By Caitlin Reilly, CQ-Roll Call (TNS)
The House Ways and Means Committee voted overwhelmingly Friday to approve a $78 billion tax package that would revive a trio of business tax incentives and expand the child tax credit.
The panel backed the measure on a 40-3 vote, with unanimous Republican and strong Democratic support, despite the minority party’s criticism of the package for doing too little to boost the child tax credit. Democratic support is likely to be key if the bill is to pass the House as a stand-alone bill, particularly if leadership wants to limit amendments or debate on the floor.
“This bill contains important provisions that individually have bipartisan support,” said Ways and Means Chairman Jason Smith, R-Mo. “We can show our constituents, who are struggling with inflation and high interest rates, that when Congress works together, we can still achieve big things: bipartisan tax relief that grows wages, supports better jobs, gives families more breathing room and keeps America competitive on the world stage.”
While Democrats criticized the bill for falling short of the 2021 expansion of the child tax credit, all but three voted for the measure: Reps. Lloyd Doggett of Texas, Linda T. Sanchez of California and Gwen Moore of Wisconsin.
Backers cited the boost to low-income housing tax credits, tax relief for victims of natural disasters and the end of double-taxation of American entities operating in Taiwan and vice versa.
“Legislation is about choices. And we got a lot into this bill. We pushed our way into it,” said Richard E. Neal of Massachusetts, the top Democrat on the panel. “We could walk out of here today saying that child credit is better than it was when we walked in. And I think that that in and of itself is a milestone. Not what we wanted—you can hear that today. But we’re going to keep pushing and pushing and pushing.”
The White House lent its support to the bill on Friday, letting it be known that President Joe Biden would likely sign the legislation if it reached his desk.
“It is a welcome step forward and we believe Congress should pass it,” White House Press Secretary Karine Jean-Pierre told reporters.
‘Significant step forward’
The 2021 child credit expansion boosted the per-child benefit to as much as $3,600 for lower-income families, made it fully refundable and allowed recipients to receive their credits in advance monthly installments. Advocates say that’s why the child poverty rate hit a historic low that year, before more than doubling the following year.
But Democrats on the committee who backed the bill said its slimmer child tax credit expansion was better than the alternative and would act as a starting point for negotiations in 2025 when many provisions of the 2017 tax law expire.
“This is a lost opportunity, but let’s face it, we do not have the majority right now,” said Rep. Donald S. Beyer Jr., D-Va., who voted for the bill. “While this bill does not get us back to full refundability or the monthly advance payments, it still represents a significant step forward in reducing child poverty.”
The committee rejected four amendments offered by Democrats, many targeting the child tax credit provisions in the bill. Democrats offered and withdrew another six amendments in the interest of time.
The bill would make the biggest difference for low-income families with more than one child, who could qualify for more of the credit faster under its provisions. It would also make more of the credit available as a refund to taxpayers and index the total credit to inflation.
The 2021, one-year expansion cost about $110 billion, compared to the $33 billion expansion spread over three years included in the bill, which would make the change retroactive to the start of last year.
The committee rejected three amendments seeking to make the credit more generous and a fourth was withdrawn.
The committee also rejected an amendment offered by Rep. Bill Pascrell Jr., D-N.J., to increase the $10,000 cap on state and local tax deductions to $60,000. The party-line vote on Pascrell’s amendment was 16-24.
Business trio
The deal struck by Smith and Senate Finance Chairman Ron Wyden, D-Ore., would also revive a trio of business tax incentives that were reduced to help lower the price tag of the 2017 tax law.
The package would allow businesses to deduct domestic research and development investments all at once, rather than spaced out over five years, retroactive to the start of 2022—generating big refunds for companies that paid higher taxes during the last two years.
It would also reinstate a more generous cap on interest payment deductions put in place by the 2017 tax law and phased out in 2022. And it would renew a provision from the 2017 law allowing businesses to deduct all of their investments in shorter-term assets such as machinery and other equipment.
The business incentives drew praise from committee Republicans, who also said no one got everything they wanted, but that the package had something for everyone.
“We had to give up a little bit of everything here, so I think all of us ended up with a something that is a good package that our colleagues will support on the floor,” Rep. Claudia Tenney, R-N.Y., said, adding that the package would “preserve so many things that were great” in the 2017 tax law.
The bill’s progress in the House will be closely monitored in the Senate, where Republicans have not publicly signed on to support the package negotiated by Senate Finance’s top Democrat.
“Getting a strong vote over there in the House is going to be very helpful to our efforts,” Senate Finance member Todd Young, R-Ind., said Thursday. “That could be the determinative factor—is having a strong Republican vote over there.”
The House is out next week, so the earliest the chamber could vote would be the week of Jan. 29. That likely puts the chief tax writers’ target of getting the package enacted by the start of tax filing season out of reach. But taxpayers could still potentially claim the expanded credits on their 2023 returns before the April deadline if both chambers act fast enough.
— Niels Lesniewski contributed to this report.
______
©2024 CQ-Roll Call Inc., All Rights Reserved. Visit cqrollcall.com. Distributed by Tribune Content Agency LLC.
Thanks for reading CPA Practice Advisor!
Subscribe Already registered? Log In
Need more information? Read the FAQs
Tags: Income Tax, Legislation, Taxes
