US Lawmakers Secure $78 Billion Tax Break Deal Amid Uncertainty

19 Jan, 2024

Congressional leaders revealed a groundbreaking bipartisan deal, totaling nearly $80 billion, aimed at fortifying tax breaks for both businesses and low-income families until 2025.

Spearheaded by Senate Finance Committee Chairman Ron Wyden, a Democrat, and House Ways and Means Committee Chair Jason Smith, a Republican, the agreement encompasses key measures to temporarily augment the child tax credit and bolster the low-income housing tax credit. Additionally, it proposes reinstating business tax deductions for 100% of research and development expenses and capital expenditures for plant and equipment, valid until the close of 2025.

The proposed adjustments align with the expiry of personal tax cuts instituted by Republicans in 2017, elevating the significance of tax policy disparities in the upcoming presidential election. Notably, the deal proposes raising the "refundable" child tax credit by $200 per child, reaching $1,800 for 2023, $1,900 for 2024, and $2,000 for 2025. Democrats have been advocating for the reinstatement of the more substantial COVID-era expansion of the child tax credit, amounting to up to $3,600 per child, which lapsed in 2021.The deal aspires to benefit 15 million children from low-income families and facilitate the construction of over 200,000 affordable housing units.

Despite the urgency expressed by Wyden and Smith to expedite the legislative process, the timeline remains uncertain, entangled in ongoing discord over government spending and proposed stopgaps to avert a federal shutdown.Emphasizing the extension of business tax breaks, Smith underscores the legislation's role in preserving over $600 billion in proven pro-growth, pro-America tax policies, supporting more than 21 million jobs. The lawmakers intend to offset the package's cost by terminating the COVID-era Employee Retention Tax Credit ahead of schedule, saving over $70 billion.

Beyond these measures, the legislation includes provisions safeguarding Taiwanese semiconductor manufacturers from dual taxation and introduces tax breaks for disaster-related losses, such as those from specific wildfires. As the agreement undergoes scrutiny, with some calling for modifications, the White House, led by President Joe Biden, remains committed to advocating for the full expanded child tax credit. The outcome of this ambitious tax package hinges on navigating the intricate landscape of bipartisan collaboration amid contentious fiscal debates.

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