Just days after Washington’s bitter fight over raising the debt limit, House Republicans are calling for billions in new tax cuts.
GOP lawmakers unveiled a plan Friday that would offer a range of benefits to big businesses, small firms as well as millions of average Americans. A cost estimate was not immediately available, but Republicans are sure to take slings over the likely budget impact, coming so soon after the debt battle in which they decried federal red ink.
But the package — which would beef up the standard deduction and expand business research writeoffs, among other provisions — is being rolled out with an eye toward a year-end tax deal, something Democrats want as well. Many are already demanding an expansion of the child tax credit as the price of any agreement, which could swell the cost.
Lawmakers had hoped to strike a similar business-tax-breaks-for-family-friendly-benefits exchange during last year’s lame-duck session, though that got surprisingly little traction.
But many are eager to try again and see the end of this year as their last chance to do something big on the tax front during this session of Congress.
Part of the Republican plan would undo restrictions on several popular business tax breaks that recently came online. Lawmakers are facing mounting pressure from the business community to nix new restrictions on writeoffs for research and development expenses, in particular, which have jacked up the effective tax rates many companies pay. Along with restoring R&D breaks, their plan would also rescind tougher rules on capital and interest expense deductions.
Other parts of the plan would expand the so-called Opportunity Zone program, with an initiative specifically aimed at benefiting rural areas — something that is especially important to House Ways and Means Chair Jason Smith (R-Mo.).
There are tax cuts for individuals as well, including a plan to temporarily expand the standard deduction to the tune of $2,000 for individuals and $4,000 for couples. Republicans would also kill an IRS crackdown on the taxes paid by gig workers Democrats pushed into law in 2021, but that has been delayed. At the same time, the bill would revoke some of the green energy tax credits Democrats created last summer.
The Ways and Means committee plans to take up the legislation next week.
Democrats have been highly critical of Republicans’ bid to cut taxes on businesses, but, ironically, Democrats might be better off going along with bigger benefits for companies.
That’s because, under the logic of Capitol Hill dealmaking, if one side gets a certain amount of money to spend, then the other gets a similar-sized allowance as well.
And expanding the child credit is costly, because it is claimed by so many people, so giving more to corporate America would mean Democrats would have a bigger budget to expand the child credit. They likely wouldn’t have enough to revive the lapsed, pandemic-era expansion that sent monthly checks to millions of Americans, so they would have to settle for something more incremental.
There are also some surprising omissions from the Republican plan, including a bipartisan proposal to cut taxes on auto dealers who complain that a combination of the pandemic and the arcane accounting rules they use to calculate their taxes temporarily sent their tax bills skyward.
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