.
A new law to expand the child tax credit would be a rare piece of substantive legislation and a political victory for President Biden and Democrats, even though Republicans could also push for corporate tax breaks and point to the deal as evidence of who are capable of governing. despite a year of notable chaos and lack of productivity.
“I think going into an election cycle things get considerably more difficult,” Neal, who also noted the narrow margins of both parties in each chamber, said last week. “But I think a lot of us could figure out how to get there.”
The expanded child tax credit cut child poverty rates almost in half in 2021 and cost approximately $105.1 billion. It expired in 2022, reducing the amount families could claim per child to levels set by former President Donald J. Trump’s 2017 tax cuts and limiting the amount of credit low-income families could receive.
The agreement announced Tuesday would gradually increase the limit on how much lower-income families could receive to match the amount of higher-income families. It would also make the credit more accessible to families with multiple children, allow parents to use the previous year’s income to claim a larger credit, and automatically adjust for inflation starting in the current tax year.
Several House Democrats, including Neal, spent the past week pushing for more enforcement of the child tax credit (including reinstating monthly checks for recipients instead of the current annual payments) and questioning whether the deal it truly offered parity for families and businesses, as advertised.
“Millions of children would be left in avoidable poverty because of a political choice, while giant corporations that pay no taxes get a huge tax cut,” Rep. Rosa DeLauro of Connecticut, the top Democrat on the House Committee, said in a statement. Assignments. statement last week. “It’s time to get to work pushing for policies that truly improve their lives, not watered-down policies for the sake of compromise.”
Senate Republicans have expressed skepticism that a deal could become law, highlighting outstanding issues including identifying a legislative vehicle for the package to become law. House Republicans have struggled over the past year to introduce many more minor bills, with a restive right emboldened to challenge their leaders and block laws to register their grievances.
“I think the chances of getting it done, at least during the January period, are pretty slim,” Sen. Charles E. Grassley, R-Iowa, said Thursday. He noted that House Republican leaders would not want to attach the package to any spending bill that already faces disagreement from the far right.
Sen. John Thune of South Dakota, the No. 2 Republican, also warned last week that any boost to the child tax credit would have to be “reasonable” and come with a “good balance” of business tax breaks.
“Those are really difficult questions,” he said of expanding the child tax credit. “We’re not going to get Republicans to agree to much of that.”
Included in the plan are Republican-written bills to exempt from tax any compensation received for wildfire disasters or the train derailment in East Palestine, Ohio, and to provide treaty-like tax benefits to individuals and businesses Taiwanese.
The political dynamics of an election year have clouded the package’s prospects.
Ohio’s Brown, for example, faces a tough re-election race in November, and Republicans see his seat as a prime opportunity to gain ground that could swing control of the Senate in their favor. Increasing the child tax credit would be a legislative and political victory for Brown, who has made it one of his signature issues.
Still, some lawmakers said the bipartisan agreement suggested that, at least in this case, electoral politics might be prompting members of Congress to do something.
“What we’re seeing here in terms of politics is that both parties – instead of failing and then pointing the finger at the other side and blaming the other side for the failure – I think both parties have come to the conclusion that the people “American would prefer to see progress, and they would prefer to see both parties working together,” Sen. Michael Bennet, D-Colorado, said last week. “I don’t know if there is a political perspective on it. But I suspect it’s a reaction to people knowing that people at home are sick and tired of the chaos.”
Alan Rappeport contributed reports.
