Bipartisan tax bill remains stuck in Senate limbo after passage by the Broad House

A bipartisan bill to expand the child tax credit and reinstate a raft of tax breaks for businesses has stalled in the Senate after receiving overwhelming approval in the House of Representatives, as Republicans oppose legislation they see as considered too generous for low-income families.

The postponement of the $78 billion tax package has jeopardized the measure’s chances and reflects the challenges of passing any major legislation in an election year. Passing a new tax law would give President Biden and Democrats an achievement they can campaign for, something Republicans may prefer to avoid.

The House of Representatives passed the measure in January on a 357-72 vote — a major bipartisan achievement in a Republican-led body that has toiled to craft legislation — and supporters had hoped to pass it around the start of tax filing to get to the finish line. season at the end of that month. But with just over a month before the filing deadline, there has been no movement in the Senate.

The package, which would be in effect through 2025, would expand the child tax credit and restore a range of tax credits related to business research costs, capital expenditures and interest. It would also include a boost to a tax credit that encourages the development of low-income housing, tax relief for disaster victims And tax breaks for Taiwanese workers and companies active in the United States.

The bill would be funded by curbing the employee tax credit, a pandemic-era program that has become a magnet for fraud. The package was crafted by the top two tax writers in Congress: Representative Jason Smith, Republican of Missouri and chairman of the Ways and Means Committee, and Senator Ron Wyden, Democrat of Oregon and chairman of the Finance Committee.

“The American people want to see a bipartisan effort that gets to a yes,” Mr. Wyden said. “The clock is ticking and families are waiting for this help. They are telling members of Congress that they would like to see this done.”

Senate Republicans have raised a range of concerns, mostly fixating on a so-called lookback provision that would allow parents to use the previous year’s income to claim a larger child tax credit. Republicans argue the measure would weaken work incentives because parents who had little to no income in the current year would still be able to claim a credit of up to $2,000 per child.

The Republican Party has also portrayed the bill’s financing mechanism as a sham, as the program that would be ended to pay for the tax benefits has cost the government far more than expected.

“The fundamental problem with the bill is that Republicans made a major concession to Democrats — allowing the child tax credit to transition into a de facto welfare program — in exchange for something Democrats already wanted: research and development tax breaks for corporations. ,” wrote Senator Thom Tillis, Republican of North Carolina and an outspoken opponent of the package an opinion piece in The Wall Street Journal.

He added: “How can a fiscal conservative defend himself by using fake savings to pay for more spending? It’s like paying off a credit card balance with another credit card. It is fiscally irresponsible and unsustainable.”

Senate Republicans have also complained that they were left out of the deal because it was reached and presented by Mr. Smith and Mr. Wyden without the approval of Senator Michael D. Crapo of Idaho, the top Republican on the Finance Committee, who opposes it. It. Negotiators tried to get Mr. Crapo on board months ago, including by limiting the lookback provision in the child tax credit, but ultimately announced the bill without his support.

Now Senate Republicans have said they want the chance to review the bill in the Finance Committee.

“Efforts to pressure Senate Republicans to approve the Wyden-Smith tax deal have been counterproductive,” Crapo said. said in a statement in which he explains some of his objections. “Each week that has passed, members have strongly voiced additional calls for numerous changes, and there have also been increasing concerns about making changes in 2023, this far into the IRS tax filing season. While I remain committed to a bipartisan resolution that a majority of Republicans in the Senate can support, I hope that the bill’s proponents will commit to pursuing a more constructive strategy.”

Any major changes to the bill would likely undermine support among Democrats, who overwhelmingly support the package as it stands. And they would send the bill back to the chaotic House, which has struggled to handle regular legislative business for months.

Mr. Wyden said he was open to Republicans’ concerns but worried they would still have to find a “smorgasbord of ideas” for the changes they were calling for.

“Depending on how you approach this, a tax bill here could become a Christmas tree in 20 minutes, and really we only have a few weeks,” Mr. Wyden said.

Although Senator Chuck Schumer, Democrat of New York and majority leader, has said he supports the bill, he has yet to commit to a floor vote.

A handful of Republicans have supported the bill and are eager to move it forward. They include Senators Steve Daines of Montana, head of the party’s campaign committee, and Todd Young of Indiana, both of whom serve on the finance panel.

“I want something done,” Mr. Daines said, emphasizing his support for the bill’s business tax provisions. “I think we have a good chance of getting through it.”

Still, the politics of an election year hang over the bill, raising questions about whether Republican leaders really want to push through a measure that would give Mr. Biden and Democrats an achievement to tout during the campaign.

Republicans see an opportunity to win the Senate majority in November, a shift in control that would position Crapo as chairman of the Finance Committee. Some, including Mr. Tillis, have argued that Republicans will have more leverage to negotiate a tax bill next year, when former President Donald J. Trump’s 2017 tax law expires.

“That’s one of the things we’re talking about,” Sen. John Kennedy, Republican of Louisiana, said Thursday after Republicans discussed the bill during a closed-door meeting.

The bill could bring political benefits to both parties. It would be a political victory for Mr. Biden and vulnerable Democrats whose seats Republicans want to claim, such as Senator Sherrod Brown of Ohio, who has made expanding the child tax credit a signature issue. Republicans, some of whom also support expanding the child tax credit, could trumpet tax breaks for corporations and point to a new tax law as evidence of their ability to govern.

Mr Crapo insisted he had no intention of delaying the bill.

“I’ve always said we have to do this,” he said last week. “I worked on it for three years to make this happen. And I think we should do that as quickly as possible.”

Mr. Young, who has been working behind the scenes to advance the package, said there was broader Republican Party support for the existing bill than had been publicly expressed and that there was “a pretty good chance” it would pass in the Senate could make progress.

Rohit Kumar, a former Republican leadership aide in the Senate who now leads national tax authorities at PWC, said several Republican senators “certainly want to say yes on the bill” but have refrained from approving it out of deference to Mr. Crapo . .

“This thing does have a clock,” Mr. Kumar said. “No one knows how much time is on that clock, but there is a clock. And at some point the political will to do so will disappear.”