WASHINGTON (Reuters) -The leaders of Congress tax-writing committees on Tuesday announced a nearly $80 billion bipartisan deal to enhance tax breaks for businesses and low-income families through 2025, but prospects for passage are unclear amid bitter fiscal divisions.
The $78 billion package, agreed by Senate Finance Committee Chairman Ron Wyden, a Democrat, and House Ways and Means Committee Chair Jason Smith, a Republican, would temporarily expand the child tax credit and boost the low-income housing tax credit. It would restore business tax deductions for 100% of research and development expenses and capital expenditures for plant and equipment.
The extensions would last until the end of 2025, aligning them with the expiration of personal tax cuts passed by Republicans in 2017 and raising the stakes for tax policy differences in November’s presidential election.
The deal would increase the maximum “refundable” child tax credit — the amount available as a cash payment — by $200 per child to $1,800 for 2023, $1,900 for 2024 and $2,000 for 2025.
Democrats have been trying to restore a much larger COVID-era expansion of the child tax credit of up to $3,600 per child, which expired in 2021.
Wyden said the plan would benefit 15 million children from low-income families while enabling the construction of more than 200,000 affordable housing units.
SHORT TIMELINE, UNCLEAR PATH
Wyden said he and Smith want to pass the package quickly so that families and businesses can take advantage of the breaks as they file tax returns this year. The filing season for 2023 income is due to start on Jan. 29.
“I’m going to pull out all the stops to get that done,” Wyden said.
But the early legislative calendar this year is consumed with bitter divisions over government spending, including another proposed stopgap to avert a federal shutdown until March to buy more time to pass funding measures.
Smith emphasized the extension of business tax breaks, which Republicans have sought to extend as they began to phase out after 2022.
“This legislation locks in over $600 billion in proven pro-growth, pro-America tax policies with key provisions that support over 21 million jobs,” Smith said.
The lawmakers plan to offset the tax package’s cost by closing the COVID-era Employee Retention Tax Credit to new claims by the end of January 2024, rather than April 15, 2025. The early end of the troubled program, along with increased enforcement and higher penalties for fraudulent claims, is expected to save more than $70 billion, according to Joint Committee on Taxation estimates.
According to a summary of the legislation, the deal also includes provisions to shield Taiwanese semiconductor manufacturers operating in the U.S. from dual taxation despite the lack of a U.S.-Taiwan tax treaty.
It also includes tax breaks for disaster-related losses, including from certain wildfires.
In a sign that changes would likely be needed, the top Senate Finance Committee Republican, Mike Crapo, called the Wyden-Smith deal “a thoughtful starting point” for the legislation, indicating that it needed changes. He said in a statement that he would work “to build broad, bipartisan support for a tax package that provides appropriate relief for working families and businesses.”
The White House was still reviewing the agreement, spokesperson Michael Kikukawa said, noting that President Joe Biden “remains committed to fighting for the full expanded child tax credit.”
Source: Economy - investing.com
