FILE PHOTO: U.S. Senate Majority Leader Chuck Schumer smiles from behind a mock U.S. Treasury check as he holds a press conference on the expanded Child Tax Credit payments at the U.S. Capitol in Washington, U.S., July 15, 2021. REUTERS/Kevin Lamarque/File Photo

US lawmakers advanced a plan on Friday that would increase tax breaks for low-income individuals and companies. This action revealed an impressive bipartisan agreement for the essentially revenue-neutral approach, despite sharp differences over levels of government spending. Just three days after the Republican chairman and their Democratic Senate counterpart revealed the deal, the US House of Representatives Ways and Means Committee approved the bill 40–3 on a vote.

The “Tax Relief for American Families and Workers Act of 2024” would raise the child tax credit and restore the full amount of company tax incentives for expenditures in plant and equipment and research and development while it is in force. The tax cuts that Republicans enacted for the general public will expire in 2025, at which point these modifications will also take effect. There will probably be contentious discussions in Congress over a significant overhaul of the tax system during this year’s presidential campaign.

Democrats aimed to reinstate the full annual amount of the child tax credit, which was expanded during the COVID era, providing up to $3,600 per child but expired in 2021. In contrast, Republicans sought to revive the immediate expensing of research and development (R&D) and capital expenditures, initially part of the 2017 tax cuts but gradually phased out starting in 2022.

While the recent agreement reinstated the business tax breaks, the expansion of the child tax credit fell short, settling at $2,000 per child in 2025. The legislation also includes tax incentives for affordable housing and assistance for individuals affected by disasters, such as wildfires and a train derailment in Ohio the previous year.

The chairman of the Ways and Means Committee, Republican Jason Smith, stressed that the bill includes useful changes to the tax code that will help rebuild neighbourhoods, raise pay and job quality, and encourage economic growth. The Joint Committee on Taxation thinks that the bill will cause the U.S. debt to grow by $399 million over the next 10 years. This number includes $77.5 billion in extra costs that were balanced by $77.1 billion in savings from tougher enforcement against false claims about the Employee Retention Tax Credit during the COVID era and the end of early claim processing.

Even though there was strong support in the vote, including from Senate Majority Leader Charles Schumer, it is still unclear whether the bill will go to the US House floor as a separate measure or as part of other “must-pass” budget legislation. The vote happened after Congress, late Thursday night, escaped a shutdown of some government agencies by putting in place stopgap measures. These measures gave lawmakers just over a month to discuss a much-needed deal on how to fund the government for the fiscal year that started on October 1.

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