U.S. Treasury Secretary Janet Yellen testifies before a Senate Finance Committee hearing on the 2025 budget on Capitol Hill in Washington, U.S., March 21, 2024.
Elizabeth Frantz | Reuters
WASHINGTON — Treasury Secretary Janet Yellen on Thursday defended President Joe Biden’s 2025 fiscal budget proposal as Republican senators said they feared taxes would rise for the middle class as the result of a law due to expire next year.
“For years, President Biden has vowed no tax increase on individuals earning less than $400,000,” Sen. Steve Daines, R-Mont., said during a Senate Finance Committee hearing where Yellen was testifying.
“And now President Biden is choosing to let the Tax Cuts and Jobs Act expire and increase the corporate tax rate, forcing American families and workers to bear the cost of these ‘woke’ policies,” Daines said, referencing clean energy policies under the 2022 Inflation Reduction Act.
Provisions of the TCJA — a landmark tax law proposed by the Trump administration and passed by Congress in 2017 — that are set to expire in 2025 include the child tax credit.
That credit allows taxpayers to reduce their tax bill by up to $2,000 per qualifying child, with an income threshold of up to $400,000 per family. An additional “other dependent credit” offers a tax credit of $500 to people with less than $400,000 in income who have qualified dependents who are ineligible for the child tax credit.
Biden’s budget will restore the expanded child tax credit, the White House has said.
“Would you agree that if the TCJA child tax credit provisions are not extended, this would also result in a tax hike for Americans making under $400,000?” Sen. Mike Crapo, R-Idaho, the committee’s ranking member, asked Yellen.
Yellen said that Biden has “committed to not raising taxes on households making under $400,000” and has expressed “a commitment to the importance of the Child Tax Credit, which has dramatically lowered child poverty.”
The TCJA doubled the existing child tax credit to $2,000, and the 2021 American Rescue Plan temporarily upped the credit amount by $1,000-$1,600 during the pandemic, according to the National Conference of State Legislatures.
The credit helped drive down the child poverty rate by 46% in 2021, from 9.7% in 2020 to 5.2% in 2021— the lowest rate on record, according to the U.S. Census Bureau.
Biden’s $7.3 trillion spending proposal seeks to reduce the federal deficit by $3 trillion over the next decade without increasing taxes on Americans earning less than $400,000.
The budget would impose a minimum 25% tax rate on the unrealized income of the very wealthiest households and raise the IRA’s corporate alternative minimum tax for billion-dollar companies from 15% to 21%, while increasing the larger corporate tax rate to 28%.
House Republicans sought to pare down the deficit by around $14 trillion over the next decade with cuts to the Inflation Reduction Act with a separate budget resolution introduced earlier in March.
Lawmakers still have not settled on a permanent budget six months into the fiscal year, although a deal was reached this week to fund the Department of Homeland Security. It is the latest in a suite of funding bills to be considered ahead of a looming deadline Saturday to avert a government shutdown.