U.S. congressional negotiators are nearing a bipartisan deal to renew expired business tax breaks and boost the child tax credit in time for many voters to receive the benefit during the current election year.
Democratic Senator Ron Wyden of Oregon and Republican Representative Jason Smith of Missouri, chairmen of the Senate and House tax committees, presented an outline of their roughly $70 billion proposal, evenly split between the corporate tax cuts and child credit, to their colleagues as talks continue.
The chairmen's proposal would provide a retroactive renewal for 2023 of an expired research and development deduction, as well as a tax break for the interest incurred on business loans. These tax cuts have been a top priority of U.S. businesses.
A remaining holdup is that progressive Democrats continue to push for the child credit to be fully refundable even for taxpayers without federal income tax obligations. Republicans insisted that would discourage work and rejected that proposal. Another issue is a possible extension of an expanded low-income housing tax credit.
Representative Richard Neal, the top Democrat on the House Ways and Means Committee, said making the tax credit fully refundable continues to be important to Democrats. Some of the proposals in the agreement, he said, are "going backward."
The tax breaks would be extended through 2025, leaving them to expire at the same time as dozens of other tax cuts that were part of former President Donald Trump's Tax Cuts and Jobs Act.
The chairmen are aiming for Congress to enact it before the Jan. 29 start of the annual tax-filing season. It is not yet clear if House and Senate leaders will quickly push through the roughly $70 billion proposal, however.
Congress is focused on avoiding the twin threats of a U.S. shutdown on Jan. 19 and Feb. 2 when temporary government funding expires. The tax deal would likely have to be attached to a must-pass funding bill for enactment before the tax season.
Politically, the tax deal could be a boost to President Joe Biden who gets low marks from voters on his handling of the economy and for incumbents in Congress who vote for the measure.
The costs of the tax breaks are partially paid for by limits on the COVID-era employee retention tax credit.
