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Child tax credit expansion, business incentives combined in new congressional tax plan

Credit: iStock

by Ashley Murray, NC Newsline
January 17, 2024

WASHINGTON — Leading members of Congress released a bipartisan, bicameral tax proposal Tuesday, promising a middle-path deal to help low-income families and provide incentives for businesses as Trump-era tax breaks expire.

The framework led by top tax policy leaders U.S. Democratic Sen. Ron Wyden of Oregon and Republican Rep. Jason Smith of Missouri would raise the child tax credit incrementally through 2025 and restore tax relief for affordable housing projects.

The three-year proposal would also make exempt disaster payments to wildfire victims and to those who suffered losses after the massive train derailment in East Palestine, Ohio. The deal also aims to extend research and development tax credits, as well as reduce tax burdens on U.S.-Taiwan business relationships, an effort to bolster relations with the autonomous island nation vulnerable to Chinese government aggression.

Wyden, chair of the Senate Committee on Finance, said in a statement that “(f)ifteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead.”

Democrats have been pushing to permanently raise the tax credit that low-income families receive per child after a temporary increase during the COVID-19 pandemic illustrated significant reductions in child poverty.  The current proposal would end in 2025.

Wyden also praised the deal’s potential to spur affordable housing construction and said that his goal “remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I’m going to pull out all the stops to get that done.”

Smith, chair of the House Committee on Ways and Means, said “American families will benefit from this bipartisan agreement that provides greater tax relief, strengthens Main Street businesses, boosts our competitiveness with China, and creates jobs.”

Ending fraud-ridden program

Both lawmakers highlighted the proposal’s effort to rein in abuse of the COVID-19-era employee retention tax credit by increasing penalties and the statute of limitations for those committing fraud, and cutting short the overall program by 14 months.

“We even provide disaster relief and cut red tape for small businesses, while ending a COVID-era program that’s costing taxpayers billions in fraud. This legislation locks in over $600 billion in proven pro-growth, pro-America tax policies with key provisions that support over 21 million jobs. I look forward to working with my colleagues to pass this legislation,” Smith continued in a statement Tuesday.

And for those who file 1099 forms, a provision tucked away in the framework would increase the threshold to file to $1,000 from the current $600.

The proposal won praise from across the tax policy spectrum.

Business Roundtable, an advocacy organization representing a wide range of U.S. CEOs, described the deal’s pitch to revive expired pro-business policies as “critical to strengthening America’s global competitiveness.”

“Business Roundtable strongly supports the bipartisan deal to restore three vital pro-growth tax policies that have expired or are being phased out,” the organization’s CEO Joshua Bolten said in a statement Tuesday. “Reviving immediate research and development expensing, full expensing for purchases of equipment, machinery and technology, and a more sensible business interest deduction would increase domestic investment, bolster U.S. innovation and create American jobs.”

Sen. Sherrod Brown, an Ohio Democrat and evangelist for the child tax credit, urged his colleagues to pass the deal, calling it a “win-win for Ohio families and Ohio manufacturers.”

“The deal’s expansion of the Child Tax Credit will help parents keep up with the rising cost of living and ensure that their hard work pays off. The business provisions will support American companies that invest in our nation’s research and manufacturing. The deal also ensures that residents of East Palestine won’t get hit with a surprise tax bill for payments they received from Norfolk Southern after last year’s derailment,” said in a statement Tuesday.

The Committee for a Responsible Federal Budget congratulated the lawmakers on reaching a long sought-after deal that would largely be paid for by combating fraudulent use of COVID funds.

But the organization, which advocates for lowering the national debt, warned that the provisions could be very costly in the long run — more than half trillion dollars over 10 years — if made permanent.

“With our debt approaching record levels, it’s incredibly important that any new policies be fully offset. Chairmen Smith and Wyden deserve praise for doing the hard work to find offsets for this package, which will help codify the principle that all policies – including tax cut extensions – must be paid for to avoid adding to the debt,” CRFB’s president Maya MacGuineas said in a statement Tuesday.

MacGuineas later continued that lawmakers “need to stop the practice of passing temporary tax and spending policies with arbitrary sunsets that exist only to hide the true costs. Policymakers already face nearly $4 trillion of policy expirations at the end of 2025, and this package would lead this cost to grow massively.

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This story is republished from NC Newsline under a Creative Commons license. Read the original story.