Congress moved one step closer to enacting $78 billion in business and child tax breaks Friday, although election-year politics add risk to the legislation’s prospects.
The House tax-writing committee approved the compromise bill with a strongly bipartisan 40 to 3 vote.
But House and Senate Republicans leaders have been silent on the tax cuts, while the White House said President Joe Biden is taking a wait-and-see approach. No full House floor vote has been scheduled.
Al Drago/Bloomberg
Enactment of the tax breaks could boost the stocks of US companies with large capital and domestic research expenditures.
Boeing Co., General Motors Co., Deere & Co., Caterpillar Inc., Amazon.com Inc., Microsoft Corp. and Apple Inc. are among the companies that stand to benefit, according to Bloomberg Intelligence.
The measure would restore expired tax breaks allowing businesses to more quickly recoup the costs of domestic research and development, interest on business loans and investment in equipment. The research tax break would be retroactive to the 2022 tax year, so manufacturers and technology companies would see a large immediate benefit this spring from the change. The return of the full capital expensing perk would benefit companies that are highly capital intensive.
The bill also includes a
Despite a heavy lobbying push from business groups, election-year politics may stymie efforts to enact the bill early in the tax season that begins Jan. 29.
Some Republicans privately say they are reluctant to approve tax refund payments to working poor parents in an election year because Biden could benefit politically. Some Democrats say the deal crafted by Senate Finance Committee Ron Wyden, an Oregon Democrat, fails to bring enough children out of poverty and leaves out benefits for middle-class taxpayers.
Meanwhile a group of lawmakers from high-tax states are trying to use the bill to raise the $10,000 cap on the state and local tax deduction, a change opposed by House Ways and Means Committee Chairman Jason Smith.
The chairman, a Missouri Republican, beat back attempts to increase the child tax credits and raise the SALT cap during his panel’s lengthy voting session on Friday.
Advocates say that passing the tax cuts would benefit lawmakers in both parties because the deadlocked Congress hasn’t accomplished much over the last year.
“The bill before us today represents bipartisan policies that are proven and effective; common sense fixes to the tax code that will rebuild our communities, support better jobs and wages, and grow our economy,” Smith said.
Speaker Mike Johnson has been silent on the tax measure as he treads carefully with restive House Republicans. Conservatives are already angry over his efforts to avoid a government shutdown. Senate Majority Leader Chuck Schumer has publicly backed the tax package.
Some conservative critics have alleged the
Individuals with small incomes would also see a boost to the amount they receive and the boost is larger for families with more than one child. Democrats led by Schumer won inclusion of a low-income housing tax break that could spur the building of 200,000 affordable homes and disaster relief provisions. The bill is paid for by curtailing use of a COVID-era employee retention tax credit.
House Democratic leader Hakeem Jeffries said this week he is withholding judgment on the tax bill. Progressive Democrats who oppose the bill said it falls too far short of restoring the larger temporary child tax credit expansion during the height of the COVID-19 pandemic.
That expansion raised the full credit to $3,600 for each young child. The maximum credit per child would remain at the current $2,000 level under the legislation, though it would be newly indexed to inflation for two years.
Democrats tried and failed to change the bill so that the full $2,000 per child credit would go to the lowest-income families and for the benefit to be paid monthly.
“We should be doing more for those who need it the most,” Alabama Democrat Terri Sewell said.
Most Democrats on the committee jumped on board with the compromise, so that could move their leader to get behind the bill.
“Politics is the art of the possible,” Virginia Democrat Don Beyer said.
The bill would lift 400,000 children out of poverty this year, according to the left-leaning Center on Budget and Policy Priorities.
