The U.S. House of Representatives passed the Tax Relief for American Families and Workers Act this week by a margin of 357-70.
The bipartisan bill, H.R. 7024, includes $600 billion of tax incentives designed to help small businesses, families, and workers.
Among the features, the tax package includes incentives for research and development (R&D), which are designed to create over $70 billion in new R&D investment and support 2 million direct R&D jobs – and over 21 million total jobs – particularly in U.S. Manufacturing. Also, it includes interest deductibility, which will generate $58 billion in additional take-home pay and create 867,000 new jobs. This seeks to provide flexibility for businesses forced to borrow at higher interest rates to meet their payroll obligations and expand their operations.
Further, the package includes a provision for 100 percent immediate expensing, which is expected to
increase investment by $400 billion and create 73,000 new jobs. In effect, it allows businesses of all sizes to immediately deduct the cost of their U.S.-based R&D investments instead of over five years.
In addition, it features a Child Tax Credit that is indexed to inflation and keeps work requirements while strengthening the incentives to work. It incrementally increases the refundable portion of the child tax credit for 2023, 2024, and 2025 and it ensures the child tax credit phase-in applies fairly to families with multiple children.
Also, it removes the current double taxation that exists for businesses and workers with a footprint in both the United States and Taiwan, thus strengthening America’s competitive position with China.
Among other provisions, it adjusts the reporting threshold for businesses that use subcontract labor from $600 to $1,000 and index for inflation; provides disaster tax relief for recent hurricanes, flooding, wildfires, and the Ohio rail disaster; and increases supply of low-income housing by enhancing the Low-Income Housing Tax Credit.
Additionally, it seeks to eliminate fraud and waste by ending the Employee Retention Tax Credit Program; and accelerates the deadline for filing backdated claims to January 31, 2024 under the COVID-era employee retention tax credit. That is expected to save over $70 billion in taxpayer dollars:
“This tax package is pro-growth, pro-jobs, and pro-American. Both the $600 billion of pro-growth tax incentives that benefit job creators and the structure and work requirements of the Child Tax Credit in this legislation were first signed into law by President Trump. Last year, the Ways and Means Committee traveled the country and listened to small business owners and American workers about their ideas to make life better for themselves and their neighbors. The Tax Relief for American Families and Workers Act is a direct response to their plea for relief. Because of this bill, working parents crushed by high prices will have an easier time putting food on the table, more things will be made here in America, and the nation will be more competitive with China,” Rep. Jason Smith (R-MO), chair of the House Ways and Means Committee, said.
It now moves to the U.S. Senate for consideration. U.S. Sen. Ron Wyden (D-OR), chair of the Senate Finance Committee, said that while there are some concerns, there is strong momentum behind this bill in the Senate.
“If I were writing this bill on my own, it would go a lot further in expanding the child tax credit. Nobody is getting everything they want, but given that it had to be bipartisan to have any chance of becoming law, I fought for every dollar for low-income kids that I could get. In the months and years ahead, my Democratic colleagues and I are going to keep fighting for even more improvements to the child tax credit to help even more families,” Wyden said.
He added that the bill contains a policy that allows taxpayers to use their income from the previous year to calculate their child tax credit.
“This was a strong vote in the House, and it means the action is moving over to the Senate. I’m going to work with Leader Schumer and my colleagues on both sides to get this done as soon as possible,” Wyden added.