The leaders of Congress’ tax committees are trying to close out a bipartisan deal on the child tax credit and business tax benefits. But new roadblocks are already cropping up.
The framework pitched to lawmakers as detailed in our PM edition would come with a roughly $70 billion price tag. Lawmakers would bring down the costs by ending employee retention tax credit claims early.
About $35 billion would go to the child tax credit — expanding access for lower-income families and adjusting the $2,000 maximum benefit for inflation. The other $35 billion would include retroactively bringing back a trio of bigger tax deductions for businesses — though it would cover domestic R&D spending, not foreign.
Smith-Wyden push: House Ways and Means Committee Chair Jason Smith (R-Mo.) and Senate Finance Committee Chair Ron Wyden (D-Ore.) still have some outstanding policy debates to settle. One key hangup: Senate Democrats are pushing for the low-income housing tax credit to be part of the package, according to multiple sources.
The incentive for building affordable rental housing has bipartisan support, and it’s coming up amid a serious housing shortage. But adding it would broaden the deal even further — a tough sell for House Republicans already wary about a price tag.
Smith and Wyden are still hoping to release a joint statement announcing a framework agreement as soon as today, though that timeline is in flux. The two know they need to show momentum as opposition in both parties builds behind the scenes.
Senate GOP pessimism: Idaho Sen. Mike Crapo, the top Republican on the Finance Committee, isn’t on board right now. Crapo has raised concerns about how a tax deal gets across the finish line. Even basic governing is extremely hard in this Congress.
If Senate Republicans don’t support this deal, it can’t pass. And Wyden’s Jan. 29 deadline — for filing season — is quickly approaching.
Some Republicans are also wary of expanding the child tax credit — a signature issue for the Biden administration — in an election year, according to a GOP aide.
House Democrats iffy: Ways and Means Democrats hammered Ranking Member Richard Neal (D-Mass.) in a closed-door meeting on the talks Wednesday.
Progressive House Democrats are railing against the idea of compromising on the child tax credit after they passed a bigger expansion in 2021 and questioning whether the deal really offers parity for families and businesses.
Neal could still back this deal if it was on a path to passing, we’re told, but that’s a big if.
Here’s some news: Any effort to pass the tax package would likely start in the House. But between the pressure from the right on Speaker Mike Johnson and government funding deadlines about to hit, there’s not much room to maneuver here.
And now Rep. Nick LaLota (R-N.Y.) is circulating a letter to Johnson requesting that any tax deal go through “regular order,” saying it shouldn’t be brought up under suspension, according to a draft we obtained.
Of course, this is about pushing for more deductions for state and local taxes, or SALT, a huge political issue in blue states like New York. Blue state GOP freshmen like LaLota have been vocal on SALT this Congress, and they’ve got allies on the other side of the aisle.
“When our party presents a bill considering a plethora of tax provisions, our party’s leadership should, at a minimum, simultaneously facilitate a debate on a SALT amendment,” the letter says.
— Laura Weiss and Brendan Pedersen