Chances are dimming that Congress will take up a multibillion-dollar package to renew a cluster of business tax breaks and provide a more generous child tax credit before lawmakers leave Washington for the year.
Republicans want to extend three provisions of their massive 2017 tax cuts: a write-off for corporate-debt costs, a broad tax break for research expenses and a tax break that allows companies to deduct all their capital-expenditure costs in one year. Democrats are demanding that any deal restore a more generous child tax credit of as much as $3,600 that was part of President Joe Biden's 2021 pandemic stimulus plan and has since expired.
Some key lawmakers say negotiations on a bill that can get the 60 votes needed to clear a Senate split 50-50 are at a standstill.
"I'm certainly not getting good vibes on a tax title at the moment," Senator John Thune of South Dakota, the No. 2 Republican leader, said.
The clock is ticking, because lawmakers are planning to complete their work for the year at the end of next week. The only vehicle left for any tax law changes is a full fiscal 2023 spending bill that is being negotiated by appropriators in the House and Senate. It is expected to begin moving through both chambers early next week.
When the next Congress convenes in January, Republicans will control the House and Democrats will retain control of the Senate — a recipe for gridlock on tax policies.
Democrats say they're not giving up on getting something done this year, but the child tax credit is key to winning their support of business tax breaks.
"We'd like to do some tax things, but our caucus feels very strongly that the child tax credit should be there as long as there are some corporate tax breaks and so far we don't have agreement with Republicans," Senate Majority Leader Chuck Schumer said on Tuesday.
Senate Finance Chair Ron Wyden, an Oregon Democrat, indicated his last and best offer is to combine two elements: an extension of the child tax credit with a revived version of the deduction for R&D costs. That deduction allows companies to curb tax liability in the same year they incur the spending, and it would benefit manufacturers, drugmakers and tech companies.
"I want them paired and I'm going to the mat for it," Wyden said. He added that he's prepared to "fight until they turn the lights out" on this session of Congress for that combination.
Top Republicans on the committee say they see little chance of a deal, with Senator John Cornyn of Texas saying talks are "on life support." Senator Chuck Grassley of Iowa, a senior Republican on the Finance Committee, said his tax counsel hasn't heard of any real talks for a package in three weeks. Grassley said Republicans want tax changes falling between $40 billion and $50 billion, but Democrats want a child tax credit change that would cost $150 billion in a single year and $450 billion over three years.
"It's a stretch to think there's going to be an agreement," Grassley said.
— With assistance from Steven T. Dennis and Laura Davison
