Congress inches toward rare bipartisan tax deal

Congress is scrambling to reach a bipartisan tax agreement to be included in the annual budget.

The emerging deal, worth an estimated $70 billion, would revive expired cuts for corporations and increase the child tax credit.

If lawmakers can pull it off, it would be a rare compromise on contentious issues in a deeply divided Washington, made all the more striking by occurring in an election year.

The negotiations are being led by the heads of the Senate and House tax committees, Democratic Sen. Ron Wyden of Oregon and Republican Rep. Jason Smith of Missouri.

A deal appears unlikely to be enacted before the annual tax-filing season begins on Jan. 29 but would apply retroactively as far back as 2023 for the business taxes.

Under the potential tax agreement, Democrats would secure a boost to the $2,000 child tax credit but below pandemic-era levels that progressives have demanded.

In exchange, Republicans would revive expired Trump-era tax cuts for companies to more quickly deduct capital expenses, deduct more interest expenses and write off domestic research and development.

The provisions would run through 2025 when other Trump-era tax cuts are due to expire, teeing up a major showdown in Congress.

“Improving the benefits now strengthens our hands as child advocates for 2025,” Mr. Wyden said. “I’ve always felt that the best politics is good policy. So, let’s help some kids, 19 million are hurting.”

But some on the left signal it’s dead on arrival unless President Biden’s pandemic-era child tax credit boost of up to $3,600 is on the table.

Rep. Lloyd Doggett, a Texas Democrat on the tax-writing Ways and Means Committee, said the “unacceptable” emerging details equate to “effectively giving $4 in corporate tax cuts for every $1 for children.”

Rep. Rosa DeLauro of Connecticut, the top Democrat on the House Appropriations Committee, agreed: “$4 for corporations, $1 for kids? Hell no.”

Republicans made clear that pandemic-era levels for the tax credit, which Democrats note significantly improved child poverty rates, are a deal breaker because of the cost.

Sen. John Thune of South Dakota, the No. 2 Republican leader, said the pandemic-era levels and refundable tax credits, which provide a direct payment to people who don’t pay taxes, were a “nonstarter.”

The business community has lobbied for corporate tax breaks as the lynchpin for economic development.

“I personally believe we need to make our economy as strong as we can make it,” said Sen. Mike Crapo of Idaho, the top Republican on the Finance Committee. “Particularly, those items are very critical to keeping our economy strong and keeping our business climate healthy.”