WASHINGTON — Senior lawmakers in Congress announced a bipartisan deal Tuesday to expand the child tax credit and provide a series of tax breaks for businesses.
The $78 billion tax agreement between House Ways and Means Chair Jason Smith, R-Mo., and Senate Finance Chair Ron Wyden, D-Ore., caps months of negotiating and pursuing common ground in the divided Congress.
It still needs to be written into legislation and secure the votes to pass the Republican-led House and the Democratic-led Senate, which is not guaranteed. But the top tax writers are hopeful it can pass quickly, before people file their taxes this year.
“American families will benefit from this bipartisan agreement that provides greater tax relief, strengthens Main Street businesses, boosts our competitiveness with China, and creates jobs,” Smith said in a statement.
The deal, details of which were reported earlier by NBC News, would enhance refundable child tax credits in an attempt to provide relief to families that are struggling financially and those with multiple children. It would also lift the tax credit's $1,600 refundable cap and adjust it for inflation.
“Fifteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” Wyden said in a statement.
The new child tax credit policy would benefit about 16 million kids in low-income families, according to an analysis by the liberal-leaning Center on Budget and Policy Priorities. “The expansion would meaningfully reduce child poverty,” CBPP wrote. “In the first year, the expansion would lift as many as 400,000 children above the poverty line. 3 million more children would be made less poor as their incomes rise closer to the poverty line.”
Democrats had demanded a larger child tax credit after an earlier version they passed for less than one year expired, causing child poverty to fall and then rise again after it lapsed. The new agreement would provide smaller benefits than the monthly payments under the American Rescue Plan.
White House spokesman Michael Kikukawa said Biden “remains committed to fighting for the full expanded Child Tax Credit” that he fought for as part of the 2021 law.
“We appreciate Chairman Wyden and Chairman Smith’s work toward increasing the Child Tax Credit for millions of families and supporting hundreds of thousands of additional affordable homes, and look forward to reviewing the full details of their agreement,” Kikukawa said in a statement.
Republicans were motivated to revive some expired portions of the 2017 Trump tax cuts for businesses. The deal includes expensing for research and experimental costs, restoration of an earlier interest deduction, an expansion of small-business expensing and an extension of bonus depreciation, according to a section-by-section summary released by the two tax-writing committees.
“The agreement announced today by Chairman Smith and Chairman Wyden is a thoughtful starting point for the House to begin the process," Sen. Mike Crapo, R-Idaho, the top Republican on the Finance Committee, said in a statement. "I will continue working with my Senate colleagues to build broad, bipartisan support for a tax package that provides appropriate relief for working families and businesses.”
Wyden has said he hopes to pass the deal by the beginning of tax filing season, which is Jan. 29. That's not assured as Congress is juggling other priorities, most notably averting a government shutdown at the end of this week and completing its funding process by March. It's not clear whether the tax deal would come up as a standalone bill or attached to a government funding measure.
If it passes, it would be a rare success story of active legislating on a politically sensitive issue by a divided Congress that has so far been historically unproductive.
“My goal remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I’m going to pull out all the stops to get that done,” Wyden said Tuesday.