Top Democrats and Republicans in Congress released a $78 billion compromise on Tuesday that they have reached to expand the child tax credit and restore three popular expired business tax breaks, but the package needs to be enacted in an election year. faces a challenging road.
The plan includes $33 billion To partially extend a large expansion of the child tax credit, which was initially extended for one year as part of the broader 2021 pandemic aid legislation, and to extend expired business-related research, business, and capital deductions. Another $33 billion was extended to restore a set of tax benefits. , Both will run till 2025.
It would also include an increase in tax credits to encourage the development of low-income housing, Tax relief for disaster victims And Tax exemption for Taiwanese workers and companies Employed in the United States. The package would be funded by reining in the Employee Retention Tax Credit, a pandemic-era program meant to encourage employers to keep workers on the payroll that has become a hotbed of abuse.
The deal represents a rare bipartisan agreement spanning both houses, brokered by Congress’s two top tax writers: Representative Jason Smith, Republican of Missouri and chairman of the Ways and Means Committee, and Senator Ron Wyden, Democrat of Oregon and President of. Finance Committee. He has led an intense round of discussions with the aim of striking a deal and signing it into law in time for the start of tax filing season this month.
But Congress faces huge hurdles in the package even handling the basic task of funding the government.
“Fifteen million children from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a great thing to have this opportunity to pass a pro-family policy that will help so many children thrive.” Helps,” Mr. Wyden said in a joint statement with Mr. Smith on Tuesday. “My goal is to pass it in time to benefit families and businesses this upcoming tax filing season, and I am going to make every effort to accomplish that.”
Mr Smith backed that up with what he said would be “more than $600 billion”. Proven pro-growth, pro-America tax policies with key provisions supporting more than 21 million jobs.
Supporters expressed optimism about the plan’s prospects, given how unlikely it seemed for a bipartisan tax package to come together.
“It’s – I don’t want to say a legislative miracle, but it almost is,” said Senator Sherrod Brown, a Democrat from Ohio and a leading proponent of the child tax credit. “Six months ago, there was no chance for a child tax credit.”
Still, major obstacles remain. Congress is primarily focused on funding the government ahead of the shutdown deadline on Friday, and dissident House Republicans are putting Speaker Mike Johnson of Louisiana at odds.
The deal also faces opposition from many Senate Republicans, and House Democrats have argued that it should do more to expand the child tax credit. Mr. Smith and Mr. Wyden’s top tax-writing counterparts — Representative Richard E. Neal of Massachusetts, the senior Democrat on the Ways and Means Committee, and Senator Michael D. Crapo of Idaho, the senior Republican on the Finance Committee — are particularly supportive of the package. did not do.
In a statement Tuesday, Mr. Crapo called it “a thoughtful start.”
The White House was also non-committal, with a spokesperson suggesting that 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 will nearly halve child poverty in 2021 and provide relief to millions of families with children,” spokesman Michael Kikukawa said. “He is committed to fighting for the full expanded child tax credit.”
The effort is a test of whether Congress can pass significant legislation during an election year. Apart from funding the government, lawmakers are primarily 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 solid legislation and a political victory for President Biden and Democrats, even as Republicans could promote business tax breaks and People can point to the deal as proof that they are capable of governing despite a year of remarkable chaos and lack of productivity.
“Going forward in the election cycle, I think it becomes significantly more difficult,” Mr. Neal, who also noted the two parties’ narrow margins in each chamber, said last week. “But I think many of us can figure out how to get there.”
expanded child tax credit almost halved the child poverty rate in 2021 and estimated to cost $105.1 billion. It expired in 2022, bringing the amount families can claim per child to the level established in 2017 by former President Donald J. It was reduced to levels set by Trump’s tax cuts and limited how much of the credit low-income families could get.
The deal announced Tuesday would gradually increase the cap on how much money low-income families can get compared to higher-income families. It would make the credit more accessible to families with multiple children, allowing parents to use their previous year’s earnings to claim a larger credit and automatically adjusting for inflation starting in the current tax year. Will adjust from.
Many House Democrats, including Mr. Neal, spent last week pushing for greater emphasis on the child tax credit — which includes restoring monthly checks to recipients instead of the current annual payments — and raised questions about whether the deal would actually create equality for families and businesses. Offers, as advertised.
Representative Rosa DeLauro of Connecticut, the top Democrat on the Appropriations Committee, said, “The policy option will leave millions of children in preventable poverty while giant corporations that pay no taxes get massive tax breaks. ” Statement last week. “Now is the time to work on policy that will actually make their lives better, not create weak policy just to make a deal.”
Senate Republicans have expressed skepticism that a deal could become law, highlighting outstanding issues including identifying a legislative vehicle to legislate the package. House Republicans have worked hard over the past year to introduce far smaller bills, with a restive right wing emboldened to defy their leaders and block legislation to voice their grievances.
“I think the chances of getting this done, at least through the January period, are very slim,” Republican Senator Charles E. Grassley of Iowa said Thursday. He said House Republican leaders would not want to attach the package to any spending bill that already faces opposition from the far right.
South Dakota’s No. 2 Republican senator, John Thune, also cautioned last week that any increase to the child tax credit must be “reasonable” and come with a “good balance” of business tax breaks.
“Those are really tough issues,” he said of expanding the child tax credit. “You’re not going to get Republicans to agree to a lot of these things.”
The plan includes Republican-written bills that would exempt from taxes any compensation received for wildfire disasters or train derailments in East Palestine, Ohio, and provide treaty-like tax benefits to Taiwanese individuals and firms. Are for.
Election year political dynamics have clouded the package’s prospects.
For example, Mr. Brown of Ohio faces a tough re-election race in November, with Republicans seeing his seat as a prime opportunity to shift control of the Senate in their favor. Extending the child tax credit would be a legislative and political victory for Mr. Brown, who has made it one of his signature issues.
Still, some lawmakers said the bipartisan agreement shows that, at least in this case, electoral politics can push members of Congress to do something.
“What you’re seeing here in terms of politics is 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 concluded that the American People would like to see progress, and they would like to see both parties working together,” Senator Michael Bennet, Democrat of Colorado, said last week. “Whether there’s a political view on this, I don’t know. But I suspect “That this is a response from people who know that people at home are sick and tired of the chaos.”
alan rapport Contributed to the reporting.