By Orion Donovan Smith, The Spokesman-Review, Spokane, Wash. (TNS)
In a rare show of bipartisan lawmaking, the House of Representatives on Wednesday overwhelmingly passed a bill that would expand the child tax credit for parents and restore a set of tax breaks for businesses, but its fate in the Senate is uncertain.
Sen. Ron Wyden, an Oregon Democrat who chairs the Senate Finance Committee, negotiated the deal with his Republican counterpart in the House, Rep. Jason Smith of Missouri. Their compromise was popular enough to secure 357 votes in the House with just 70 lawmakers opposed, mainly from each party’s most hardline members.
In the Senate, however, the bill faces resistance from key Republicans, led by Sen. Mike Crapo of Idaho, the top GOP member of the Senate Finance Committee. While Crapo and Wyden have worked together on tax legislation in the past—including a tax break for investments between the United States and Taiwan that was included in the package that passed the House—the Idaho senator has signaled he won’t support the bill as-is.
In a statement when Wyden and Smith unveiled their deal on Jan. 16, Crapo called it “a thoughtful starting point,” but he told NBC News on Jan. 29 he wants to see changes, although he declined to say what those changes should be. Senate GOP Leader Mitch McConnell of Kentucky told NBC he would defer to Crapo on the bill, which would need to advance through the Finance Committee before a vote on the Senate floor, where it would need at least 60 votes to defeat a filibuster.
The expanded child tax credit included in the bill doesn’t go as far as the pandemic-era expansion that expired at the end of 2021, which transformed an existing $2,000-a-year tax deduction into monthly payments of up to $300 per child to all but the highest-income U.S. families.
Under the legislation that passed the House on Wednesday, the current $2,000-per-child yearly maximum credit would increase with inflation. The exact amount would depend on a family’s income and number of children.
Families would need to earn at least $2,500 a year to qualify for the credit, a provision intended to encourage parents to work. It would also phase in gradually, with the full credit available only in the 2025 tax year. A single parent with one child would need to earn at least about $25,000 a year to qualify for the full credit, while a married couple with two children would have to make at least about $35,000 annually.
The bill restores corporate tax breaks created by the tax law Republicans passed in 2017 that have expired or are set to expire soon. They include tax credits for research and development, as well as capital projects like building factories or manufacturing equipment.
It also includes a change to the Low-Income Housing Tax Credit—championed by Sen. Maria Cantwell, D-Wash.—that would increase the amount of federal money states could receive to build more affordable housing.
The tax cuts for investment between the United States and Taiwan are effectively a tax treaty between the two allies, which hasn’t happened through the usual channels because China regards Taiwan’s claim to independence as illegitimate.
The nonpartisan Joint Committee on Taxation estimates that the package would cost $79 billion over a decade, although most of the credits would expire after 2025. In theory, that entire cost would be offset by limiting excessive payments of the Employee Retention Credit, a pandemic-era program the Internal Revenue Service says has been subject to fraud.
However, the nonpartisan Committee for a Responsible Federal Budget estimates that the true cost could be roughly $650 billion over a decade, if the tax cuts and credits are extended throughout that time period.
In the House, the bill was supported by every Washington and Idaho lawmaker except for Rep. Russ Fulcher, a Republican who represents North Idaho and is a member of the hard-right House Freedom Caucus.
A total of 47 Republicans and 23 Democrats voted against the bill. Rep. Bob Good of Virginia, chairman of the Freedom Caucus, has said his group sees the expanded child tax credit as part of a growing “welfare state.” Some progressive Democrats, on the other hand, say the child tax credit expansion doesn’t go far enough and the business tax cuts benefit major corporations.
Even if Crapo and Wyden could compromise on the substance of a bill, it may be doomed by election-year dynamics making some Republicans oppose anything that could be seen as a win for President Joe Biden. Sen. Chuck Grassley, R-Iowa, told reporters at the Capitol on Wednesday that parents receiving checks ahead of November’s election could favor the incumbent.
“Passing a tax bill that makes the president look good,” Grassley said, “means he could be reelected.”
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