Monday, July 22, 2024

House passes bill to enhance child tax credit, revive key tax breaks for businesses

by Associated Press

WASHINGTON (AP) — The House accomplished something unusual Wednesday in passing with broad, bipartisan support a roughly $79 billion tax cut package that would enhance the child tax credit for millions of lower-income families and boost three tax breaks for businesses, a combination that gives lawmakers on both sides of the political aisle coveted policy wins.

Prospects for the measure becoming law are uncertain with the Senate still having to take it up, but for a House that has struggled to get bills of consequence over the finish line, the tax legislation could represent a rare breakthrough. The bill passed by a vote of 357-70.

Speaker Mike Johnson, R-La., threw his support behind the bill on Wednesday morning. He spent part of the previous day meeting with GOP lawmakers who were concerned about particular features of the bill, namely the expanded child tax credit. Some were also unhappy that it failed to address the $10,000 cap on the total amount of property taxes or state or local taxes that consumers can deduct on their federal returns. Raising the cap is a top priority of lawmakers from the Republican members of the New York congressional delegation, whose victories in 2022 helped the GOP take the majority.

Johnson committed to moving a bill that addresses the cap, but there is no bill text yet and legislation would have to move through the House Rules Committee, which leaves the timing very much in flux. Athina Lawson, a spokeswoman for Johnson, said the speaker and the chairman of the House Ways and Means Committee, Rep. Jason Smith, R-Mo., agreed to work with lawmakers to “find a path forward.”

Johnson called the tax cut bill on the House floor important, bipartisan legislation that would revive “conservative pro-growth tax reform.” He also said it would bring an early end to a “wasteful COVID-era program” that has been plagued with fraud. Moving up the deadline for claiming the employee retention tax credit is expected to largely offset the cost of the tax cuts in the legislation.

Johnson also emphasized the importance of the bill moving through the House Ways and Means Committee before coming to the full House for a vote, saying it was a good example of how Congress is supposed to work.

House Republicans were anxious to restore full, immediate deductions that businesses can take for the purchase of new equipment and machinery, and for domestic research and development expenses. They argue such investments grow the economy and incentivize American companies to keep their manufacturing facilities and operations in the United States. The bill also provides businesses more flexibility in determining how much borrowing can be deducted.

“Each of these policies will help American businesses grow, create jobs and sharpen their competitive advantage against China,” Smith said as debate began on the House floor.

Democrats focused on boosting the child tax credit. The tax credit is $2,000 per child, but not all of that is refundable. The bill would incrementally raise the amount of the credit available as a refund, increasing it to $1,800 for 2023 tax returns, $1,900 for the following year and $2,000 for 2025 tax returns. The bill also adjusts the topline credit amount to temporarily grow at the rate of inflation.

Households benefitting as a result of the changes in the child tax credit would see an average tax cut of $680 in the first year, according to estimates from the nonpartisan Tax Policy Center.

Democrats pushed to restore the more generous tax credit they passed in 2021 in President Joe Biden’s first year in office with payments occurring on a monthly basis. The credit was $3,600 annually for children under age 6 and $3,000 for children ages 6 to 17. But most lawmakers were willing to take what gains they could get through the compromise bill.

“You know I’ve been told that a half a loaf is better than none,” said Rep. Danny Davis, D-Ill. “This isn’t even half a loaf, but I’m going to vote for it because our families and businesses need help.”

“What’s in front of us tonight is pretty simple,” said Rep. Richard Neal, D-Mass. “Sixteen million children will benefit from the improvement to the child tax credit. That’s a fact.”

But for some Democrats, it wasn’t enough.

“This bill provides billions of dollars in tax relief for the wealthy, pennies for the poor,” said Rep. Rosa DeLauro, D-Conn. “Big corporations are richer than ever. There is no even split.”

And for some Republicans, it was too much. The chief critics of the expanded child tax credit likened it to “welfare.”

“What is a refundable tax credit? It’s welfare by a different name. We’re going to give cash payments, checks, to people who don’t even pay taxes,” said Rep. Thomas Massie, R-Ky.

Rep. Drew Ferguson, R-Ga., chafed at that characterization, saying “we all believe on this side of the aisle that you should work in order to receive federal benefits. That is something that this bill does.”

While there were complaints about the tax bill from some of the most conservative and liberal members of the House, a significant majority from each party voted for it. Proponents are hoping the strong show of support will stir action in the Senate.

The bill keeps a threshold of a household having $2,500 in income to be eligible for refundable child tax credit payments.

The bill also would enhance a tax credit for the construction or rehabilitation of rental housing targeted to lower-income households, adding an estimated 200,000 housing units around the country. That was a key priority of lawmakers from states with acute housing shortages and soaring prices. And it would ensure victims of certain natural disasters and the East Palestine, Ohio, train derailment don’t get hit with a big tax bill for payments they received as compensation for their losses.

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