Wyden Brokers Bipartisan Compromise on Business Tax Credits, Housing Aid
Congress is stumbling to reach a compromise on spending, border security and aid to Ukraine and Israel, but a bipartisan deal has been reached on a tax measure.
Oregon Senator Ron Wyden, who chairs Senate Finance, and House Ways and Means Chair Jason Smith, R-Missouri, jointly announced a $70 billion tax bill that revives three business tax credits, expands eligibility for the federal child tax credit and provides a boost to low-income housing.
The tax measure wasn’t included in the latest stopgap spending measure, so it is in the queue to move on its own in a legislative environment marked by a political standoff between the Democratically controlled Senate, the GOP-controlled House and former President Trump.
Wyden earlier expressed willingness to bundle business tax credits with child tax credit expansion. “Fifteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” Wyden said.
The expanded child tax credit would allow low-income families with more than one child to qualify for more of the credit more quickly and make more of the credit available as a refund. The current $1,600 per child limit would be raised to $1,800 for 2023, and gradually increase to $2,000 in 2025. It would index the total credit, currently capped at $2,000 per child, to inflation starting in 2024. Families could use previous year’s income to qualify for tax credit benefits.
Wyden is pressing for quick congressional action so the provisions are in effect for the tax-filing season, which began this week.
The tax bill cleared the Ways and Means Committee on Monday on a 40-3 vote and could come to the House floor as early as Wednesday. Because the bill is being fast-tracked to the floor, it will require a two-thirds majority of House members to pass.
There are objections to the tax measure from the left and the right. Left-leaning Democrats dislike more business tax breaks, especially amid a booming economy and a sharp stock market rise.
Republicans from New York and California are upset because the compromise failed to increase the cap on federal deductions for state and local taxes, which was part of the 2017 Trump tax bill. They say the current $10,000 cap disadvantages middle-income taxpayers. Conservative House Republicans said the expanded child tax credit could benefit undocumented immigrant families. Congressman Chip Roy, R-Texas, blasted his fellow Republicans who support the bill as “whores” for business.
If the tax bill manages to pass the fractious House, it’s not slam dunk to move quickly in the Senate, despite Wyden’s support. It could become an element of an even larger bipartisan package that includes border security, aid to Ukraine and Israel and Fiscal Year 2024 appropriations.
Senate Majority Leader Chuck Schumer has endorsed the compromise. Senate Republicans haven’t committed one way or the other. Ranking Senate Finance Committee member Mike Crapo of Idaho said further provisions may be necessary to secure Republican support.
“Fifteen million kids from low-income families
will be better off as a result of this plan.”
Revised Business Tax Credits
Smith touted the business benefits in the tax bill. “American families will benefit from this bipartisan agreement that provides greater tax relief, strengthens Main Street businesses, boosts our competitiveness with China and creates jobs,” he said. “This legislation locks in more than $600 billion in proven pro-growth, pro-America tax policies with key provisions that support more than 21 million jobs.”
As reported by Roll Call, the package would restore business tax incentives phased out to lower the price tag of the 2017 tax law. Businesses could deduct domestic research and development investments all at once, rather than over five years.
The package would reinstate a more generous cap on interest payment deductions the 2017 tax law and phased out in 2022. It would extend a 2017 tax bill provision allowing businesses to deduct all of their investments in short-term assets, such as machinery and other equipment. The deduction dropped to 80 percent of those purchases last year and will phase out entirely by 2027, absent congressional action. The deal also would allow small businesses to deduct up to $1.29 million in investments, up from $1 million and provide benefits to U.S. companies operating in Taiwan.
The business breaks and child tax credit expansion each will cost around $13 billion. To offset the hefty price tag for the new tax bill, pandemic-era employee retention tax credits would be eliminated.
Housing Tax Credit and Disaster Relief
An expansion of the low-income housing tax credit and tax relief for individuals impacted by natural disasters, including the East Palestine, Ohio, train derailment, were added to the package to broaden support. The House Ways and Means Committee approved a $5 billion disaster relief bill last November.
The tax measure would restore a 12.5 percent cap on low-income housing tax credits in place from 2018 to 2021, allowing states to allocate more of the credit to affordable housing projects. Senate Democrats urged Wyden to include housing provisions to support construction of more than 200,000 affordable homes.
Mixed Support From Interest Groups
As expected, reviews of tax compromise were mixed. There was widespread support for the child tax credit expansion. Business organizations praised the revival of tax credits, while progressive groups lamented the horse-trading required to advance provisions benefitting lower-income families with children.
Pending Border Security Compromise
After months of behind-the-scenes negotiations, senators have produced a bipartisan border security measure, which according to Senator James Lankford, R-Oklahoma, contains provisions sought by Trump during his presidency.
The text of the compromise is circulating in the Senate. A central provision is giving the President authority to reject all migrants and asylum seeks once the daily average for border crossings surpasses 5,000 over a week or crossings surpass 8,500 on a single day. There would be harsher penalties for persons who attempt illegal crossings multiple times.
Restrictions would not be lifted until border crossings remained below the average daily threshold for at least two weeks. Limits would be placed on the use of in-country parole. The asylum process would be would be shortened to six months. Migrants could be granted exceptions for humanitarian reasons.
President Biden has expressed support for the compromise. “It would give me, as President, the authority to shut down the border when it becomes overwhelmed. If given that authority, I would use it the day I sign the bill into law. If you’re serious about the border crisis, pass a bipartisan bill and I will sign it.”
Sources familiar with the provisions in the compromise indicate if the bill was the law, the U.S.-Mexico border would have been closed for the past four months when around 250,000 migrants illegally tried to cross the border.
On the campaign trail, Trump has called the compromise a “bad bill”, though it’s unclear he has seen the legislative text. Appearing on the CBS news show Face the Nation on Sunday, Lankford said he insisted on including provisions in the compromise that Trump sought during his presidency.
The Oklahoma Republican Party has sanctioned Lankford for his work on the compromise, presumably at the behest of Trump, who has said he wants to keep the border and immigration as his top campaign issue this year.
Speaker Mike Johnson, reflecting Trump’s political request, has pronounced the Senate border security compromise “dead on arrival” in the House. Instead, House Republicans are teeing up the impeachment of Homeland Security Secretary Alejandro Mayorkas for failing to address the border crisis.
The border compromise has become a critical component of a larger national security package requested by Biden that includes financial aid to Ukraine, Israel and Taiwan. Congressional observers indicate a majority of Senate and House members support Biden’s security request.