The outlook in the Senate is a little bit more murky. Senate Republican leader Mitch McConnell has been silent on it and top Republican tax-writer Mike Crapo has threatened “hundreds” of amendments on the Senate floor to change the bill.
Critics of the measure are focusing on a provision that allows individuals without taxable income in 2025 to use their income in 2024 to claim the credit in that year. They argue that this undermines the incentive to work in 2025. Under existing law continued by the tax bill, an individual must earn at least $2,500 to receive a portion of the child tax credit. Supporters of the bill point out that the Joint Committee on Taxation, the official scorekeeper of Congress, has found negligible impact on the economy and labor market from the bill.
There is also a debate among Republicans on the way the bill pays for the tax breaks by ending the fraud-plagued Covid-era employee retention tax credit. Critics say that since that tax break was not paid for in the first place, ending it shouldn’t count as a pay to pay for the child tax breaks.
A coalition of 250 business groups including the U.S. Chamber of Commerce, Business Roundtable and National Association of Manufacturers has lobbied hard for the bill authored by Ways and Means Chairman Jason Smith and Senate Finance Chairman Ron Wyden.
The measure would restore expired tax breaks allowing businesses to more quickly recoup the costs of domestic research and development, interest on business loans and investment in equipment. The research tax break would be retroactive to the 2022 tax year, so manufacturers and technology companies would see a large immediate benefit this spring from the change. The return of the full capital expensing perk would benefit companies that are highly capital intensive.
The bill allows more of the $2,000 per child tax credit to be paid to individuals with low income and boosts payments to low income filers with multiple children. The maximum credit would be indexed to inflation for two years starting in 2024.
The bill also includes a double taxation agreement with Taiwan, a provision that irks Beijing.
This article was provided by Bloomberg News.