With widespread, bipartisan support, the House achieved an unprecedented feat on Wednesday by passing a roughly $79 billion tax cut package that would increase three business tax breaks and improve the child tax credit for families with millions of lower incomes. This combination gives lawmakers on both sides of the political spectrum much-needed policy victories.
The Senate still needs to consider the idea, so there are no guarantees that it will become law. However, the tax legislation could be a rare triumph for the House, which has had difficulty passing important initiatives. Voters approved the bill 357–70.
Speaker Mike Johnson announced his support for the bill early on Wednesday. He had spoken with Republican members earlier in the day, who expressed concerns about specific aspects of the measure, such as the increased child tax credit.
The fact that it ignored the $10,000 cap on the total amount of property taxes and state or local taxes that taxpayers can write off on their federal returns infuriated some people as well. The Republican members of the New York congressional delegation, whose victories in 2022 contributed to the GOP gaining the majority, have raised the cap as their main objective.
Johnson Pledged to Move a Bill
Johnson pledged to move a bill to address the cap, but the timetable is very much uncertain as the proposal must pass the House Rules Committee and there is currently no bill language available. A representative for Johnson named Athina Lawson claimed that the speaker and Republican congressman Jason Smith, the chairman of the House Ways and Means Committee, had decided to collaborate with lawmakers to find a solution.
Johnson also underlined how crucial it was that the bill pass the House Ways and Means Committee before heading to the full House for a vote, citing it as an excellent illustration of how Congress should operate.
Republicans in the House were keen to reinstate the complete and instant deductions that companies can claim for expenses related to domestic research and development as well as the acquisition of new machinery and equipment. They contend that these kinds of investments boost economic growth and encourage American businesses to maintain their operations and manufacturing plants here in the country. Additionally, the measure gives corporations greater freedom in deciding how much might be deducted from borrowing.
As the House floor discussion got underway, Smith stated that each of these reforms will help American companies expand, generate employment, and strengthen their competitive advantage over China.
Democrats prioritized raising the credit for child taxes. Each child receives a $2,000 tax credit, however not all of that money is refundable. The plan would gradually increase the credit amount that can be refunded, making it $1,800 for tax returns filed in 2023, $1,900 for the next year, and $2,000 for tax returns filed in 2025. Additionally, the bill updates the topline credit amount such that it grows indefinitely at the rate of inflation.
During Joe Biden‘s first year in office, Democrats tried to reinstate the larger tax credit they had passed in 2021, with monthly payments. For children under six, the credit was $3,600 annually, and for those between six and seventeen, it was $3,000 annually. However, most parliamentarians were content to accept the advantages that the compromise bill offered.
Democratic candidate Danny Davis remarked, “You know, I’ve been told that a half a loaf is better than none.” Even though this isn’t even half a loaf, I’m going to vote in favor of it since our families and companies need assistance.
Tonight’s agenda is rather straightforward, according to Representative Richard Neal. The enhancement of the child tax credit will benefit sixteen million youngsters. That is true.
But that wasn’t sufficient for certain Democrats.
Representative Rosa DeLauro stated, “This bill provides billions of dollars in tax relief for the wealthy, pennies for the poor.” Large companies are wealthier than before. There isn’t even a separation.
And too much for some Republicans. The main opponents of the increased child tax credit compared it to “social assistance.”