We’ll just say it — 2023 wasn’t a great year for tax policy. But there’s hope for all you tax lovers out there.
The groundwork that lawmakers laid this year, along with some big deadlines on the horizon, could make 2024 a busy period in tax land. What happens in the new year will set up landmark legislative efforts to address a pile of tax policies that expire after 2025.
To be clear, no one was expecting a Republican House and Democratic Senate to yield significant tax changes this year. But that didn’t stop lawmakers from trying to revive some lapsed business tax breaks and exploring ways to reexpand the child tax credit.
Now, top lawmakers sound closer to a deal and appear far more willing to strike one than they did 12 months ago.
“I feel that we’re really well positioned now to be able to put something together,” Senate Finance Committee Chair Ron Wyden (D-Ore.) told us.
The landscape: Last December, Democrats and Republicans weren’t getting anywhere on expanding the child tax credit. But now lawmakers from both parties are saying publicly there’s a deal to be made that includes expanded benefits for families with kids.
Let’s be clear, however — it’s still highly unlikely any tax deal will come together before the lame-duck session next year.
But Sen. Mike Crapo (R-Idaho), ranking member on the Senate Finance Committee, told us Republicans taking over the House helped get bipartisan talks around the child tax credit to “more of a reasonable zone” this year.
Another factor in talks was Rep. Jason Smith (R-Mo.) ascension as chair of the House Ways and Means Committee. Smith and Wyden have built up their relationship over the past year. Wyden said this week he speaks with his Ways and Means counterpart regularly amid tax negotiations.
Democrats now appear willing to accept something closer to Republicans’ demands. The GOP wants to ensure work requirements for the child tax credit, and keep the costs way below the 2021 version.
Any deal on the child tax credit would also include revivals of tax breaks for businesses — likely for research and development spending, interest expenses and the purchase of assets that lose value over time.
Top tax writers would love the chance to attach a deal to a funding package early in the year, but that seems highly unlikely given bigger challenges in the spending fight. They’ve also considered trying to pass a standalone tax package, likely by using a widely-backed bill to extend tax treaty-like benefits to Taiwan.
Of course, it’s just as likely that blowout funding fights between the Senate and House early next year will force tax policy to get lost in the mix. But if tax committee members see an opening, don’t be surprised if they try to capitalize on it.
SALT-y shores: We can’t talk about 2024 without addressing deductions for state and local taxes. Republicans put a $10,000 cap on SALT deductions in their 2017 tax law, a move despised by property owners in high-cost metro areas.
If there was ever a time for SALT to crystallize as a major issue for both parties, it’s 2024. Many of the deduction’s champions represent the most vulnerable seats in Congress, and this issue affects a wide swath of their constituents.
Rep. Andrew Garbarino (R-N.Y.), a leader of SALT efforts earlier this year, told us he’ll keep pressing the issue as tax bills come up. Garbarino expects his allies will flex their power on SALT moving forward in any slim House majority.
“This goes beyond party lines here,” Garbarino said. “Like I said, it’s about the regions, the states. So I think no matter who’s in charge of Congress, it’s going to stay as a major issue, especially with the cap expiring in the next two years.”
With the cap set to expire after 2025, we expect opponents of the current SALT limit to make their presence known in the coming year.
— Laura Weiss
