House Republicans Unveil Plan for New Tax Cuts
Fresh off their battle to cut federal spending in exchange for agreeing to raise the debt ceiling, House Republicans on Friday released plans for a new package of tax cuts that would likely reduce revenues by billions of dollars.
The three bills included in the American Families and Jobs Act were introduced by Rep. Jason T. Smith, the Missouri Republican who chairs the Ways and Means Committee. Members of the committee told Roll Call that they hope to finish markup of the legislation by the end of next week.
What’s in the legislation: One of the bills would revive tax breaks for corporate research and development that were included in the 2017 Republican tax law but allowed to expire last year. Taking aim at some of the environmental provisions in the Inflation Reduction Act that President Joe Biden signed into law last summer, the bill would also limit tax breaks for the purchase of electric cars and revoke some tax credits for investments in clean energy. And it would terminate a new Superfund tax on crude oil, as well as end the ability of the Superfund to borrow from general tax revenues.
A second bill would increase the size of the standard tax deduction over the next two years for families that make less than $400,000 per year. Married couples would see a $4,000 “guaranteed deduction bonus,” while single filers would get an extra $2,000.
The third bill would repeal a new tax rule that requires taxpayers using services such as Venmo and PayPal to report all transactions worth more than $600. As The Washington Post’s Tony Room notes, the implementation of that rule has been delayed by the IRS, but Republicans have been pushing to return the reporting threshold to $20,000. The third bill would also increase the size of tax breaks for small businesses that buy new equipment, allowing an immediate write-off of $2.5 million, and expand the use of “opportunity zone” tax advantages in rural areas.
Cutting taxes, cutting revenues: While the three bills have not yet been scored by the Congressional Budget Office, they would likely increase debt and deficits significantly if they were to take effect. Previous CBO scores of similar legislation suggest that the GOP plan would be costly, although much depends on how the changes were implemented and how long the changes lasted, as well as what kind of offsetting changes were made.
The Urban-Brookings Tax Policy Center said Friday that restoring full tax breaks for business investments and loan costs would cost about $500 billion over 10 years. While the new Republican plan calls for those changes to last just two years, it’s likely that GOP lawmakers would push for extensions at the next expiration date. At the same time, the Republican bill calls for the repeal of green energy tax breaks, which could offset some of the costs of the proposed tax cuts.
“These policies will provide relief for working families, strengthen small businesses, grow jobs, and protect American innovation and competitiveness, Smith said in a statement.
Rep. Richard Neal, the top Democrat on the Ways and Means Committee, said the Republican plan follows a well-established pattern of pushing for more tax cuts soon after expressing concerns about the size of the national debt. “It’s Republican clockwork. Not even a week after their manufactured default crisis and it is back to tax cuts for the wealthy and well-connected,” Neal said in a statement. “This stoops to a new low even for them: retroactive corporate tax cuts, next-to-nothing for the most vulnerable children and families and sneaking in favors for Big Oil.”
Neal also said the proposal is an expression of “failed trickle-down economics,” and warned that there will likely be more proposals along the same lines ahead. “Make no mistake about it, they are laying the groundwork for even bigger cuts in 2025,” he said.
What’s next: While the legislation has little chance of making it past the Senate and becoming law in its current state, there’s a chance that some of the provisions could play a role in a tax deal that many lawmakers expect to pursue at the end of the year.
