The House looked to accomplish something unusual Wednesday in passing with broad, bipartisan support a roughly $79 billion tax cut package that would enhance the child tax credit and boost three tax breaks for businesses, a combination that gives lawmakers on both sides of the political aisle coveted policy wins.
Prospects for the measure becoming law are uncertain with the Senate still having to take it up, but for a House that has struggled to get bills of consequence over the finish line, the tax legislation could represent a rare breakthrough. Debate and a final vote on the measure are scheduled for the evening.
Speaker Mike Johnson, R-La., threw his support behind the bill on Wednesday morning. He spent part of the previous day meeting with GOP lawmakers who were concerned about features of the bill, namely the expanded child tax credit. Some were also unhappy that it fails to address the $10,000 cap on the total amount of property taxes or state or local taxes that consumers can deduct on their federal returns. Raising the cap is a top priority of lawmakers from members of the New York congressional delegation.
Congress passed a bill on Thursday that would prevent a partial government shutdown this weekend.
Johnson committed to moving a bill that addresses the cap, but there is no bill text yet and legislation would have to move through the House Rules Committee, which leaves the timing very much in flux. Athina Lawson, a spokeswoman for Johnson, said the speaker and the chairman of the House Ways and Means Committee, Rep. Jason Smith, R-Mo., agreed to work with members to “find a path forward.”
Johnson called the tax cut bill on the House floor important, bipartisan legislation that would revive “conservative pro-growth tax reform.” He also said that it would bring an early end to a “wasteful COVID-era program” that has been plagued with fraud. Moving up the deadline for claiming the employee retention tax credit is expected to largely offset the cost of the tax cuts in the legislation.
Johnson also emphasized the importance of the bill moving through the House Ways and Means Committee before coming to the full House for a vote, saying it was a good example of how Congress is supposed to work.
House Republicans were anxious to restore full, immediate deductions that businesses can take for the purchase of new equipment and machinery, and for domestic research and development expenses. They argue such investments grow the economy and incentivize American companies to keep their manufacturing facilities and operations in the United States. The bill also provides businesses more flexibility in determining how much borrowing can be deducted.
“Each of these policies will help American businesses grow, create jobs and sharpen their competitive advantage against China,” Smith said as debate began on the House floor.
What changes are proposed for the new child tax credit?
The tax credit is $2,000 per child, but not all of that is refundable. The bill would incrementally raise the amount of the credit available as a refund, increasing it to $1,800 for 2023 tax returns, $1,900 for the following year and $2,000 for 2025 tax returns. The bill also adjusts the topline credit amount to temporarily grow at the rate of inflation.
Households benefitting as a result of the changes in the child tax credit would see an average tax cut of $680 in the first year, according to estimates from the nonpartisan Tax Policy Center.
Democrats pushed to restore the more generous tax credit they passed in 2021 in President Joe Biden’s first year in office with payments occurring on a monthly basis. The credit was $3,600 annually for children under age 6 and $3,000 for children ages 6 to 17. But most lawmakers were willing to take what gains they could get through the compromise bill.
“I’ll continue to do what I can to fight for more,” said Rep. Suzan DelBene, D-Wash. “…We aren’t reaching all the families who really can use the child tax credit the most.”
The bill also would enhance a tax credit for the construction or rehabilitation of rental housing targeted to lower-income households, adding an estimated 200,000 housing units around the country. And it would ensure victims of certain wildfires and the East Palestine, Ohio, train derailment don’t get hit with a big tax bill for payments they received as compensation for their losses.