US Lawmakers Propose $78B Child, Business Tax Credit Bill

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Facts

  • Sen. Ron Wyden (D-Ore.) and Rep. Jason Smith (R-Mo.) have unveiled a bipartisan tax bill that would issue $78B in tax breaks ahead of the upcoming tax-filing season — retroactively reversing some business-tax rules implemented under GOP leadership in 2017 and expanding the child tax credit.1
  • This package proposes reallocating funds from the pandemic-era employee retention tax credit to the child tax credit and the business tax benefits, which would last through 2025 and are each valued at $33B. It further includes tax relief for disaster survivors, tax credits for low-income housing development, and tax breaks for Taiwanese workers and businesses operating in the US.2
  • Regarding the child tax credit, this bill would change rules to allow more low-income families with children under 17 to qualify for the benefit. Additionally, the annual refundable amount per child — currently at $1.6K — would raise to $1.8K in 2023, $1.9K in 2024, and $2K in 2025.3
  • Though this tax break was expanded during the COVID pandemic years, the previous Congress refrained from making it permanent. During the proposed three-year renewal, work requirements would remain in place to qualify for the tax child credit despite some opposition on the left.4
  • Meanwhile, the business tax provision would allow companies to immediately, rather than the five years it currently takes, and retroactively from 2022 to deduct all of their US-based research and development costs while restoring full, immediate deductions for some capital expenses and additional interest deductions.5
  • On Friday, the House Ways and Means Committee will hold a hearing to work on and weigh in on this major bipartisan legislation. While the tax-writing panel expects to advance this proposal, fissures and points of debate are expected to arise, as many lawmakers have yet to express their position on the matter.6

Sources: 1WSJ, 2The New York Times, 3CBS, 4FOX News, 5USA Today and 6Washington Examiner.

Narratives

  • Establishment-critical narrative, as provided by The Hill. All too often, American politicians have introduced bills to create or expand the so-called 'refundable tax credits,' which they have falsely marketed as tax cuts despite effectively representing new direct expenditure because checks exceed taxes paid. As the national debt has already toppled $34B, the US should rein in public spending to reduce the burden on taxpayers instead of expanding federal benefits.
  • Pro-establishment narrative, as provided by Bloomberg. Though the US has been in a precarious fiscal situation, adding up to $100B to the budget deficit to reduce poverty and boost the economy makes perfect economic sense. Child poverty costs the US economy over $1T, as it slashes productivity and increases both health care costs and crime, while the gross domestic product could fall by up to $325B per year without the proposed business tax deductions.

Predictions