A House panel on Jan. 19 approved a bill that would provide $78 billion in business and child tax breaks, sending the measure to the chamber’s floor.
This agreement combines the reinstatement of tax breaks for businesses that were sought by Republicans during the Trump administration with the expansion of the child tax credit, which is something that Democrats have been pushing for.
The committee, led by Republicans, fielded questions from the minority party about the child and corporation tax credits and whether the allocation of credits was appropriate.
Democrats asserted that as the plan stands currently, it will likely raise about 8 percent of children out of poverty, and they want to support a plan that would have raised more children above the poverty line.
Rep. Danny Davis (D-Ill.) illustrated his party’s position during his comments at the Jan. 19 hearing, saying the 2021 Child Tax Credit was so effective because “it was advanced, completely refundable, and targeted to help the lowest-income families. It cut poverty because it gave families with no income money for their children each month.”
The lawmaker asserted that the previous legislation was in “sharp contrast” to the current bill, which will “not restore the 2020 Child and Dependent Care Tax Credit, but give up to $8,000 to working parents for child care costs with two or more children.”
The proposal would reinstate some corporate tax deductions, increase the low-income housing tax credit, and broaden the child tax credit, according to a joint statement released by the Senate Ways and Means Committee leadership on Jan. 16.
More Revenue Expected
The legislation is bipartisan but has an uncertain path through Congress.“We even provide disaster relief and cut red tape for small businesses, while ending a COVID-era program that’s costing taxpayers billions in fraud,” House Ways and Means Committee Chairman Jason Smith (R-Mo.) said in a statement.
By doing away with the tax credit that was in place during the pandemic, this bill would raise more than $70 billion if it were to pass both the Republican-controlled House and the Democratic-controlled Senate and then be signed into law by President Joe Biden.
The package’s proposed changes include making the child tax credit more widely available, increasing the amount of the credit’s refundable element over time, and linking future increases to inflation.
In addition, the proposal restores full and immediate expensing for investments in things like equipment and machinery, revives a tax advantage for interest paid on business loans, and renews an expiring research and development tax deduction retroactively for 2023.
“By incentivizing R&D, this plan is also going to promote innovation and help sharpen our economic competitiveness with China and the rest of the world,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said of the legislation.
The three tax cuts that were instituted during the Trump administration and were lauded by businesses when they were first passed in 2017 began to expire at the end of 2021. This is what the current package aims to restore.
Investments in domestic research and development would be eligible for an instant tax benefit under the R&D plans, instead of phased-in over five years. Businesses will not be required to deduct domestic research or trial costs until taxable years starting in 2026.
