Bipartisan Tax Deal Aims to Expand Child Tax Credit and Extend Business Tax Breaks

In a significant development, top lawmakers from the Senate and House tax-writing committees have announced a bipartisan deal that seeks to temporarily expand the Child Tax Credit and extend several business tax breaks. The proposed legislation, known as the “Tax Relief for American Families and Workers Act of 2024,” aims to provide relief to families, businesses, and the economy as a whole. However, the deal faces an impending deadline and uncertain path ahead as it requires approval from both chambers of Congress.

Expansion of Child Tax Credit:

The centerpiece of the deal is the expansion of the Child Tax Credit for three years. This provision aims to provide financial assistance to families with children, particularly those with low incomes. The current cap for the refundable child tax credit is $1,600. Under the proposed bill, this amount would be increased to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025. Additionally, the credit would be adjusted for inflation starting in 2024.

The expansion of the Child Tax Credit is seen as a crucial step in reducing child poverty and supporting families. The U.S. Census Bureau’s findings indicate that the child tax credit included in the 2021 COVID relief bill, the American Rescue Plan, significantly reduced child poverty. This version of the credit was fully refundable, and many Democrats have advocated for a new version modeled on that bill.

Extension of Business Tax Breaks:

The proposed legislation also includes a range of business tax breaks designed to stimulate economic growth and competitiveness. One provision allows corporations to immediately deduct research and development costs, rather than spreading them out over five years. Another provision permits 100% expensing of investments on equipment. The bill also increases the amount that small businesses can write off.

These business tax breaks are intended to encourage investment, innovation, and job creation. Supporters argue that these measures will strengthen the economy and make American businesses more competitive globally, particularly in the face of competition from China.

Uncertain Path Ahead:

While the bipartisan deal represents a significant step forward, its ultimate fate remains uncertain. The legislation must gain approval from both the House and Senate, and it faces a tight deadline as the 2023 tax filing season approaches. Some House Democrats have expressed concerns that the deal does not go far enough, particularly regarding the Child Tax Credit. They argue that it leaves millions of children behind and tilts too much towards corporations.

The bill’s success hinges on garnering sufficient bipartisan support to pass both chambers of Congress. Senate Majority Leader Chuck Schumer has expressed support for the deal, but it remains to be seen whether enough Republican senators will back it. Senator Mike Crapo, the top Republican on the Finance Committee, has called the bill a “thoughtful starting point” but has not explicitly endorsed it.

Potential Impact and Implications:

The passage of the Tax Relief for American Families and Workers Act of 2024 could have significant implications for families, businesses, and the economy. The expansion of the Child Tax Credit would provide much-needed financial relief to families with children, potentially reducing child poverty and improving overall well-being.

The extension of business tax breaks could stimulate investment, innovation, and job creation, leading to economic growth and increased competitiveness. However, the potential costs and trade-offs associated with these measures must also be carefully considered.

Conclusion:

The bipartisan tax deal represents a significant effort to address the needs of families, businesses, and the economy. The expansion of the Child Tax Credit and extension of business tax breaks could have positive impacts on various sectors of society. However, the deal faces an uncertain path ahead, as it requires approval from both chambers of Congress and faces potential opposition from some lawmakers. The ultimate outcome of this legislation will depend on the ability of lawmakers to find common ground and compromise to pass a bill that addresses the needs of all stakeholders.