On Tuesday, a bipartisan group of lawmakers proposed a tax deal estimated to be worth $78 billion. The proposed package intends to bolster the child tax credit, bring back a number of company tax breaks, boost financing for affordable housing, and offer more assistance for relief operations following natural disasters. Notwithstanding its possible advantages, the package still has a long way to go before it becomes law.
A portion of the increased child tax credit should be reinstated, according to certain progressive organizations and congressional Democrats. In 2021, this credit was essential in lowering child poverty and giving families financial security. However, some Republicans and business groups have been advocating for the removal of limitations on businesses’ ability to deduct purchases of machinery and equipment from their taxes, along with other tax breaks.
Despite the fact that this agreement has bipartisan and bicameral support, it is crucial to remember that the leadership did not negotiate it. Consequently, it is still uncertain how this arrangement will pass Congress. While some members think it should be treated as a stand-alone bill, others are pushing for it to be attached to a must-pass package in order to assist its passing. Though the chief negotiators remain optimistic, Congress has a lot of urgent matters on its plate right now, and making any kind of meaningful progress during an election year is always harder.
What s in the package
Rep. Rosa DeLauro of Connecticut, the leading Democrat on the House Appropriations Committee, is one of the key individuals who opposes the deal’s expansion of the child tax credit. Representative DeLauro feels that the expansion is insufficient.
Though not as significant as the one included in the Democrats’ American Rescue Plan Act in 2021, the deal intends to bolster the popular child tax credit. The Act extended eligibility to more parents, enhanced the credit amount for some families, and established a monthly transfer of half the credit.
By progressively expanding the credit’s refundability and eliminating the penalty for larger families, the new package seeks to increase the credit’s accessibility for lower-income families. It also suggests that starting in 2024, the tax credit be adjusted for inflation.
Additionally, rather than deducting the cost of research and development over a five-year period, businesses operating in the US will be able to deduct the cost of such investments immediately. It would enable these and other tax relief initiatives.
The proposal seeks to provide immediate write-offs for small businesses and tax relief to families affected by recent hurricanes, flooding, wildfires, and the Ohio train disaster in order to support enterprises and individuals affected by disasters.
The package would increase the availability of low-income housing by improving the Low-Income Housing Tax Credit.
Additionally, it would expedite the timeframe for submitting retroactive claims for the Employee Retention Tax Credit—a scheme that was sadly beset by extensive fraud—which was created during the Covid-19 outbreak.
The clause is anticipated to save the government more than $70 billion, which will help pay for the package.