A bipartisan group of lawmakers unveiled a comprehensive $78 billion tax package on Tuesday, aiming to bolster the child tax credit, reinstate certain business tax breaks, and allocate funds for affordable housing and disaster relief. The proposal faces multiple challenges in its journey towards approval.
Among the key features of the package is an effort to enhance the child tax credit, a move supported by congressional Democrats and progressive groups who emphasize the credit’s role in reducing child poverty and stabilizing family finances in 2021. On the other side, some Republicans and business advocates seek to reverse restrictions on companies’ ability to deduct investments in machinery and equipment, along with other tax relief measures.
Despite the noteworthy bipartisan and bicameral support, the deal was not brokered by leadership, introducing uncertainties regarding its passage through Congress. While some lawmakers advocate attaching it to a must-pass bill for smoother approval, the possibility of it standing alone exists. The optimism of lead negotiators is tempered by the reality that Congress, especially in an election year, faces numerous challenges to accomplish significant legislative milestones.
One notable absence of support comes from Representative Rosa DeLauro of Connecticut, the top Democrat on the House Appropriations Committee, who contends that the proposed child tax credit expansion falls short of expectations. The deal aims to strengthen the child tax credit, albeit not as generously as the Democrats’ American Rescue Plan Act did in 2021, which increased the credit’s size for specific families and facilitated monthly disbursements.
The current package envisions making the credit more accessible for lower-income families by incrementally increasing its refundability, eliminating penalties for larger families, and adjusting for inflation starting in 2024. Additionally, it proposes allowing businesses to immediately deduct the costs of their US-based research and development investments, among other tax relief measures.
In addressing the aftermath of disasters, the package suggests augmenting the immediate write-off amount for small businesses and extending disaster tax relief to families affected by recent hurricanes, flooding, wildfires, and the Ohio rail disaster.
To further stimulate the Low-Income Housing Tax Credit, an initiative to boost low-income housing availability, the package introduces enhancements. It also accelerates the deadline for filing backdated claims for the Employee Retention Tax Credit, a Covid-19 era program marred by widespread fraud but estimated to save taxpayers over $70 billion – contributing to financing the overall tax package.
While the proposal presents a bipartisan effort to address critical economic aspects, its pathway through Congress remains uncertain, with various factors influencing its potential success or hurdles. As lawmakers deliberate on the intricate details, the package reflects the intricate negotiations and compromises needed in the legislative process, especially in the context of a challenging election year.