With all of the partisan rancor flying around Washington, D.C. during this election season, it’s somewhat amazing that any type of bipartisan deal could be reached on something as controversial as taxes. Yet, that’s what House Ways and Means Committee Chairman Jason Smith, R-MO., and Senate Finance Committee Chairman Ron Wyden, D-OR, managed to do.
Their Tax Relief for American Families and Workers Act is designed as a bridge to 2025, when key provisions in the 2017 Tax Cuts and Jobs Act will expire.
Provisions
This package would raise limits on the Section 179 expensing provision and restore a bonus depreciation provision to 100%. Both provisions are used by farmers to reduce the cost of equipment and machinery.
Under the Tax Cuts and Jobs Act, passed in 2017, the bonus depreciation provision that allows a business to immediately write off the cost of equipment or buildings dropped from 100% to 80% of the purchase price in 2023 and is scheduled to fall to 60% this year, 40% in 2025 and 20% in 2026 before ending in 2027.
The Section 179 expensing allowance allowed businesses to write off up to $1.16 million of the cost of equipment and software for 2023, with the limit phased down dollar for dollar as spending exceeds $2.9 million. The Smith-Wyden deal would raise the expensing limit to $1.29 million and increase the phaseout threshold to $3.22 million, with both indexed to inflation.
Smith had originally sought to raise the expensing limit to $2.5 million and boost the phaseout threshold to $4 million.
He said the bill will also save over $70 billion in taxpayer dollars by closing out the COVID-era Employee Retention Tax Credit Program, “which has become overrun with fraud and ballooned in cost six times larger than CBO’s original estimate.”
“This legislation locks in over $600 billion in proven pro-growth, pro-America tax policies with key provisions that support over 21 million jobs,” Smith said in a statement.
The congressional deal also includes an expansion of the child tax credit, which was a priority for Democrats.
“Fifteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” Wyden said in a statement.
Under current law, the maximum refundable credit was capped at $1,600 per child for 2023. Under the agreement, the limit would rise to $1,800 for 2023 and then go to $1,900 for 2024 and $2,000 for 2025, along with an inflation adjustment for both those years.
Out of committee with ease
Smith managed to move the package out of his committee by an overwhelming 40-3 vote, and unanimous support from all of the Republicans. However, the bill is widely being attacked by some hard-right members of Congress who don’t like the child tax credit and a few moderate Republicans who dislike the bill because it does not restore the state and local tax deductions which are a priority for members from high tax states like New York.
Smith has been trying to knock down some GOP concerns about the impact of the child tax credit. A statement issued by the Ways and Means Committee said a “simple reading of the bill” shows the Biden administration “is explicitly prohibited from manipulating the bill’s tax relief in an attempt to send politically timed refund checks against the interests of the American people.”
A second statement from the committee rebutted claims that the credit would benefit illegal immigrants or encourage working parents to quit their jobs.
In an attempt to combat the House naysayers, House Speaker Newt Gingrich weighed in to support the tax bill and tie it back to former President Donald Trump.
“This legislation fulfills President Trump’s transformational framework for economic growth that was part of the 2017 Tax Cuts and Jobs Act. We know the results: 50-year record unemployment, higher wages, and an end to companies moving overseas,” Gingrich wrote in a blog post endorsing the package. “The benefits far outweigh the costs. The Tax Relief for American Families and Workers Act (H.R. 7024) should be passed with a big bipartisan majority.”
Senate concerns
Even if the bill does pass the House, there is no guarantee that it can cross the finish line in the U.S. Senate.
Sen. Jerry Moran, R-KS, says “we all keep waiting for a tax bill to appear” but he’s “not so sure there is significant enthusiasm” for the measure. Speaking on Agri-Pulse Newsmakers, Moran said that the top Republican on the Senate Finance Committee, Idaho’s Mike Crapo, was not part of the negotiations between House Ways and Means Committee Chairman Jason Smith and Senate Finance Committee Chairman Ron Wyden.
“So, there’s some skepticism about what’s in there,” Moran said about the tax package and that it may take time to catch up on all of the details.
Editor’s note: Sara Wyant is publisher of Agri-Pulse Communications, Inc., www.Agri-Pulse.
