House passes $78B tax bill in rare bipartisan vote

The House passed bipartisan tax legislation Wednesday evening that would expand the Child Tax Credit and restore several business tax breaks — a rare feat in an otherwise bitterly divided Congress that has frequently suffered crippling dysfunction.

The $78 billion tax package was sent to the Senate on a vote of 357 to 70, with strong support from both Republicans and Democrats. It awaits an uncertain future in the upper chamber, with some Senate Republicans calling for hearings and others eager to make changes in the bill.

Some House progressives voted against the package, saying it wouldn’t do enough to slash child poverty. They were joined by Republicans on the right who grumbled that it's an expansion of the welfare state in disguise.

But moderates from both parties provided the tax deal with the two-thirds majority it needed to get through the House under an expedited procedure known as suspension of the rules.

The passage belied the House’s usual reputation for partisan gridlock and was a big win for House Speaker Mike Johnson, who took the gavel in October after the tumultuous ousting of former Speaker Kevin McCarthy (R-Calif.) Republicans have routinely failed even to coalesce around routine procedural votes, frequently appearing completely ungovernable.

“The Tax Relief for American Families and Workers Act is pro-growth, pro-jobs, pro-America,” said House Ways and Means Chair Jason Smith (R-Mo.), the architect of the legislation along with Senate Finance Committee Chair Ron Wyden (D-Ore.). “It’s a strong commonsense bipartisan step forward in providing tax relief for working families and small businesses.”

“Most prognosticators would have told you as recently as a month ago that this bill was destined to die in negotiations or collect dust on a shelf if it ever got introduced,” said Wyden. “Given the sorry state of our political climate, it’s a real victory to have such strong momentum behind this bill that will help 16 million American kids from low-income families get ahead.”

Paradoxically, while the package has cleared the gauntlet of the House, it awaits perhaps its biggest obstacle in the Senate, where Republican tax writers have so far indicated they are strongly opposed to several aspects of the deal.

The bipartisan appeal of the bill stems from its pairing of the Child Tax Credit expansion sought by Democrats with the revival of a trio of business tax cuts sought by Republicans.

The expansion of the child credit would make it more widely available to families with more than one child and increase the “refundable” portion of the credit that parents with very low incomes receive in the form of a check. The left-leaning Center for Budget and Policy Priorities estimates that the expansion will benefit around 16 million children and lift as many as 400,000 children out of poverty in its first year of enactment.

It was the refundable part of the credit that, in the end, convinced some conservatives to vote against the deal, even though several indicated they liked the business tax breaks included in the legislation.

“I do rise in opposition to this legislation. And I do so reluctantly because I know the significant amount of work by my friend from Missouri, by those on frankly both sides of the aisle, to reach agreement,” said Rep. Chip Roy (R-Texas), a member of the House Freedom Caucus. “But unfortunately, as happens in this town, this legislation comes with provisions that, frankly, the people I represent are tired of. And its provisions that would continue to expand the welfare state.”

Another complaint from the right was that checks for the child credit would go to undocumented immigrants with U.S.-born children, even though that has been a long-standing feature of the credit.

“This is how the bipartisan agreement came together: If the Republicans were willing to give Democrats what they wanted for illegal aliens to get massive subsidies in welfare, then the Democrats were willing to give the Republicans what they wanted on a bunch of business welfare,” said Rep. Matt Gaetz (R-Fla.).

On the opposite ideological side, progressives who voted against the bill insisted businesses were getting far more tax breaks than working-class families and Democrats should have pushed for something more robust like the 2021 version of the expanded child credit — which some researchers said slashed child poverty nearly in half in 2021.

“We reached 61 million children with the Child Tax Credit. We lifted half of kids out of poverty,” Rep. Rosa DeLauro (D-Conn.) told POLITICO as lawmakers began debate on the deal. The tax deal is “not dollar for dollar, not parity.”

The package would restore immediate deductions for business research and development costs that were cut back by the Republicans’ 2017 Tax Cuts and Jobs Act. Small businesses that under current rules have to spread them out over five years have widely reported having to cut back on R&D investments and lay off employees as a result.

The tax deal also includes relief for companies operating in the United States and Taiwan, an important source of computer chips for the U.S.; a boost to affordable housing tax credits and expanded disaster relief for victims of major federal disasters.

Nonetheless, there was a resounding sense among supporters that the successful vote showed that Congress could still be effective at enacting important polices. It also established that the two parties could work together on tax policy ahead of a giant tax cliff in 2025, when the bulk of the Trump tax cuts are set to expire, which would mostly affect individual taxpayers.

“This is a good bill, not just for my district but for our country and yes, for our country’s faith in Congress’s ability to actually affect the lives and livelihoods of all Americans,” said Ways and Means member Jimmy Panetta (D-Calif.).

“This has set the tone for the Ways and Means agenda where we are able to make the best package possible,” said Rep. Carol Miller (R-W.Va.).

According to a senior Republican aide, granted anonymity to speak about private procedural considerations, the Senate is unlikely to move on the package until March because of other priorities like passing government funding bills.

GOP tax writers in the chamber have also demanded a committee markup of the package, which, the aide said, is only fair given that the House did so.

But with the White House indicating its support for the package, Congress is a lot further towards enacting major tax laws in an election year than many observers would have ever expected.