Comes on Heels of Spending Cut Demands and as Wyden Calls for Balance
House Republicans are expected to move a set of tax incentives that include lapsed provisions of the Trump-era tax cut, as well as some provisions with bipartisan support. Ways and Means Chair Jason Smith, R-Missouri, characterized the bill, which could be considered this week, as “helping working-class families, small businesses and to build in America.”
Smith and House Republican leaders see the legislation as the opening volley in negotiations over tax policy with the Democratically controlled Senate and the President Biden. First, the bill has to attract support from the entire House GOP caucus, which is fractured and not functional over the debt ceiling deal negotiated by Speaker Kevin McCarthy with Biden.
Roll Call reported Smith has consulted with the “House Freedom Caucus, Main Street Caucus, Republican Governance Group and opponents of the $10,000 cap on deducting state and local taxes, known as the SALT cap.” Smith reportedly has secured enough Republican votes to get the measure out of committee to the House floor, where the House Freedom Caucus is denying McCarthy the procedural votes to consider any vote on bills.
Republican Ways and Means members huddled last week to take stock of what will finally be in and out of the tax measure, expected to be marked up this week. “We’ve talked a lot about R&D expensing, going back to where we were and making sure small businesses are able to compete and just making sure we’re in a strong competitive environment,” according to Congressman Kevin Hern, R-Oklahoma and a member of the committee. “And that we’re clawing back any bad tax policies that were put forth under Democrats that were incentivizing very wealthy individuals as opposed to helping the American people.”
The ”bad policies’ Hern referenced include repealing clean energy tax credits approved in 2022.
Republican Tax Proposals
GOP proposals are likely include raising the $600 tax reporting threshold for online sales and gig work on PayPal, Venmo, eBay, Etsy, Uber, Lyft and Airbnb. Suggestions range from eliminating the threshold or raising it to $20,000. They also may give car dealers a tax break who faced larger minimum tax bills because of inflated prices due to pandemic global supply chain issues.
Another proposal is to raise the standard deduction over the next two years for households earning less than $400,000 and individuals earning less than $200,000 annually. The higher deduction would phase out for earners gradually as taxpayers will higher adjusted incomes.
There apparently is still divided opinion over how and whether to modify the cap on state and local tax deductions. Some decisions of what to include or exclude could rest on a calculation of the political environment in 2025 when Trump tax cut provisions expire.
Congressman Richard Neal, D- Massachusetts and ranking Ways and Means Democrat, pointed to a disconnect between House Republicans pushing for spending cuts and now promoting tax cuts that will increase the national deficit.
However, Democrats have tax cuts in mind, too. Washington Congresswoman Suzan DelBene, who chairs the House Democratic campaign arm, is pushing for permanent expansion of the child care tax credit.
Oregon Democratic Senator Ron Wyden, who chairs the Senate Finance Committee, said any tax bill needs to balance bolstering the social safety net if it includes business incentives. He also said tax policy needs to encourage increased housing production across the nation. Wyden has scheduled a hearing on anti-poverty and family support tax proposals in preparation for a potential tax measure moving in Congress this year.
“Any tax bill needs to balance bolstering the social safety net if it includes business incentives.” –Senator Ron Wyden
Wyden Statement on House Tax Bill
“As I’ve told Republicans repeatedly, Democrats are on board with fixing business tax incentives like R&D expensing as long as Congress also passes support for the most vulnerable children and families on the same scale. The tax uncertainty a lot of businesses are dealing with right now, particularly around R&D expensing, is a direct result of the timing and budget gimmicks Republicans used to inflate their 2017 corporate tax handouts.
“Democrats are interested in helping businesses and American families at the same time. Pairing tax cuts for businesses and families has been the bipartisan practice for several years in recent memory. I’m hopeful there’s enough common ground for the two sides to reach an agreement this year, and I’m going to work with my colleagues in the Senate on our own priorities.
“Other elements in this package will never get Democratic support. Too much of this package is made up of giveaways to the wealthy and big corporations, and it goes without saying that repealing landmark clean energy incentives from the Inflation Reduction Act is a nonstarter in the Senate. Republicans are so dedicated to this ideological fight against anything that addresses the climate crisis, they’re willing to commit major acts of economic self-sabotage. American manufacturing is booming thanks in large part to the clean energy package in the Inflation Reduction Act, and the irony is, Republican-led districts and states are benefitting the most. The bottom line is, repealing IRA clean energy incentives would be a gut punch for American businesses, workers and manufacturers, a gift to Big Oil and Chinese industry, and a major setback in the fight to address the climate crisis. It’s not going to happen.”