House Passes $79 Billion Tax Cut Package with Bipartisan Support, Boosting Child Tax Credit and Business Tax Breaks
In a surprising turn of events, the House of Representatives achieved a remarkable feat by passing a $79 billion tax cut package with overwhelming bipartisan support. This package includes provisions to enhance the child tax credit for millions of lower-income families and boost three tax breaks for businesses. The passage of this bill represents a significant victory for lawmakers from both sides of the political aisle, who have been eagerly seeking policy wins.
Although the prospects of the measure becoming law are uncertain, given that it still needs to be taken up by the Senate, the passage of the tax legislation in the House is undeniably a rare breakthrough. The bill garnered an impressive vote of 357-70, showcasing the broad support it received from representatives across party lines.
One key figure who played a crucial role in rallying support for the bill is Speaker Mike Johnson, a Republican from Louisiana. He threw his weight behind the legislation and even held meetings with fellow GOP lawmakers who had concerns about certain aspects of the bill, particularly the expanded child tax credit. Additionally, some lawmakers were dissatisfied with the bill’s failure to address the $10,000 cap on property taxes or state and local taxes that can be deducted on federal returns. Notably, raising this cap is a top priority for Republican members of the New York congressional delegation, whose victories in 2022 contributed to the GOP taking the majority.
Speaker Johnson assured his colleagues that he would work towards addressing the cap, although no bill text has been produced yet. The legislative process would involve moving the bill through the House Rules Committee, which means the timing remains uncertain. Nonetheless, Johnson’s commitment to finding a path forward received positive feedback from lawmakers and stakeholders.
On the House floor, Speaker Johnson hailed the tax cut bill as important bipartisan legislation that would rejuvenate “conservative pro-growth tax reform.” In addition, he emphasized that it would bring an early end to a “wasteful COVID-era program” that has been plagued with fraudulent activity. By moving up the deadline for claiming the employee retention tax credit, the bill is expected to offset a significant portion of the tax cuts’ cost.
Furthermore, Speaker Johnson underscored the significance of the bill passing through the House Ways and Means Committee before reaching a vote in the full House. He highlighted it as a prime example of how Congress should function, with collaboration and consideration of all perspectives.
While Republicans focused on restoring full and immediate deductions for businesses’ purchase of new equipment and machinery, as well as domestic research and development expenses, Democrats directed their attention towards enhancing the child tax credit. Currently, the tax credit stands at $2,000 per child, but not all of it is refundable. The bill seeks to incrementally raise the refundable portion of the credit, reaching $1,800 for 2023 tax returns, $1,900 for the following year, and finally $2,000 for 2025 tax returns. Additionally, the bill adjusts the topline credit amount to temporarily grow at the rate of inflation.
Estimates from the nonpartisan Tax Policy Center suggest that households benefiting from these changes in the child tax credit would experience an average tax cut of $680 in the first year. Democrats aimed to reinstate the more generous tax credit they passed in 2021 under President Joe Biden’s administration, which involved monthly payments. This credit amounted to $3,600 annually for children under age 6 and $3,000 for children ages 6 to 17. However, most lawmakers were willing to compromise and accept the gains offered by the bill.
Representative Danny Davis, a Democrat from Illinois, expressed his support for the bill despite acknowledging its shortcomings. He stated, “You know I’ve been told that a half a loaf is better than none. This isn’t even half a loaf, but I’m going to vote for it because our families and businesses need help.” Representative Richard Neal, a Democrat from Massachusetts, echoed this sentiment, emphasizing that the improvement to the child tax credit would benefit 16 million children.
Nonetheless, some Democrats felt that the bill did not go far enough in providing relief to those in need. Representative Rosa DeLauro from Connecticut criticized the bill for providing “billions of dollars in tax relief for the wealthy, pennies for the poor.” On the other hand, certain Republicans argued that the expanded child tax credit resembled “welfare.” Representative Thomas Massie from Kentucky contended that providing cash payments to individuals who don’t pay taxes is equivalent to welfare. However, Representative Drew Ferguson from Georgia rebuffed this characterization, asserting that work should be a prerequisite for receiving federal benefits.
Despite criticisms from both conservative and liberal members of the House, a significant majority from each party ultimately voted in favor of the bill. Supporters of the legislation hope that this strong show of support will motivate the Senate to take action.
The tax cut package also includes provisions to enhance the tax credit for construction or rehabilitation of rental housing targeted at lower-income households. This measure is expected to add an estimated 200,000 housing units across the country, addressing the acute housing shortages and soaring prices faced by many states. Additionally, the bill ensures that victims of certain natural disasters and the East Palestine, Ohio, train derailment are not burdened with a hefty tax bill for compensation received for their losses.
While the fate of the bill remains uncertain until it passes through the Senate, its successful passage in the House is undoubtedly a significant achievement. The bipartisan support it garnered reflects a rare moment of collaboration and compromise in Congress. As lawmakers continue to navigate the complexities of tax policy, this tax cut package represents a step towards providing relief to both families and businesses, albeit with some perceived shortcomings.
