House Passes Bipartisan Tax Bill Without SALT Changes

“It’s a strong, commonsense, bipartisan step forward in providing urgent tax relief for working families and small businesses,” Smith said on the floor ahead of the 357-70 vote. “Parents in Main Street communities across this country will see lower taxes, more opportunity and greater financial security after we pass this legislation.”

The bill would devote about $33 billion to reviving a trio of business tax breaks and roughly the same amount to expand the child tax credit, with the most significant gains going to low-income families with more than one child. The legislation would also boost the low-income housing tax credit, end double taxation of U.S. companies operating in Taiwan and provide tax relief to victims of natural disasters.

The cost would be offset by ending the processing of employee retention credit claims early. The pandemic-era tax break has been rife with fraud, prompting the IRS to pause processing claims last year to sort through $2.8 billion worth of potentially fraudulent claims.

‘Welfare bill in drag’

Republicans voted for the bill by a margin of 169-47, despite criticism for the party’s right flank about its expansion of the child tax credit. Rep. Matt Gaetz, R-Fla., dismissed the partially refundable child tax credit and business breaks as a form of welfare.

“This is not a tax bill,” Gaetz said. “It is a welfare bill in drag.”

Ways and Means member Rep. Greg Murphy, R-N.C., who supported the bill, said he shared concerns raised by some Senate Republicans that allowing families to use the previous year’s income to qualify for the child tax credit would weaken its work requirements.

“I agree, but there’s also a thing called negotiation,” Murphy said. “We don’t have the perfect bill because we don’t have supermajorities in each chamber.”

Democrats adopted a similar attitude toward the bill, with many saying it wasn’t the bill they would draft, but that it would improve on the status quo. Ways and Means top Democrat Richard E. Neal of Massachusetts said he pitched it to his party at Wednesday morning’s whip meeting.

“We were able to assert the reality of what’s in the bill. It does enhance the child tax credit. It does not give us everything we wanted. Many of these other provisions are also popular with Democrats,” Neal said ahead of the vote. “The vehicle that we’re going to vote on tonight is the best that we were going to get.”

Ahead of the vote, Democrats criticized the package for doing too little to expand the child tax credit, specifically failing to make the full credit available to families with little or no taxable income. Still, 188 voted to pass the package, against 23 “no” votes on the Democratic side.

The bill now heads to the Senate where its supporters were looking for a strong vote in the House to pressure the chamber to move quickly to pass the package. Finance Chair Wyden has vowed to push to get the bill passed into law “as quickly as possible,” despite misgivings from Republicans, who have yet to publicly back the legislation.

‘SALT’ dispute

Internal divisions within the Republican Party came to a head Tuesday when a group of New Yorkers threatened to block an unrelated rule on the floor. The move prompted a flurry of closed-door meetings between House leadership, the Ways and Means Committee, blue-state Republicans and members of the House Freedom Caucus, who had separate issues with the package related to immigration.

In the end, the House moved forward with the Wyden-Smith deal without making changes. But House leadership is working with blue-state Republicans to bring a standalone SALT relief bill to raise the $10,000 deductions cap for married couples, sources familiar with negotiations said.

Rep. Andrew Garbarino, one of the New Yorkers involved in talks, said negotiators received scores from the Joint Committee on Taxation on Wednesday outlining the cost of four to five options that would raise the cap for married couples to different levels, with some scenarios also imposing income limits.

“There was a commitment to work in good faith,” Garbarino said of leadership. “I don’t know if there’s draft legislation right now, but there’s a thought about what it could be, and now they’re talking to people about whether or not to make it out of Rules and to the floor.”

Negotiators have discussed the possibility of backing a clean SALT relief bill or a bill that combines lifting the cap on deductions with conservative policy demands, Garbarino said, adding that talks were ongoing.

Conservative policy riders could include requiring parents filing for the child tax credit to include their own Social Security numbers, a source familiar with negotiations said Tuesday evening. The provision would stop undocumented immigrants from collecting the credit on behalf of their children born in the U.S.

The separate SALT bill was under discussion for a vote next week, but ahead of the vote Wednesday evening there were rumblings that the House Rules panel could meet as early as that night to consider the still-unreleased measure.

That could set up a vote as early as Thursday on the stand-alone bill, which would only require a simple majority for passage. But getting that measure through the Senate and that chamber’s 60-vote threshold would be a tall order, given Senate Republicans’ reluctance to lift the SALT cap and Democratic opposition to child credit restrictions on undocumented immigrants, if such language is added.

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