Senate's Decision on Child Tax Credit and Tax Reforms Explained
Explore the complex debate on the Senate's recent decision to block a bipartisan tax bill that aimed to expand child tax credit and business tax breaks.
Published August 02, 2024 - 00:08am
The recent Senate vote to block a bipartisan legislation expanding the child tax credit and renewing key business investment deductions has triggered a heated debate about the future of tax reforms in the United States. The bill's failure in the Senate poses significant implications for both families and businesses, revealing a complex web of political maneuvering and economic implications.
On Thursday, the Senate procedural vote ended with a 48-44 result, falling short of the 60 votes required to move the bill forward. While GOP Senators such as Josh Hawley (R-MO), Markwayne Mullin (R-OH), and Rick Scott (R-FL) supported the bill, significant opposition came not only from Republicans but also from Independent Senators Bernie Sanders (I-VT) and Joe Manchin (I-WV) who typically caucus with Democrats.
The blocked legislation had previously sailed through the House with overwhelming bipartisan support, passing with a 357-70 vote. The bill's provisions were designed to both expand the child tax credit and restore tax breaks for research and development (R&D) investments, which business groups prioritized. Had it passed, it would have retroactively improved the child tax credit to 2023 levels and adjusted corporate tax incentives to aid businesses facing higher tax burdens through amortized R&D expenses.
The bill also proposed indexing the child tax credit to inflation and refining the maximum refundable amount per child to increase incrementally from $1,600 in 2023 to $2,000 by 2025. Advocates argued that these changes would be significantly beneficial for lower-income families, lifting millions of children out of poverty.
From a political perspective, the Republicans' opposition, led by figures such as Sen. John Kennedy (R-LA) and Sen. Mike Crapo (R-ID), who is set to take over the top tax-writing position if the GOP wins control in the upcoming elections, mainly revolved around the bill's structural provisions. Criticisms included concerns about the provision allowing parents to rely on the previous year's income to calculate the current year's child tax credit, which some conservatives argued might lead to workforce reductions.
Sen. Ron Wyden (D-OR) and House Ways and Means Chairman Jason Smith (R-MO) worked closely to craft this bill. However, Senate Minority Leader Mitch McConnell (R-KY) and others argued that if Wyden had sincerely wished to address Republican concerns, he would have facilitated more negotiations and committee process amendments.
The debate around the bill also encapsulates broader concerns related to the looming expiration of significant tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA). The current political landscape has amplified the sense of urgency for both parties to secure a deal before key provisions sunset in 2025. Senators like Todd Young (R-IN) highlighted the missed opportunity but remained hopeful for a possible reconciliation in the next legislative year.
President Biden's administration notably supported the bill, positing that it averaged immediate tax breaks of about $700 for eight million working families without raising the deficit. The White House contended that the bill's holistic approach would aid in creating more affordable homes and lowering rents, a critical aspect in the current economic environment.
Progressive voices, including Sen. Bernie Sanders, opposed the bill due to its perceived over-emphasis on corporate tax breaks. Sanders criticized the bill for offering substantial retroactive tax benefits to large, profitable defense contractors like Lockheed Martin and Raytheon. He argued that, in the face of significant wealth and income inequality, the bill disproportionately favored corporations at the expense of working families, equating to at least $3 in corporate tax breaks for every $1 in family-focused tax cuts.
The failure to pass the bill has left a considerable number of families in limbo. The enhanced child tax credit, which had previously managed to reduce childhood poverty significantly, will now face re-adjustment hurdles, especially as the TCJA provisions wind up. The historic low child poverty rate of 5.2% achieved in 2021, largely due to temporary adjustments in the child tax credit, might not be maintained given the current legislative stasis.
The narrative moving forward is framed by the anticipated 2025 tax battle, with pressure on lawmakers to craft a sustainable solution to child poverty while simultaneously accommodating business-friendly tax incentives. Democrats, as urged by social activists and economists, must aim higher and leverage upcoming negotiations effectively to yield a tax code overhaul that benefits American workers rather than entrenching the current disparities.