The House Freedom Caucus is still studying the details, but some conservatives have objected to expanded child tax credits as a disincentive to work. The bill would be partially paid for by ending claims for the Covid-era Employee Retention Tax Credit, which some Republicans argue helps small businesses.
Child Credits
Democrats’ votes are needed to pass in the House and they may seek changes to the child tax provisions. Progressives such as Connecticut’s Rosa DeLauro last week called for the full expansion of the credit from a current maximum of $2,000 per child to $3,600 for young children.
Wyden and Smith’s deal would help the working poor by making a larger portion of the tax credit available to families with low tax obligations. Currently those families aren’t allowed access to the full credit. Poor families with more than one child would gain the most.
The $2,000 child tax credit also would be indexed to inflation.
Colorado Senator Michael Bennet, who co-authored the pandemic-era expansion of the child credit, in a statement urged fellow Democrats to accept the deal and come back later for more. Democratic Senator Sherrod Brown, who faces a tough reelection fight in Ohio in a race that could determine which party controls the Senate, also backs passing the measure. Brown has long advocated for an expanded child tax credit, and he also secured a tax break for residents of East Palestine, Ohio on compensation paid to them by Norfolk Southern after last year’s rail disaster.
“This bipartisan tax deal is a win-win that will cut taxes for Ohio families and Ohio manufacturers,” Brown said.
Business Breaks
The proposal would restore several expired or expiring business tax breaks such as allowing companies to immediately deduct the full cost of U.S.-based research and development instead spreading the benefit out over five years. Limiting the tax break to domestic R&D is a disappointment to industries with large foreign activities like pharmaceuticals.
The deal also restores the ability for businesses to immediately write off the purchases of equipment like machines and vehicles, and it allows for the deduction of some types of interest.
Boeing Co., NextEra Energy Inc., and General Motors Co. are some of the companies that will benefit under the return of the equipment write off, which generally helps boost manufacturing and utility companies that are highly capital intensive.
The Business Roundtable and the National Association of Manufacturers have made passing the tax package a top lobbying priority.
The deal includes bipartisan legislation to spur investment between the U.S. and semiconductor superpower Taiwan by providing double taxation relief for businesses operating in the two democracies.
Lawmakers say the package would be paid for by ending new claims for the troubled employee retention tax credit program on Jan. 31, after a public notice.
This article was provided by Bloomberg News.