Debate previews coming tax tiffs
President Joe Biden in his State of the Union address Thursday laid out broad new policy aims for a second term, which include using tax hikes on major corporations and the wealthy to make new investments in child care and eldercare, affordable housing and education.
The speech, and the debates over policy over the course of the 2024 election, signal the start of a massive struggle facing Congress and the White House next year, as trillions of dollars in tax cuts pushed in 2017 by former President Donald Trump expire. If Biden wins another four years, Democrats will try to enact Biden’s plans, which, by some measures, are broader than the legislative achievements that have anchored his first term. If Trump wins, Republicans will fight to keep many of those earlier cuts.
Congress is already considering legislation that would mark a first step for Biden’s agenda. A bill to expand the child tax credit — a major Biden priority that provides money for working families — and to restore certain corporate tax breaks passed the House in January and is gathering support in the Senate.
The measure could lift hundreds of thousands of children out of poverty, according to nonpartisan projections. It would be a scaled-down version of an earlier expansion of the credit Biden won but that expired at the end of 2021.
“The child tax credit I passed during the pandemic cut taxes for millions of working families and cut child poverty in half,” Biden said in his address Thursday. “Restore that child tax credit.”
Lawmakers have been considering the legislation until recent days under a deadline, saying they had to pass it before filing season ends in April to save taxpayers the confusion of additional paperwork and changing tax policy.
But Treasury Department officials told The Washington Post the IRS could deliver the child tax credit without any extra work for families. The agency could automatically amend tax returns for individuals who would be newly eligible for the credit or entitled to a larger payment. Roughly 10% of all taxpayers would require an IRS adjustment.
“Based on lessons learned through the stimulus payments issued during the pandemic and additional capacity added to IRS resources, the agency would be able to determine eligible taxpayers who have already filed, and issue payments automatically without people needing to take any additional action like filing an amended return,” Treasury spokesperson Ashley Schapitl said.
The sparring over a new expansion of the child tax credit is a preview of what could come next year — and some lawmakers want to wait to see who wins the elections this fall before changing tax laws.
Renewing Trump’s $2 trillion tax cut legislation when it expires would add another roughly $3 trillion to the deficit, according to nonpartisan estimates.
In his speech to Congress — and on the campaign trail — Biden has used taxes as a populist device, drawing a contrast between his plan to expand services for the working and middle classes and Trump’s tax law, which mainly benefited the wealthy and corporations. Americans have also viewed Trump’s law unfavorably since it passed in 2017, according to national pollster Gallup.