Since Congress returned from its August recess, there has been increasing discussion in tax policy circles about what might be included in a December tax package — particularly the business tax breaks that have expired (some of which we highlighted last month past). Many on Capitol Hill have estimated that such a tax package, and what is included, will likely be determined by November’s midterm elections and which party wins control of the House and Senate. However, legislative shenanigans have grown over key tax proposals, such as fixing research and development (R&D) depreciation and easing state and local tax (SALT) deduction caps.
Last week, however, an influential group of bicameral Democrats issued a joint press statement saying they would prevent any “corporate tax cuts” from being extended in a December tax package unless the child tax credit is expanded. (CTC). The letter was signed by House and Senate Tax Representative Susan DelBene (D-WA) and Senators Michael Bennet (D-CO) and Sherrod Brown (D-OH), along with Representative Rosa DeLauro (D-CT) . Senators Bennet and Brown and Representative DelBene will have a key role in shaping a December tax package, particularly in the Senate Finance Committee and the House Ways and Means Committee, respectively. However, it is important to note that Representative DeLauro is the Chairman of the powerful House Appropriations Committee, which will have a central role in crafting the December spending package – expected to be the primary legislative vehicle for any legislation. tax to be considered in lame duck.
New child poverty data released last week by the Census Bureau is likely to put pressure on congressional Democrats to take a firm stance on the CTC. But including the expanded CTC provisions would come at a significant revenue cost (the cost of these CTC expansions was $109 billion when it was enacted into the American Rescue Plan, according to the Joint Committee on Taxation). Since the December package will likely need bipartisan support to pass, this new CTC dynamic raises two key questions:
- In exchange for extending business tax breaks, would Republicans be willing to negotiate the CTC? That remains an open question that may not be answered until after the midterm elections. That said, there has recently been a willingness by Senate Republicans, particularly Sen. Mitt Romney (R-UT), to negotiate on the CTC.
- If an extended CTC is included in a December package, could this mean there could be flexibility for longer extensions for business tax relief provisions such as R&D depreciation? Given the significant costs associated with the CTC expansions, this could certainly give Republicans leverage when negotiating for broader business tax relief in December — especially since the CTC is a top priority for congressional Democrats and the White House.
Negotiations around the CTC could be crucial in determining the elements and scope of a December tax package, including popular business tax breaks. Stay tuned for developments. #TaxTake
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