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5 fights to watch as tax deal goes to Senate

The tax deal, which includes business tax cuts and an expansion of the Child Tax Credit (CTC), was passed by the House of Representatives on Wednesday night by a vote of 357-70. But the bill’s fate in the Senate is up in the air.

The deal, proposed by top tax writers Sen. Ron Wyden (D-Ore.) and Rep. Jason Smith (R-Missouri), was a rare bipartisan effort in a divided Congress, but the Senate In this midst of all this, they may face their toughest hurdle yet. Republican resistance.

Asked Thursday if there were enough Republicans to support the bill, Sen. Kevin Cramer, RN.D., told reporters, “That would be the trick.”

Here are five key issues to watch regarding the tax bill before the Senate.

How will the bill be covered?

Along with $33 billion in business credits and other provisions, the bill also increases the Employee Retention Tax Credit, a pandemic-era tax cut that helps businesses that don’t lay off workers, to fund a $33 billion expansion of the Child Tax Credit. It will be abolished.

But Republicans argue that shifting spending from one tax credit to another won’t actually balance costs in the long run.

“It’s kind of a bogus quid pro quo,” said Sen. John Cornyn (R-Texas). “That’s because the original tax credits made during the pandemic were not paid. So it seems like smoke and mirrors to now say that unpaid tax credits can be used to make this payment.”

“I certainly support the Finance Committee holding hearings and raising prices, but I don’t want to just rubber stamp it,” Cornyn added.

Kramer expressed similar hesitation Thursday.

“I wish they had paid more. I know there’s compensation, but they’re paying for it with money they’re not being paid,” he said.

The bill would extend the business deduction and child tax credit for two years, but budget experts warn that lawmakers intend to extend them far beyond the tax code’s 2025 reset. .

The bill’s highest cost of tax credits is about $79 billion, but Mr. Smith has already boasted that business credits alone will ultimately save companies $600 billion that they would have paid the government. Experts say this figure is accurate, assuming the provision is extended.

This could significantly contribute to the national deficit, which has ballooned since the pandemic and currently stands at about $34 trillion.

“I don’t support it,” said Sen. Ron Johnson (R-Wis.). “We’re $34 trillion in debt. We can’t afford to keep doing this.”

Asked whether expanding business credit and children’s credit was a good trade-off, Mr Johnson said no.

“It’s not worth laying the groundwork for a 10-year, $1 trillion child tax credit program,” he said.

Republicans issue child tax credit

Republicans also want to tie CTC expansion to stricter work requirements.

Sen. John Thune, R.S., told reporters Thursday that the bill needs to be amended or it won’t get 60 votes.

“There are some things you shouldn’t put in there, like some of the things in the CTC. It’s always connected to work. You can have it for a year, but then you can’t work and You get it for the second year in a row,” Thune told The Hill shortly after the bill was announced.

“They increased their refundable amounts and indexed their overall creditworthiness.” [to inflation]. There are some things I have to consider there,” he said.

But Democrats are unlikely to embrace stricter work requirements, as multiple experts have raised questions about the effectiveness of such measures.

“A growing body of evidence suggests that they do not encourage work,” economist Kathryn A. Edwards wrote in a 2023 paper. opinion article. “On the contrary, they are more likely to impose hardships and increase poverty. When combined with the lack of adequate labor protections, they can even approach exploitation.”

Democrats worry the bill is too pro-business.

Democrats say the tax bill is too biased toward corporations, extending business tax credits stripped away as part of the 2018 deep cut in corporate tax rates.

“This is a compromise, and some on our side believe it is a mix of tax benefits for businesses and tax benefits for businesses. [child tax credit] That’s not their preference,” Sen. Tim Kaine (D-Va.) said Thursday.

Kaine said he remains “very inclined to support” the bill, but some of his progressive colleagues remain unconvinced.

Sen. Bernie Sanders, R-Vermont, said the package is still up in the air and needs to be considered in more detail.

“The child tax credit is an important step to help low-income families. That’s the good news. The bad news and disagreement is that big corporations that make profits already don’t pay their fair share of taxes. , we’re giving them huge tax rates. That’s the balance we have to look at,” he said.

Complaints about state and local taxes may limit assistance.

Resistance to the deal in the House was notable among Republicans in blue states who want to increase the cap on state and local tax (SALT) deductions as part of a larger tax deal.

Sources told The Hill that New York Republicans and House leadership agreed to bring a SALT bill to the floor by the end of next week, but later announced that House Speaker Mike Johnson (R-Louisiana) A close aide from the state opposed the move. time frame.

If the bill becomes reality, it could add another dimension to the debate in the Senate that could potentially be folded or sidelined.

Sen. Bob Menendez (D.N.J.) said Thursday that the bill needs more time, but he thinks he will support it.

“I think I agree with that. We’ll just have to see,” he said.

The impact of passing a huge tax bill on elections

Senators are also concerned with the overall picture of the tax package and the question of which party stands to gain more from its passage.

Senator Chuck Grassley (R-Iowa) told semaphor “Passing a tax bill that makes the president look good — mailing checks before the election — means he has a chance of being re-elected,” he said Wednesday.

“If that happens, the 2017 tax cuts will not be extended.”

Mr. Wyden disputed Mr. Grassley’s claims Thursday.

“I’ve heard…that Biden is cutting checks. That’s just ridiculous,” he said, adding that IRS Commissioner Danny Wuerffel “could get this done within a few weeks.” He added that he admitted it.

“Many small businesses are talking with colleagues to do everything we can to get this done quickly and get it signed by the president,” he told reporters.

Copyright 2024 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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