As filing day nears, bipartisan tax bill stalled by Senate GOP
WASHINGTON — A bipartisan bill to expand the child tax credit and reinstate a set of business tax breaks has stalled in the Senate after winning overwhelming approval in the House, as Republicans balk at legislation they regard as too generous to low-income families.
The delay of the $78 billion tax package has imperiled the measure’s chances and reflects the challenges of passing any major legislation in an election year. Enacting a new tax law would give President Joe Biden and Democrats an achievement to campaign on, something that Republicans may prefer to avoid.
The House approved the measure in January by a vote of 357-72, and its backers had hoped to get it across the finish line around the start of tax-filing season at the end of that month. But with just over a month before the filing deadline, it has not moved in the Senate.
The package, which would be in effect through 2025, would expand the child tax credit and restore a set of tax breaks related to business research costs, capital expenses and interest. It would also include a boost to a tax credit encouraging the development of low-income housing, tax relief for disaster victims, and tax breaks for Taiwanese workers and companies operating in the United States.
The bill would be financed by reining in the employee retention tax credit, a pandemic-era program that has become a magnet for fraud. The package was brokered by the top two congressional tax writers, Rep. Jason Smith, R-MO., chair of the Ways and Means Committee, and Sen. Ron Wyden, D-ore., chair of the Finance Committee.
Senate Republicans have expressed a variety of concerns, fixating primarily on a “look-back” provision that would allow parents to use their previous year’s earnings to claim a larger child tax credit. Republicans argue the measure would weaken work incentives because it would allow parents who had little to no income in the current year to still claim a credit of up to $2,000 per child.
The GOP also has portrayed the mechanism for financing the bill as a sham, since the program that would be ended to pay for the tax provisions has cost the government far more than expected.
Senate Republicans have also complained that they were cut out of the deal, since it was reached and presented by Smith and Wyden without an endorsement from Sen. Michael Crapo of Idaho, the top Republican on the Finance Committee, who opposes it. The negotiators tried months ago to get Crapo on board, including by limiting the look-back provision in the child tax credit, but ultimately announced the bill without his backing.
Senate Republicans have said they want the chance to overhaul the bill in the Finance Committee.
Any major changes to the bill would most likely sap support among Democrats, who overwhelmingly back the package as is. And they would punt the bill back to the chaotic House, which has struggled for months to conduct regular legislative business.