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WASHINGTON (AP) – The House of Representatives accomplished something unusual Wednesday by passing with broad bipartisan support a roughly $79 billion tax cut package that would improve the child tax credit for millions of low-income families and boost three tax breaks for businesses, a combination that gives lawmakers on both sides of the political aisle coveted political victories.
The prospects for the measure becoming law are uncertain as the Senate has yet to approve it, but for a House that has struggled to get major bills across the finish line, the tax legislation could represent a breakthrough. rare. The bill was approved by 357 votes in favor and 70 against.
Chairman Mike Johnson, R-La., expressed support for the bill Wednesday morning. He spent part of the previous day meeting with Republican lawmakers who were concerned about particular features of the bill, namely the expanded child tax credit. Some were also unhappy that he did not address the $10,000 limit 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 for lawmakers from Republican members of New York’s congressional delegation, whose victories in 2022 helped the GOP gain the majority.
Johnson has pledged to pass a bill addressing the cap, but there is no bill text yet and the legislation would have to go through the House Rules Committee, leaving the timing in flux. Athina Lawson, Johnson’s spokeswoman, said House Ways and Means Committee Chairman Rep. Jason Smith, R-Mo., agreed to work with lawmakers to “find a path forward.”
Johnson called the tax cut bill in the House of Representatives important bipartisan legislation that would revive “conservative pro-growth tax reform.” He also said he would soon end a “wasteful COVID-era program” that has been plagued by fraud. Moving up the deadline to claim the employee retention tax credit is expected to largely offset the cost of the tax cuts provided in the legislation.
Johnson also emphasized the importance of the bill passing through the House Ways and Means Committee before going to the full House for a vote, saying it was a good example of how Congress is supposed to work.
House Republicans were eager to restore the full and immediate deductions that companies can take for the purchase of new equipment and machinery, and for internal research and development expenses. They argue that such investments grow the economy and incentivize American companies to maintain their manufacturing facilities and operations in the United States. The bill also gives businesses more flexibility in determining how much loan can be deducted.
“Each of these policies will help American businesses grow, create jobs, and sharpen their competitive advantage against China,” Smith said as the House debate began.
Democrats focused on boosting the child tax credit. The tax credit is $2,000 per child, but not all of it is refundable. The bill would gradually increase 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 amount of the credit main to temporarily grow at the rate of inflation.
Households that benefit as a result of the changes to the child tax credit would see an average tax cut of $680 in the first year. according to estimates of the nonpartisan Tax Policy Center.
Democrats pushed to restore the most generous tax credit they approved in 2021, in President Joe Biden’s first year in office, with monthly payments. The credit was $3,600 annually for children under 6 years of age and $3,000 for children ages 6 to 17. But most lawmakers were willing to take advantage of whatever benefits they could get through the compromise bill.
“You know, I’ve been told that half a loaf is better than nothing,” said Rep. Danny Davis, D-Ill. “This is not even half a loaf, but I am going to vote for it because our families and businesses need help.”
“What we have in front of us tonight is pretty simple,” said Rep. Richard Neal, D-Massachusetts. “Sixteen million children will benefit from the enhanced child tax credit. It is a fact.”
But for some Democrats that was not enough.
“This bill provides billions of dollars in tax relief for the rich and pennies for the poor,” said Rep. Rosa DeLauro, D-Conn. “Large corporations are richer than ever. “There is not an even division.”
And for some Republicans it was too much. Leading critics of the expanded child tax credit likened it to “welfare.”
“What is a refundable tax credit? It’s wellness with a different name. We’re going to give cash payments and checks to people who don’t even pay taxes,” said Rep. Thomas Massie, R-Ky.
Rep. Drew Ferguson, R-Ga., bristled at that characterization, saying, “We all believe on this side of the aisle that you have to work to receive federal benefits. That’s something 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 of each party voted in favor. Advocates hope the strong show of support will spur action in the Senate.
The bill maintains the threshold for a household with income of $2,500 to be eligible to receive refundable child tax credit payments.
The bill would also enhance a tax credit for the construction or rehabilitation of rental housing intended for low-income households, adding about 200,000 housing units nationwide. That was a key priority for lawmakers in states with severe housing shortages and rising prices. And it would ensure that victims of certain natural disasters and the train derailment in East Palestine, Ohio, do not receive a large tax bill for payments they received as compensation for their losses.
Copyright 2024 The Associated Press. All rights reserved.
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