Speaker Mike Johnson will allow a vote on a $78 billion business and child tax break bill, siding with corporations over a group of Republicans who objected to the package negotiated with Senate Democrats.
House Majority Leader Steve Scalise officially announced the bill will come up for a vote on Wednesday. A two-thirds majority will be needed to pass it and prospects for its passage are good.
To appease a group of New York Republicans from high-tax areas, Johnson has also promised a separate vote next week on a bill doubling the $10,000 state and local tax deduction cap for joint filers, according to two people familiar with the agreement. A third person familiar said the timing of the vote will depend on the group drumming up GOP support for the bill, which has not yet been written.
That SALT cap bill is unlikely to pass given widespread opposition from conservative Republicans and some progressive Democrats. But the vote itself is a political win for the New Yorkers, many of whom represent districts favorable to President Joe Biden.
The decision to hold the vote came after a group of New York Republicans pressed Johnson for a separate vote on the state and local tax deduction cap. They briefly held up business in the house on Tuesday to make their case. Talks over the SALT cap went late into the evening in Johnson's suite of offices.
Enactment of the tax breaks could boost the stocks of US companies with large capital and domestic research expenditures.
Boeing Co., General Motors Co., Deere & Co., Caterpillar Inc., Amazon.com Inc., Microsoft Corp. and Apple Inc. are among the companies that stand to benefit, according to Bloomberg Intelligence.
The bill received a strong 40-3 bipartisan vote in the Ways and Means Committee this month and the White House backs it even though progressives wanted a more generous child tax payment.
Large support from Democrats will be needed given objections from some conservatives who say the expansion of child tax credit payments for the working poor could discourage work. Members of the hardline Freedom Caucus also say the bill would allow U.S. children of undocumented immigrants to qualify for the credit. But that is a feature of current law — signed by former President Donald Trump.
"It's up to them if they want to go home and tell people why they voted against a lot of tax cuts," said Oklahoma Representative Tom Cole, referring to the conservative bloc of opponents.
House Democratic Caucus Chairman Pete Aguilar said Tuesday in an interview that he expected the measure to garner strong support from his side of the aisle, adding that he planned to vote for it.
A group of mostly northeastern Republicans threatened to vote against the package because it would not raise the $10,000 cap on the state and local tax deduction imposed under the 2017 tax law. These lawmakers pushed to amend the bill to allow a $20,000 cap. The group likely does not have the votes to sink the bill.
The outlook in the Senate is a little bit more murky. Senate Republican leader Mitch McConnell has been silent on it and top Republican tax-writer Mike Crapo has threatened "hundreds" of amendments on the Senate floor to change the bill.
Critics of the measure are focusing on a provision that allows individuals without taxable income in 2025 to use their income in 2024 to claim the credit in that year. They argue that this undermines the incentive to work in 2025. Under existing law continued by the tax bill, an individual must earn at least $2,500 to receive a portion of the child tax credit. Supporters of the bill point out that the Joint Committee on Taxation, the official scorekeeper of Congress, has found negligible impact on the economy and labor market from the bill.
There is also a debate among Republicans on the way the bill pays for the tax breaks by ending the fraud-plagued COVID-era employee retention tax credit. Critics say that since that tax break was not paid for in the first place, ending it shouldn't count as a way to pay for the child tax breaks.
A coalition of 250 business groups including the U.S. Chamber of Commerce, Business Roundtable and National Association of Manufacturers has lobbied hard for the bill authored by Ways and Means Chairman Jason Smith and Senate Finance Chairman Ron Wyden.
The measure would restore expired tax breaks allowing businesses to more quickly recoup the costs of domestic research and development, interest on business loans and investment in equipment. The research tax break would be retroactive to the 2022 tax year, so manufacturers and technology companies would see a large immediate benefit this spring from the change. The return of the full capital expensing perk would benefit companies that are highly capital intensive.
The bill allows more of the $2,000 per child tax credit to be paid to individuals with low income and boosts payments to low income filers with multiple children. The maximum credit would be indexed to inflation for two years starting in 2024.
The bill also includes a double taxation agreement with Taiwan, a provision that irks Beijing.
