Bipartisan Tax Bill with Child Tax Credit and Business Provisions Fails in Senate

“Senate Republicans love to talk about they are the party of family and business, so it’s very odd to see them come out so aggressively against expanding the child tax credit and rewarding businesses with the [research and development] tax credit, but that seems to be what they’re doing,” Schumer said on the floor ahead of the vote. “Senate Republicans can either choose bipartisanship and get this done now, or they can choose partisanship [and] leave families hanging out to dry.”

The measure wouldn’t affect separate R&D credits, but it would restore companies’ ability to claim full deductions for research expenses in the first year, something a broad coalition of industries has been angling for since that tax break got less generous at the start of 2022.

The Senate voted 48-44 on cloture on the motion to consider the tax bill negotiated by Senate Finance Chairman Ron Wyden, D-Ore., and House Ways and Means Chairman Jason Smith, R-Mo. Schumer changed his vote to ‘nay,’ to allow the option to reconsider the cloture motion at a later date.

Schumer hinted that he might bring the motion up again after lawmakers return from August recess.

“I’m hopeful that Republicans when they go home will feel the heat,” Schumer said at a press conference following the vote. “I’m hopeful that they will come back and stop their intransigent position that they’re not going to do anything because Donald Trump doesn’t want to see any accomplishments here.”

The bill would revive a trio of business tax breaks, including the full upfront deduction of research and development expenses, and expand the child tax credit to make it more generous to low-income families. The House passed the legislation on a 357-70 vote in January.

GOP senators, including Minority Leader Mitch McConnell of Kentucky, dismissed the vote as a political ploy, citing the timing of holding a cloture vote right before the Senate leaves town for August recess.

“Today’s vote doesn’t seem intended to produce a legislative outcome. The Democratic leader himself admitted this week that losing the vote would be a political benefit to vulnerable Senate Democrats running for reelection,” McConnell said on the floor. “Well, I’m not so certain the American people are impressed by message votes, and I don’t think they give out points for incomplete work.”

Defections

Republicans nearly uniformly voted against the motion. Exceptions included Josh Hawley of Missouri, Markwayne Mullin of Oklahoma and Rick Scott of Florida, who’s mounting a long-shot bid to succeed McConnell as GOP leader next year.

Former President Donald Trump’s running mate JD Vance did not make it back from the campaign trail for the vote.

The bill’s expansion of child tax credit and tax relief for victims of the East Palestine train derailment would have made it a difficult vote for the Ohio Republican, who has floated giving preferential treatment to families, including imposing a higher tax rate on child-free people and allowing parents to vote on behalf of minor children.

Democrats took aim at Vance, who was in Arizona visiting the southern border on Thursday, for missing the Senate action.

“When the American people vote in November, they’ll remember that when Vance had a chance to show up for working families, he was nowhere to be found,” Democratic National Committee spokesperson Aida Ross said in a statement.

All Democrats backed the cloture motion, though two independents who caucus with that side of the aisle did not: Bernie Sanders of Vermont and Joe Manchin III of West Virginia.

Manchin has cited issues with the child tax credit, as well as concerns about adding to the deficit. The bill’s cost would be offset by bringing the pandemic-era employee retention tax credit to an early end.

In a statement, Sanders, a self-described democratic socialist, said the tax bill was too tilted towards business breaks.

“When all is said and done, this bill would provide at least $3 in corporate tax breaks for every $1 in tax cuts for working families with children,” Sanders said. “That is not a good deal for working families.”

‘Calculated move’

Sen. Michael D. Crapo, top Republican on the Senate Finance Committee, called on Democrats to break apart the bill and vote on pieces individually. That would require separate votes on tax breaks for disaster victims, ending double-taxation of U.S. companies operating in Taiwan, restoring the lost business deductions and ending the pandemic-era employee retention tax credit, which is currently the offset for the rest of the package.

Wyden previously has dismissed this suggestion.

“While Senate Republicans have also been accused of playing politics, the timing of today’s vote —coupled with the lack of meaningful engagement since January to reach a compromise — confirms that the strategy was always a take-it-or-leave-it proposition in the Senate,” Crapo, R-Idaho, said on the floor.

Earlier in the week Crapo said he hoped defeat on the floor would bring Democrats to the negotiating table. But senators have had months to work on compromise legislation, and Wyden says he and the Idaho Republican traded offers that went nowhere.

“Senate Republicans had a seat at the negotiating table as we worked on this bill for seven months, and they stalled for another six after the House passed it with an overwhelming bipartisan vote in January. The goalposts kept moving,” Wyden said in a statement after the vote. “For any Senate Republicans to claim they were denied an opportunity to put their mark on it is absurd.”

Wyden offered to remove a provision allowing families to use the previous year’s income to qualify for the child tax credit, which Republicans have objected to, citing work requirements, and replace it with a different provision targeting aid at similarly situated low-income families.

Republicans’ counterproposal would have alienated every Democrat in the Senate, Wyden said, adding that it was tied to immigration. Conservatives in the House proposed blocking immigrant parents from collecting the child tax credit on behalf of children who are U.S. citizens. Crapo previously said he was sympathetic to the idea.

Wyden also accused Republicans of holding out until next year, when they would be in a stronger negotiating position if they retake the Senate in November and likely will have to address the expiration of parts of the 2017 tax law. It’s a calculation some GOP senators have also voiced.

“We can get a lot better deal in terms of renewing tax cuts on a permanent basis by waiting, in my opinion,” said Sen. John Kennedy, R-La. “I don’t see it as a gamble. I see it as a calculated move.”

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