Outside the Beltway

House Passes Bipartisan Tax Bill

Will wonders never cease?

James Joyner · Thursday, February 1, 2024 · 7 comments

Roll Call (“Tax bill overcomes objections from left and right, passes House“):

The House on Wednesday night passed a $79 billion family and business tax break bill after several days of uncertainty, teeing it up for consideration in the Senate.

The package negotiated by House Ways and Means Chairman Jason Smith, R-Mo., and Senate Finance Chair Ron Wyden, D-Ore., easily mustered the two-thirds majority needed to pass, despite GOP drama earlier in the week and previous criticism from Democrats.

[…]

The bill would devote about $33 billion to reviving a trio of business tax breaks and roughly the same amount to expand the child tax credit, with the most significant gains going to low-income families with more than one kid. The legislation would also boost the low-income housing tax credit, end double taxation of U.S. companies operating in Taiwan and provide tax relief to victims of natural disasters. 

The cost would be offset by ending the processing of employee retention credit claims early. The pandemic-era tax break has been rife with fraud, prompting the IRS to pause processing claims last year to sort through $2.8 billion worth of potentially fraudulent claims. 

In a statement after the House vote, Wyden said he’d work with Senate Majority Leader Charles E. Schumer, D-N.Y., and other senators “to get this done as soon as possible.”

Republicans voted for the bill by a margin of 169-47, despite criticism from the party’s right flank about its expansion of the child tax credit. Rep. Matt Gaetz, R-Fla., dismissed the partially refundable child tax credit and business breaks as a form of welfare.

“This is not a tax bill,” Gaetz said. “It is a welfare bill in drag.”

Ways and Means member Rep. Greg Murphy, R-N.C., who supported the bill, said he shared concerns raised by some Senate Republicans that allowing families to use the previous year’s income to qualify for the child tax credit would weaken its work requirements.

“I agree, but there’s also a thing called negotiation,” Murphy said. “We don’t have the perfect bill because we don’t have supermajorities in each chamber.”

Democrats adopted a similar attitude toward the bill, with many saying it wasn’t the bill they would draft, but that it would improve on the status quo. Ways and Means top Democrat Richard E. Neal of Massachusetts said he pitched it to his party at Wednesday morning’s whip meeting.

“We were able to assert the reality of what’s in the bill. It does enhance the child tax credit. It does not give us everything we wanted. Many of these other provisions are also popular with Democrats,” Neal said ahead of the vote. “The vehicle that we’re going to vote on tonight is the best that we were going to get.”

Ahead of the vote, Democrats criticized the package for doing too little to expand the child tax credit, specifically failing to make the full credit available to families with little or no taxable income. Still, 188 voted to pass the package, against 23 “no” votes on the Democratic side.

The infrequency with which Congressional leaders, particularly Republicans, have acceded to the realities of governing in the American system in recent years makes their doing so on a fairly overwhelming basis here noteworthy. Of course nobody got everything they wanted. That’s nearly impossible given the way our government is structured.

One issue remains unresolved and, shockingly, leadership had the good sense to simply punt rather than let it hamstring the bill:

Internal divisions within the Republican Party came to a head Tuesday when a group of New Yorkers threatened to block an unrelated rule on the floor. The move prompted a flurry of closed-door meetings between House leadership, the Ways and Means Committee, blue-state Republicans and members of the House Freedom Caucus, who had separate issues with the package related to immigration.

In the end, the House moved forward with the Wyden-Smith deal without making changes. But House leadership is working with blue-state Republicans to bring to the floor a stand-alone SALT relief bill to raise the $10,000 deductions cap for married couples.

The current plan is to bring to the floor a newly-introduced bill from several New York Republicans and a few others to double the cap for joint filers to $20,000, but only for households earning up to $500,000 — and only for the 2023 tax year. The House Rules Committee plans to meet at 8 a.m. Thursday to consider the measure, which is expected on the floor next week.

Rep. Andrew Garbarino, one of the New York Republicans involved in the talks, said earlier that negotiators received scores from the Joint Committee on Taxation on Wednesday outlining the cost of four to five options that would raise the cap for married couples to different levels, with some scenarios also imposing income limits. 

Negotiators had discussed the possibility of backing a clean SALT relief bill or a bill that combines lifting the cap on deductions with conservative policy demands, Garbarino said.

My household would benefit considerably from raising the SALT cap, which amounted to a very large tax increase for us. Its sole purpose, as best as I can tell, was a Screw You to the blue states for having the temerity to vote for Democrats in 2016. It’s been a priority for Democrats, particularly those who represent high-cost-of-living cities, to reverse it but has proved impossible to build a consensus for doing so. Even Nancy Pelosi, the most skilled Speaker in decades, couldn’t do it.

Aside from the fact that we bought our house with the understanding that we would be able to deduct the sizable state and local property taxes on our federal filing, though, it’s hard to come up with an argument for why the American taxpayer should subsidize the costs of relatively well-to-do families. That, coupled with the reality that it would increase the deficit while doing nothing to help the average Republican voter, gives considerable inertia to the status quo.