Congress’ top tax writers are circling a long-anticipated deal to expand the child tax credit and revive some expired tax benefits for businesses.
Bipartisan negotiations spearheaded by House Ways and Means Committee Chair Jason Smith (R-Mo.) and Senate Finance Committee Chair Ron Wyden (D-Ore.) have been active in recent days. Sources close to the committees are increasingly optimistic the pair could produce an agreement as early as next week, though there’s still work to be done.
Any bipartisan tax deal would be a huge development. And lead negotiators are eyeing a very ambitious deadline. They could try to attach a tax compromise to whatever government funding deal leaders cobble together later this month, just in time for the 2023 filing season.
We still think a tax agreement clearing Congress anytime soon is unlikely. But the shape of a bipartisan deal on issues like the child tax credit would lay significant groundwork for 2025, when a large swath of former President Donald Trump’s 2017 tax law is set to expire.
Here’s what to expect: The package would likely expand the child tax credit along with business benefits that recently lapsed for research and development spending, purchases of assets that lose value over time and interest expenses.
Whatever tax writers do is expected to sunset after 2025 to align with the upcoming expiration of the GOP’s tax cuts.
A key factor — and one lawmakers are still finalizing — is the cost. Negotiators from both sides are well aware that Republicans, particularly in the House, won’t go for anything with a huge price tag. Tax writers are looking at ways to bring down the total cost.
The looming tax filing season means that any retroactive deal would need to pass in the next few weeks or so in order for the IRS to implement it. And that would still be a huge challenge. Not to mention, Congress has its plate full of higher-priority fights over government funding, Ukraine aid and the U.S.-Mexico border.
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— Laura Weiss