Two big political winners of the legislation’s passage would be Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR), who crafted the plan during weeks of negotiations.
And the White House, at least from a messaging standpoint, also stands to gain a political advantage whether the legislation passes or not.
If the bill is signed into law, President Joe Biden’s campaign can emphasize that he and Democrats helped expand the child tax credit. If it fails, the campaign can blame Republicans for blocking a bigger child tax credit and tax provisions prized by corporations.
But the White House’s endorsement of the legislation makes things more complicated for other Republicans.
“That’s a big challenge right now,” said Paolo Mastrangelo, the co-founder and co-president of American Policy Ventures, a project that works to support members of Congress looking to find bipartisan solutions. “I think that if you’re Republicans and leadership, you’re trying to figure out — is there a way to do this this year that really makes it seem from a messaging perspective like they’re not giving a win to Biden or that it’s at least on equal footing?”
Notably, House Speaker Mike Johnson (R-LA) hasn’t endorsed the legislation. He has already faced conflict with the conservative Freedom Caucus over government funding, and he risks further friction by signing off on greater refundable child tax credits.
“The politics of this for the new speaker seem to me to be rather challenging,” said G. William Hoagland, the senior vice president at the Bipartisan Policy Center. “He’s got a lot of problems, it seems to me, just getting it out of the House.”
One hangup that Republicans might have with the child tax credit expansion under this plan is that it increases the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in 2024, and $2,000 in 2025. Some conservatives disfavor refundable tax credits on the basis that they are akin to a check from the government.
Some critics, including the Wall Street Journal’s editorial board, don’t like how it would allow parents to rely on the prior year’s income to calculate the credit for this year and next. “Work one year — and earn benefits for two,” the board said.
Some Republicans also raised the objection that U.S.-born children of illegal immigrants might be able to benefit from the child tax credit (although that has been the case for years).
For instance, Rep. Scott Perry (R-PA), an influential member of the conservative Freedom Caucus, went as far as to say last week that allowing illegal immigrants to receive the child tax credit “should be a red line” for Republicans.
The legislation in question does not change policy related to eligibility by immigrants, but rather, it maintains the policies that Republicans agreed to as part of the 2017 Trump tax cuts, which Perry and other GOP members voted in favor of.
While structuring the child tax credit in 2017, Republicans added a requirement that beneficiaries of the child tax credit must provide the Social Security numbers for their children. Illegal immigrants don’t have Social Security numbers issued by the government, so tying the credit to Social Security numbers was meant to restrict the benefit from illegal immigrants.
Nevertheless, the parents receiving the credit on behalf of their children don’t have to provide a Social Security number. Rather, they can claim it with just an Individual Taxpayer Identification Number — something that critics say can hand the credit to illegal immigrants.
The child tax credit was temporarily supercharged by Democrats as part of Biden’s 2021 coronavirus relief bill. That increase went far beyond what is being proposed now, which complicates the politics of this current plan. The 2021 expansion received heaps of criticism from Republicans, in large part because it allowed families to claim the credit without having income.
Even though the first iteration of the child tax credit in the 1990s came with Republican support under the leadership of then-House Speaker Newt Gingrich (and was later expanded as part of the 2017 Trump tax cuts), the temporary Biden-era version may overshadow GOP ties to the credit in the eyes of the public.
“So that has been really hard optically for Republicans over the past two years to square. … It’s seen by the public as a progressive priority, so them working on it is difficult optically for their base, for their primaries, and for their general elections,” Mastrangelo said.
Some Republicans in high-tax states such as New York and California also pushed for the legislation to include a provision to raise the cap on state and local tax deductions. Because that wasn’t included, it threatens their support, with Rep. Nick LaLota (R-NY) already saying he will vote against the bill.
On the Left, Democrats could complicate passage of the bill because they don’t think that it goes far enough to expand the child tax credit, with some wanting to see a repeat of the 2021 expansion.
Some liberals are also not fans of the business tax cuts.
The bill renews a tax deduction for research and development costs for businesses, something that business groups have been lobbying for and the GOP has prioritized. Since the break expired in 2022, companies have had to amortize R&D expenses, meaning they faced a higher tax burden.
The agreement temporarily pauses the phaseout of bonus depreciation. That was a provision in the 2017 Trump tax cuts that allowed companies to write off certain capital expenditures immediately instead of having those deductions written off over the “useful life” of the asset.
One factor boosting the bill’s odds in the House, though, is a desire among Republicans to have accomplishments to tout to voters.
“I think the House is desperate to show that they can govern,” said Alex Conant, a GOP strategist and a partner at Firehouse Strategies. “House Republicans are eager to have deliverables for their constituents, and this is a relatively easy one that a lot of people back home are going to like.”
Mastrangelo said it might be a little easier of a lift on the House side than the Senate because the plan plays well or would be seen as politically neutral in many lawmakers’ districts. Plus, the House side has elections every two years.
“They’re up for reelection this year anyway, so they would want to be able to show that they’ve done something, so I think it’s easier for the median House Republican to view this as either a neutral vote or something they can turn into a positive from a messaging perspective,” Mastrangelo said.
Mastrangelo said that the Senate, whose members serve longer six-year terms, might be eying the potential that Republicans will win control of the Senate and perhaps the presidency. That would mean they would have more leverage to craft the policy surrounding the plan next year.
“The Senate — only a third of them are up for reelection, so a lot of them are more focused on who is going to win the White House? Are we helping Biden out by doing this or not?” Conant said. “Two-thirds of the Senate is not worried about their reelection. They’re worried about the broader political environment and how this plays into that.”
Nevertheless, the business world is pushing the GOP hard to pass legislation restoring those key tax incentives. Delivering to business constituents would be a political win for Republicans, Conant said, which would probably outstrip whatever blowback there would be from the base to the expanded child tax credit.
If the negotiations end up not shaking out and the legislation isn’t passed, the topic will be punted to 2025 — a time when several more provisions from the Trump tax cuts will expire and lawmakers will be forced into crafting a major fiscal legislative bill.
Mastrangelo said making progress on this bill would be a “down payment” on next year’s talks.
Two big political winners of the legislation’s passage would be Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR), who crafted the plan during weeks of negotiations.
And the White House, at least from a messaging standpoint, also stands to gain a political advantage whether the legislation passes or not.
If the bill is signed into law, President Joe Biden’s campaign can emphasize that he and Democrats helped expand the child tax credit. If it fails, the campaign can blame Republicans for blocking a bigger child tax credit and tax provisions prized by corporations.
But the White House’s endorsement of the legislation makes things more complicated for other Republicans.
“That’s a big challenge right now,” said Paolo Mastrangelo, the co-founder and co-president of American Policy Ventures, a project that works to support members of Congress looking to find bipartisan solutions. “I think that if you’re Republicans and leadership, you’re trying to figure out — is there a way to do this this year that really makes it seem from a messaging perspective like they’re not giving a win to Biden or that it’s at least on equal footing?”
Notably, House Speaker Mike Johnson (R-LA) hasn’t endorsed the legislation. He has already faced conflict with the conservative Freedom Caucus over government funding, and he risks further friction by signing off on greater refundable child tax credits.
“The politics of this for the new speaker seem to me to be rather challenging,” said G. William Hoagland, the senior vice president at the Bipartisan Policy Center. “He’s got a lot of problems, it seems to me, just getting it out of the House.”
One hangup that Republicans might have with the child tax credit expansion under this plan is that it increases the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in 2024, and $2,000 in 2025. Some conservatives disfavor refundable tax credits on the basis that they are akin to a check from the government.
Some critics, including the Wall Street Journal’s editorial board, don’t like how it would allow parents to rely on the prior year’s income to calculate the credit for this year and next. “Work one year — and earn benefits for two,” the board said.
Some Republicans also raised the objection that U.S.-born children of illegal immigrants might be able to benefit from the child tax credit (although that has been the case for years).
For instance, Rep. Scott Perry (R-PA), an influential member of the conservative Freedom Caucus, went as far as to say last week that allowing illegal immigrants to receive the child tax credit “should be a red line” for Republicans.
The legislation in question does not change policy related to eligibility by immigrants, but rather, it maintains the policies that Republicans agreed to as part of the 2017 Trump tax cuts, which Perry and other GOP members voted in favor of.
While structuring the child tax credit in 2017, Republicans added a requirement that beneficiaries of the child tax credit must provide the Social Security numbers for their children. Illegal immigrants don’t have Social Security numbers issued by the government, so tying the credit to Social Security numbers was meant to restrict the benefit from illegal immigrants.
Nevertheless, the parents receiving the credit on behalf of their children don’t have to provide a Social Security number. Rather, they can claim it with just an Individual Taxpayer Identification Number — something that critics say can hand the credit to illegal immigrants.
The child tax credit was temporarily supercharged by Democrats as part of Biden’s 2021 coronavirus relief bill. That increase went far beyond what is being proposed now, which complicates the politics of this current plan. The 2021 expansion received heaps of criticism from Republicans, in large part because it allowed families to claim the credit without having income.
Even though the first iteration of the child tax credit in the 1990s came with Republican support under the leadership of then-House Speaker Newt Gingrich (and was later expanded as part of the 2017 Trump tax cuts), the temporary Biden-era version may overshadow GOP ties to the credit in the eyes of the public.
“So that has been really hard optically for Republicans over the past two years to square. … It’s seen by the public as a progressive priority, so them working on it is difficult optically for their base, for their primaries, and for their general elections,” Mastrangelo said.
Some Republicans in high-tax states such as New York and California also pushed for the legislation to include a provision to raise the cap on state and local tax deductions. Because that wasn’t included, it threatens their support, with Rep. Nick LaLota (R-NY) already saying he will vote against the bill.
On the Left, Democrats could complicate passage of the bill because they don’t think that it goes far enough to expand the child tax credit, with some wanting to see a repeat of the 2021 expansion.
Some liberals are also not fans of the business tax cuts.
The bill renews a tax deduction for research and development costs for businesses, something that business groups have been lobbying for and the GOP has prioritized. Since the break expired in 2022, companies have had to amortize R&D expenses, meaning they faced a higher tax burden.
The agreement temporarily pauses the phaseout of bonus depreciation. That was a provision in the 2017 Trump tax cuts that allowed companies to write off certain capital expenditures immediately instead of having those deductions written off over the “useful life” of the asset.
One factor boosting the bill’s odds in the House, though, is a desire among Republicans to have accomplishments to tout to voters.
“I think the House is desperate to show that they can govern,” said Alex Conant, a GOP strategist and a partner at Firehouse Strategies. “House Republicans are eager to have deliverables for their constituents, and this is a relatively easy one that a lot of people back home are going to like.”
Mastrangelo said it might be a little easier of a lift on the House side than the Senate because the plan plays well or would be seen as politically neutral in many lawmakers’ districts. Plus, the House side has elections every two years.
“They’re up for reelection this year anyway, so they would want to be able to show that they’ve done something, so I think it’s easier for the median House Republican to view this as either a neutral vote or something they can turn into a positive from a messaging perspective,” Mastrangelo said.
Mastrangelo said that the Senate, whose members serve longer six-year terms, might be eying the potential that Republicans will win control of the Senate and perhaps the presidency. That would mean they would have more leverage to craft the policy surrounding the plan next year.
“The Senate — only a third of them are up for reelection, so a lot of them are more focused on who is going to win the White House? Are we helping Biden out by doing this or not?” Conant said. “Two-thirds of the Senate is not worried about their reelection. They’re worried about the broader political environment and how this plays into that.”
Nevertheless, the business world is pushing the GOP hard to pass legislation restoring those key tax incentives. Delivering to business constituents would be a political win for Republicans, Conant said, which would probably outstrip whatever blowback there would be from the base to the expanded child tax credit.
If the negotiations end up not shaking out and the legislation isn’t passed, the topic will be punted to 2025 — a time when several more provisions from the Trump tax cuts will expire and lawmakers will be forced into crafting a major fiscal legislative bill.
