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Jan 10, 2024, 11:44pm EST
politics

Corporate cuts and cash for kids: Details emerge on Congress’s big new tax deal

REUTERS/Elizabeth Frantz
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The News

Details of a long-awaited bipartisan tax agreement that would boost the Child Tax Credit and enact a trio of business tax cuts trickled out Wednesday, though its chances of eventual passage remained unclear.

The total price tag of the package so far amounts to $70 billion, evenly split between the child credit expansion and business tax benefits, according to Rep. Don Beyer, D-Va. It’s intended to be a three-year deal running through 2025, when much of the Trump administration’s signature tax law is set to expire, setting the stage for a major renegotiation of the IRS code.

“We will have a stronger hand for kids and families in 2025 if we improve the [Child Tax Credit] benefit now,” Senate Finance Committee Chair Ron Wyden, D-Ore., told Semafor. “They’ll feel the benefit.”

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But there are still obstacles between this nascent tax package and President Joe Biden’s desk. Sen. Mike Crapo, R-Idaho, the ranking Republican on the Senate Finance panel, has been noncommittal about the deal so far.

“We continue working on it. There is no agreement at this point,” he told Semafor.

Speaker Mike Johnson also hasn’t been involved in the long-running negotiations which previously collapsed at the end of 2022. “I haven’t even had a chance to look at it yet,” Johnson said.

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That might start changing. Rep. Ron Estes, R-Kan., member of the tax-writing House Ways and Means Committee, told reporters he planned to meet with Speaker Johnson to brief him on the tax measure on Thursday. “Looking forward to a good outcome,” he said.

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The Details

The potential deal would include several changes meant to gradually increase the generosity of the Child Tax Credit, which is currently worth up to $2,000 per child. By 2025 it would increase the maximum value to $2,100 and let families take the full credit as a cash payment if they have no tax liability. Currently, parents can only receive up to $1,700 as cash. Crucially, it would also include a faster phase-in of the credit for households with multiple children.

The three business tax provisions would include extending rules allowing companies deduct the cost of capital expenses immediately, instead of spreading them over years; establishing a larger interest deduction; and restoring the ability for businesses to immediately write off research and development expenses — though only for domestic spending (One Democratic aide and person familiar with the deal said that limitation was a cost-saving measure from Republicans).

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All cautioned the closely-held talks remained fluid and nothing was final.

Most, if not all of the package would be financed by shutting off the Employee Retention Tax Credit shortly after a possible deal becomes law, per one of the Democratic aides. The program was originally established in 2020 to provide a lifeline to struggling businesses that kept employees on payroll during the depths of the pandemic, but has since become a magnet for scams and fraud.

While he didn’t believe it was the key factor driving negotiations, Rep. Jodey Arrington, R-Tex., told Semafor that a tax agreement could have “the ancillary benefit” of demonstrating House Republicans can draft laws even with their slender majority.

“That’s an important thing for us to demonstrate that we can govern with the thinnest of margins with our majority and divided Congress,” Arrington told Semafor. “So I think there’s tremendous value there.”

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Room for Doubt

Still, there’s skepticism about a deal crossing the finish line. “Mike Johnson is walking a tight rope and the tax committees are asking him to juggle chainsaws before he gets to the other side,” a tax expert connected to Capitol Hill said.

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