Tax Benefits for Businesses and Low Income Families
On Friday, U.S. lawmakers took a significant step in backing a bill aimed at boosting tax benefits for businesses and low-income families. This move showcased a rare bipartisan consensus on the largely revenue-neutral proposal, even in the face of sharp differences over federal spending.
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In a 40-3 vote, the House of Representatives Ways and Means Committee greenlit the “Tax Relief for American Families and Workers Act of 2024.” This approval came just three days after the Republican chairman of the committee struck a deal with his Democratic Senate counterpart.
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Tax Benefits for Businesses and Low Income Families
The key provisions of the bill include an increase in the child tax credit and the restoration of full value for diminishing business tax deductions related to research and development and plant and equipment investments. These changes are slated to be effective until 2025, coinciding with the expiration of the Republican-passed individual tax cuts.
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The period leading up to 2025 is expected to witness intense debates on a comprehensive tax code overhaul during the presidential election campaign.Among the priorities for Democrats is the restoration of the full annual amount of the COVID-era expansion of the child tax credit, which lapsed in 2021. On the Republican front, there is a push to reinstate immediate expensing of research and development and capital expenditures, integral components of the 2017 tax cuts that began phasing out in 2022.
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While the deal successfully reinstated business tax breaks, the expansions for the child tax credit fell short, reaching only $2,000 per child in 2025. Additionally, the bill incorporates tax breaks for affordable housing and assistance for individuals affected by disasters such as wildfires and a train derailment in Ohio last year.Jason Smith, the Republican chairman of the Ways and Means Committee, described the bill as containing “common-sense fixes to the tax code that will rebuild our communities, support better jobs and wages, and grow our economy.”
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The Joint Committee on Taxation estimates that the measure will result in a $399 million increase in U.S. deficits over 10 years. This cost is partially offset by $77.1 billion in savings achieved through strengthening the enforcement of fraudulent claims on the COVID-era Employee Retention Tax Credit and ceasing the early processing of claims.Although the committee’s vote reflects robust bipartisan support, led by Senate Majority Leader Charles Schumer, the path forward for the bill remains uncertain.
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It is unclear whether it will proceed to the House floor as a standalone bill or be attached to other “must-pass” fiscal legislation. The vote occurred following last-minute measures on Thursday to avert a government shutdown for some agencies, providing just over a month to reach an elusive deal on government funding for the fiscal year that began on Oct. 1.