WASHINGTON — A bipartisan team of lawmakers on Tuesday announced that they had finalized a deal to restore business tax breaks and expand a credit that gives millions of parents refunds at tax time.
Senate Finance Committee Chair Ron Wyden (D-Ore.) and House Ways and Means Committee Chair Jason Smith (R-Mo.) unveiled the details of their agreement in a joint press release.
The proposed expansion of the child tax credit falls far short of a policy that Democrats enacted in 2021 as part of the American Rescue Plan, which briefly provided advance monthly refunds worth as much as $300 per child. But Tuesday’s announcement reflects the reality of a divided government.
“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.
Smith said that the proposal aids families, but he emphasized that it also “strengthens Main Street businesses, boosts our competitiveness with China, and creates jobs.”
Households that already benefit from the child tax credit would be able to receive a larger portion of the credit as cash refunds, some families with multiple children would get more money per child, and families would have flexibility to base their eligibility on the most advantageous recent tax year.
But the proposal would not greatly expand the $2,000 value of the credit, and it would retain the current requirement that families earn at least $2,500 to qualify — meaning the poorest households would not benefit.
Rep. Rosa DeLauro (D-Conn.), a longtime champion of expanding the child tax credit, said last week that she would not support the Wyden-Smith proposal as it had been described prior to its finalization Tuesday. She noted that the temporary child tax credit expansion that Democrats enacted in 2021 lifted 4 million children out of poverty — about 10 times as many as could escape poverty under the new package.
As of early Tuesday afternoon, DeLauro had not reacted to the final version.
DeLauro’s early opposition shows the difficulty for Wyden and Smith in their quest to shepherd the deal through Congress. Lawmakers are already facing a government funding deadline, with a shutdown imminent, and they’re deadlocked on foreign military aid and immigration policy. It’s hard to see a complex tax deal finding its way to the president’s desk.
Another child tax credit champion, Sen. Michael Bennet (D-Colo.), said that he supported the deal despite his disappointment that it didn’t go further.
The deal received a significant endorsement from the liberal Center on Budget and Policy Priorities, which estimated that in its first year, “the proposal would lift as many as 400,000 children above the poverty line and make an additional 3 million children less poor as their incomes rise closer to the poverty line.”
The proposal will likely get support from business groups that have clamored for the restoration of a tax deduction for research and development and an additional deduction for the cost of capital investments, two key components of the deal. The cost of the package is offset by the elimination of a much-criticized employee retention tax credit.