On heels of debt fight, House GOP rolls out tax-cut package

Just days after Washington’s bitter fight over raising the debt limit, House Republicans are calling for billions in new tax cuts.

GOP lawmakers unveiled a plan Friday that would offer a range of benefits to big businesses, small firms as well as millions of average Americans.

Nonpartisan congressional forecasters say the tax cuts would run some $240 billion over the next decade, most of which Republicans are proposing to cover by rescinding $216 billion in green energy breaks — something that’s unlikely to fly with Democrats.

The package — which would beef up the standard deduction and expand business research writeoffs, among other provisions — is being rolled out with an eye toward a year-end tax deal, which many Democrats want as well. They are already demanding an expansion of the Child Tax Credit as the price of any agreement, which could swell the cost.

“These policies will provide relief for working families, strengthen small businesses, grow jobs, and protect American innovation and competitiveness,” said Ways and Means Committee Chair Jason Smith (R-Mo.).

The panel’s ranking Democrat, Rep. Richard Neal (D-Mass.), retorted: “Not even a week after their manufactured default crisis and it is back to tax cuts for the wealthy and well-connected.”

Lawmakers had hoped to strike a similar business-tax-breaks-for-family-friendly-benefits exchange during last year’s lame-duck session, though that got surprisingly little traction.

But many are eager to try again and see the end of this year as their last chance to do something big on the tax front during this session of Congress.

Part of the Republican plan would undo restrictions on several popular business tax breaks that recently came online. Lawmakers are facing mounting pressure from the business community to nix tighter rules on writeoffs for research and development expenses, in particular, which have jacked up the effective tax rates many companies pay.

Along with temporarily restoring R&D breaks, their plan would also rescind through 2025 tougher rules on capital and interest expense deductions.

Other parts of the plan would expand the so-called Opportunity Zone program, with an initiative specifically aimed at benefiting rural areas — something that is especially important to Smith. They would also restore reporting requirements designed to gauge the program’s effects that Republicans were forced to drop when they originally created the initiative.

The plan would raise the threshold at which small businesses must report payments to contractors to $5,000 from $600, noting that hasn’t been increased in more than 50 years despite inflation. And the bill would allow small firms to immediately deduct $2.5 million in investment expenses, up from $1 million.

There are tax cuts for individuals as well, including a plan to temporarily expand the standard deduction to the tune of $2,000 for individuals and $4,000 for couples. Republicans would also rename the standard deduction the “guaranteed deduction.”

They would kill an IRS crackdown on the taxes paid by gig workers Democrats pushed into law in 2021, but that has been delayed. At the same time, the bill targets some of the green energy tax credits Democrats approved last summer, including benefits for buying electric vehicles, which would offset at least some of the cost of the plan.

The Ways and Means Committee plans to take up the legislation next week.

Democrats have been highly critical of Republicans’ bid to cut taxes on businesses, but, ironically, Democrats might be better off going along with bigger benefits for companies.

That’s because, under the logic of Capitol Hill deal making, if one side gets a certain amount of money to spend, then the other gets a similar-sized allowance as well.

And expanding the child credit is costly, because it is claimed by so many people, so giving more to corporate America would mean Democrats would have a bigger budget to increase the credit. They likely wouldn’t have enough to revive the lapsed, pandemic-era expansion that sent monthly checks to millions of Americans, so they would have to settle for something more incremental.

There are some surprises in the package, including a provision that would impose a 60 percent excise tax on people from certain countries like China that buy U.S. farmland. The bill would also allow S corporations to take advantage of a break for so-called qualified small business stock.

There are also some unexpected omissions as well, with lawmakers leaving out a bipartisan proposal to cut taxes on auto dealers who complain that a combination of the pandemic and the arcane accounting rules they use to calculate their taxes temporarily sent their tax bills skyward.