The House is set Wednesday to consider a major bipartisan proposal that would expand the child tax credit and renew key business investment deductions.
House Majority Leader Steve Scalise (R-LA) added consideration of the legislation, H.R. 7024, the Tax Relief for American Families and Workers Act, to the schedule for Wednesday.
The floor vote was highly anticipated and comes as some Democrats and Republicans have misgivings about the bill, and after an effort by New York Republicans on Tuesday to halt action on the House floor to demand changes to the legislation. House Speaker Mike Johnson (R-LA) is pushing the legislation through with a provision that requires a two-thirds majority vote to pass, meaning the bill will have to gain support from both parties.
The goal of leadership is to get the bill passed into law in time for tax season, which begins at about the end of January.
The legislation expands the child tax credit — long a priority for Democrats and some Republicans. It also restores some now-expired tax breaks for business investment, a major goal for Republicans and many Democrats.
Business groups have pushed lawmakers hard to get the bill passed. They contend that the expired provisions are a drag on their companies and the broader economy.
Specifically, the legislation renews a tax deduction for research and development costs for businesses. Since the break expired, companies have had to amortize R&D expenses, meaning they faced a higher tax burden.
The bill also temporarily pauses the phaseout of bonus depreciation. That was a provision in the 2017 Trump tax cuts that allowed companies to write off certain capital expenditures immediately instead of having those deductions written off over the “useful life” of the asset.
On the child tax credit front, the bill expands the child tax credit by changing the calculation of the credit on a per-child basis to make it more generous. It also increases the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in 2024, and $2,000 in 2025.
The proposal raises the current $1,600 cap on the amount of the credit that is refundable, a change that would most benefit lower-income families.
But, as with most legislation that is designed to appease both parties, there are critics on the Right and Left.
From the Left, some Democrats want an even bigger enhancement for the child tax credit. In 2021, shortly after President Joe Biden was sworn into office and Democrats held both chambers of Congress, Democrats pushed through a massively expanded, but temporary, child tax credit. Those enhancements have since expired. Specifically, the credit was raised to $3,600 for children under the age of six and $3,000 for older children, with perhaps the biggest change being the removal of an income threshold for those who receive the funds. The current proposal being considered on the floor includes work requirements — something that is seen as a red line for Republicans.
Some Democrats have also bemoaned the lucrative tax breaks for corporations, arguing that the legislation is a bigger win for Wall Street than Main Street.
“We should demand more of ourselves than going along with a deal that gives big corporations billions and billions of dollars more in tax breaks than help for struggling families,” Sen. Elizabeth Warren (D-MA) recently told reporters.
From the Right, there are concerns about the cost of the bill. The $78 billion bill is fully paid for through changes to the pandemic-era employee retention tax credit. But, some Republicans contend that the estimate is a moving target and that it could end up adding to the deficit. And if all the tax breaks were made permanent, it would cost $645 billion through 2033, according to the Committee for a Responsible Federal Budget.
There are also some conservative lawmakers who have said the bill would encourage illegal immigration, a hot-button political topic at the moment. They contend that the legislation doesn’t do enough to prevent illegal immigrants from claiming child tax credits. The bill’s Republican authors, though, have noted that it maintains a requirement that the Social Security numbers of the children be provided in order to receive it, a provision meant to limit the benefits from being claimed by illegal immigrants.
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The Republicans from New York, a high-tax state, threatened to vote down the legislation because it doesn’t include changes to the cap on state and local tax deductions imposed by the 2017 Trump tax overhaul.
The bill faces uncertain odds in the Senate as well. But if the legislation is approved by both chambers, President Joe Biden would sign it, the White House has said.