What? A New Tax Cut?
Terry H. Schwadron
June 13, 2023
Buried under the flood of Donald Trump indictment coverage was a report that just days after Congress voted to settle the financial crisis over satisfying a vote on the debt ceiling, House Republicans are maneuvering for billions of dollars in new tax cuts.
Proposals for tax breaks — a group of three bills — would offer benefits for big and small businesses, expand so-called opportunity zones for rural areas, and take money away from green energy tax breaks.
What makes it a stand-out, of course, is that these are more proposed benefits largely for businesses whose taxes already have been cut, and that would amount to another boost of the national debt — the very danger that the same Republicans took to the edge of the cliff just two weeks ago.
Now, it is doubtful that these bills will proceed to success without substantial change since Democrats in the House and Senate will find reason to block it. But the idea of threatening to discard the nation’s credit one week over debt concerns, and then to return the next week to ask for more is a head-shaker.
Republicans, including Ways and Means Committee Chair Jason Smith, R-Mo., say most of the new proposals would be paid for by wiping out green energy tax breaks. Democrats like Richard Neal, D-Mass., noted that “not even a week after their manufactured default crisis and it is back to tax cuts for the wealthy and well-connected.”
It’s a preview of the delayed budget fights to come later this year, a conflict foreshadowed by the settlement of the debt ceiling vote that save financial markets but put a limit on ongoing government spending.
One of the settlement points for debt was elimination of some spending to expand the number of IRS agents aimed at collecting more tax from the nation’s wealthiest. Republicans insisted the focus be on spending, not on collecting more revenue.
What’s in the Plan?
Against our expectations, a certain kind of convenient view of compromise may lurk beneath all the surface partisan tensions.
We can expect that for these provisions to move ahead, Democrats will seek to exact the price of expanding the child tax credit, for example, or some other social service program.
And, given the current, petulant protest campaign by the most extreme Freedom Caucus members against their own Republican Speaker Kevin McCarthy, it is unclear whether even a bill normally winning party backing will proceed in an uninhibited manner. The House’s most extreme right-wing members are acting out against what they see as weakness in McCarthy’s settlement of the debt crisis without bringing the country to its knees.
Actually, the broad outlines of the newly proposed tax breaks emerged a year ago, but never won political traction on either side in Congress.
As Politico explained, the bills would undo restrictions on several business tax breaks that recently took effect. One involves tighter rules on write-offs for research and development expenses, something that has raised the effective tax rates many companies pay. Other would rescind through 2025 tougher rules on capital and interest expense deductions, expand rural opportunity zone provisions or drop various reporting requirements. There are tax cuts for individuals as well, including a plan to temporarily expand the standard deduction to the tune of $2,000 for individuals and $4,000 for couples.
Republicans would eliminate an IRS crackdown on the taxes paid by gig workers that Democrats enacted in 2021, but that has been delayed. And the plan targets green energy tax credits for buying electric vehicles, offsetting at least some of its cost.
If you’re looking for consistency, Congress is a bad bet.
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