House Passes $78 Billion Tax Cut Bill With Modified Child Tax Credit

A bill that would restore several key business tax credits that expired when Donald Trump left office passed the House by a bipartisan vote of 357-70. The bill also restores a modified child tax credit support. It received support from 188 Democrats and 169 Republicans. Forty-seven Republicans voted against the bill along with 23 Democrats.

“The Tax Relief for American Families and Workers Act is important bipartisan legislation to revive conservative pro-growth tax reform. Crucially, the bill also ends a wasteful COVID-era program, saving taxpayers tens of billions of dollars,” Speaker Mike Johnson (R-La.) said in a statement. 

Johnson had been dubious of the bill’s $78 billion price tag and the modified child tax credit. In the end, the GOP tweaked the child tax break, sunsetting the credit in 2025.

Johnson resisted pressure to raise the cap on property taxes, the SALT deduction, that northeastern lawmakers and Democrats from big states were agitating for. Johnson pledged to bring up the property tax cap as a separate bill later in the session.

The “wasteful COVID-era program” is the employee retention tax credit of which the IRS said “95% of claims now being made by businesses for a COVID-era tax break were fraudulent,” according to AP.

Associated Press:

House Republicans were anxious to restore full, immediate deductions that businesses can take for the purchase of new equipment and machinery, and for domestic research and development expenses. They argue such investments grow the economy and incentivize American companies to keep their manufacturing facilities and operations in the United States. The bill also provides businesses more flexibility in determining how much borrowing can be deducted.

“Each of these policies will help American businesses grow, create jobs and sharpen their competitive advantage against China,” [Rep. Jason] Smith said as debate began on the House floor.

The bill faces an uncertain future in the Democratic Senate, where some Republicans are questioning the bill as well.

New York Times:

Senate Republicans have also sought to pump the brakes, in another indication of the political challenges the package still faces. The bill would be a win for President Biden and Democrats, who have made expanding the child tax credit a signature issue, including Senator Sherrod Brown of Ohio, who is up for re-election this year and is a key target for Republicans in November.

Senator Michael D. Crapo of Idaho, the top Republican on the Finance Committee, said on Wednesday that he still had concerns with the bill — including a provision that would allow parents to use their previous year’s earnings to claim a bigger credit, which he argued would discourage work — and wanted to see it amended in the Senate. Mr. Crapo, and many other Senate Republicans, previously voted in favor of the same provision in previous bills.

“I’m sure there are going to be a number of issues, like raised yesterday in the House, that didn’t get resolved,” Crapo said. “I’m guessing that a lot of those kinds of issues will come up, and we’ll have to work through them.”

There’s been no timetable posted for Senate action, although the entire Congress is going to be busy trying to pass a budget by the end of March.