Top line
The House passed a $78 billion tax cut bill Wednesday that would expand the child tax credit for low-income families and restore the corporate tax credit, a rare moment of bipartisanship that could provide hundreds of dollars in tax cuts and credits to some families – even though he faces an uncertain future in the Senate.
President Joe Biden, House Speaker Mike Johnson (R-La.) and House Minority Leader Hakim … [+]
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Key facts
The bill expands the child tax credit for three years to cover the roughly 80 percent of families who pay little or no income taxes and don’t earn enough to qualify for the full credit, according to the left-leaning Center on Budget and Policy Priorities.
The existing child tax credit program gives qualified families earning at least $2,500 a year a maximum tax credit of $2,000 per child or a refund of up to $1,600 for those who owe less than $2,000 in taxes, but the amount of the credit depends on family income and increases at a rate of 15 cents for every dollar earned above $2,500.
The proposed changes would leave the $2,500 lower income limit in place, but phase in the credit at 15% per child rather than per family.
The maximum refund available for families paying less than $2,000 in taxes will also increase to $1,800 for the 2023 tax year, $1,900 in 2024 and $2,000 in 2025.
The bill would adjust the credit for inflation starting in the 2024 tax year and give families the option to claim the credit on current or prior year earnings.
Most of the families who will take advantage of the new credit in the 2023 tax year are in the two lowest income quintiles: about half of households earning less than $21,000 a year and nearly a quarter of households earning less than $40,500 — which equates to an average tax cut of $680 for households that would benefit, according to the bipartisan Tax Policy Center.
Tangent
The deal also restores a number of Trump-era tax breaks that expire in 2022, including allowing them to immediately deduct spending on US-based research and development and new equipment and machinery.
A big number
400 million dollars. That’s how much the tax bill is expected to cost over the next 10 years.
Decisive quote
Sen. Chuck Grassley (R-Iowa) expressed concern to reporters that passing legislation “that makes the president look good — mailing checks before the election — means he can get re-elected and then we’re not going to extend the tax cuts for 2017.” Unlike the one-year expansion of the program in 2021, when the credit was doled out in monthly checks, the new proposal would include the increased credit on families’ annual tax refunds.
Tangent
New York GOP Reps. Anthony D’Esposito, Nick LaLotta, Mike Lawler and Andrew Garbarino threatened to vote against the legislation if it didn’t include an increase in the $10,000 cap on deductions for state and local taxes, known as SALT, and mortgage interest. The additional tax break — removing a cap put in place during the Trump administration — is a priority for upper-middle-class income earners in high-tax states like New York and could have implications for the GOP’s ability to retain control of the House in upcoming elections , as the congressmen who threatened to vote against the tax bill represent vulnerable swing districts that helped shift the House to Republican control in the 2022 midterms. The caucus ultimately voted in favor of the proposal after a commitment from of House leadership to ultimately vote to remove the SALT cap.
Key background
The House of Representatives passed the bill with bipartisan support by a 357-70 vote on Wednesday, but it faces an uncertain future in the Senate, where it needs 60 votes to pass. The latest proposal comes after the expiration of the one-year extension of the child tax credit included in the 2021 American rescue plan. That program increased the maximum credit to $3,000 for children under 17 and $3,600 for children under 6 and was fully refundable, which meant that families with no income were eligible, significantly reducing the child poverty rate. Democrats generally support the new benefits in the House bill, although some, including Rep. Rosa DeLauro (D-Conn.), said they did not go far enough, complaining about the end of the 2021 version, while some Republicans argued , that they have gone too far. Sen. Mitt Romney (R-Utah) called the legislation “excessive,” arguing to the Washington Post that it could become “another entitlement program that is extremely expensive.” DeLauro said the bill “provides billions of dollars in tax relief for the rich, pennies for the poor.”
