The Senate on Thursday killed long-stalled bipartisan legislation to expand the child tax credit and renew key business investment deductions.
The procedural vote was 48-44, with 60 votes needed to end debate and move to a final vote. GOP Sens. Josh Hawley (R-MO), Markwayne Mullin (R-OH), and Rick Scott (R-FL) all voted yes on the bill, while Sens. Bernie Sanders (I-VT) and Joe Manchin (I-WV) voted against it.
The failure was expected as many in the Republican caucus had wanted to see the $78 billion legislation, which passed overwhelmingly in the House, amended and reworked through the committee process, rather than being brought directly to the floor for a vote as is.
Putting the legislation up for a vote was a political gambit by Senate Majority Leader Chuck Schumer (D-NY), who knew it wouldn’t get enough votes but can now message that Republicans voted against a bill to give families a bigger child tax credit and lower taxes for businesses.
Optics aside, some Republicans who voted against the bill support the underlying intent, but had several problems with the bill’s structure.
For instance, there is a provision in the bill that allows parents to rely on the previous year’s income to calculate the child tax credit for this year and next, which some conservatives argue would lead to some parents quitting the workforce in some years.
As the Thursday vote approached, it seemed as though more Republicans turned against the bipartisan bill. Many think that there will be a better shot to rework tax policy after the election and were anticipating that the legislation would be tanked ahead of the vote.
“It’s dead as Woodrow Wilson,” Sen. John Kennedy (R-LA) said Wednesday afternoon.
Sen. Ron Wyden (D-OR) worked closely with House Ways and Means Chairman Jason Smith (R-MO) to craft the legislation. Crucially, Wyden’s counterpart on the Finance Committee, Sen. Mike Crapo (R-ID), opposed the legislation. Crapo is set to take over the top tax-writing position in the Senate if Republicans win in November.
“Wyden wouldn’t do any negotiating with Crapo whatsoever,” Sen. Ron Johnson (R-WI) told the Washington Examiner ahead of the vote.
The $78 billion bill is fully paid for through changes to the pandemic-era employee retention tax credit. Although, some Republicans contend that the estimate is a moving target and that it could end up adding to the deficit.
Despite the Republican firewall in the Senate, the bill sailed through the House in a 357-70 vote.
If it would have passed, the legislation would have expanded the child tax credit by changing the calculation of the credit on a per-child basis to make it more generous. It would also have raised the maximum refundable amount per child from $1,600 to $1,800 in tax year 2023, $1,900 in 2024, and $2,000 in 2025, a change that would benefit lower-income families.
Additionally, the bill indexed the child tax credit to inflation so that its value is not eroded over time, a change that child tax credit advocates have long pursued.
On the business side, the legislation would have restored a tax deduction for research and experimentation costs for businesses, a measure that business groups have been lobbying for and Republicans have prioritized. Since the tax break sunset, companies have had to amortize R&D expenses, meaning they faced a higher tax burden.
In addition, the agreement temporarily paused the phaseout of bonus depreciation. That was a provision of 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.
The White House said it “strongly supports” the bill and signaled that President Joe Biden would sign it into law if it reached his desk.
“This bipartisan legislation would give immediate tax breaks averaging about $700 to eight million working families with children this year and build more affordable homes to lower rents—without raising the deficit,” the administration said in a statement. “The House passed this bill with overwhelming bipartisan support, and the Senate should do the same.”
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Vice President Kamala Harris’s presidential campaign can now blame Republicans for blocking a bigger child tax credit and tax provisions prized by corporations, a line of attack that will undoubtedly be used in the lead-up to the election.
Still, Republicans will still have an opportunity to remake the tax code and implement some of the changes in the Wyden-Smith bill should they win control of the Senate and the White House. Regardless of who is in power, several tax provisions from the Trump tax cuts are expiring and a big negotiation over federal tax policy is expected in the new year.
