In a rare display of bipartisan cooperation, Congress is on the brink of passing a significant bill that could potentially lift half a million children out of poverty in Washington. The proposed legislation involves an expanded tax credit for parents of children aged 16 and younger, mirroring a plan that briefly passed during President Biden’s first year in office.
The bipartisan effort, led by Democratic Sen. Ron Wyden of Oregon and Republican Rep. Jason Smith of Missouri, has gained momentum, securing a 40-3 approval in the Republican-controlled House Ways and Means Committee earlier this month. If successful, the bill could be voted on in the House as soon as next week.
The proposed tax credit is a scaled-down version of the 2021 plan, which aimed to reduce child poverty by converting the tax credit into a universal child allowance. However, the 2021 plan faced opposition and expired after one year, leading to a spike in child poverty by approximately 5 million children in the following year.
The current deal, brokered by Wyden and Smith, falls short of the 2021 plan but expands refundability to cover most families with some earnings. It eliminates a cap in the current law and allows families to qualify based on either their current or previous year’s income, offering flexibility for parents, especially single mothers with unstable jobs.
Despite potential hurdles, such as unrelated tax issues and ideological opposition in the Senate, the strong bipartisan support in the House tax-writing committee indicates a promising outlook for the bill’s approval. The plan aims to lift about 400,000 children out of poverty in the first year and reduce poverty for an additional 3 million, with a full phase-in expected by 2025.
The deal-making process involved concessions, with Democrats agreeing to support the renewal of three expiring corporate tax breaks sought by Republicans. This includes write-offs for research and experimentation expenses, full expensing for capital investments, and a larger deduction for interest expenses. To fund these measures, the plan would phase out the COVID-19-era relief measure known as the employee retention tax credit, which the IRS identifies as a source of widespread fraud.
If the tax measure successfully passes through Congress and receives President Biden’s signature before the April 15 tax-filing deadline, families could benefit from the expanded credit this year. Despite the challenges faced by a closely divided Congress, the potential passage of this bill signifies a notable bipartisan achievement amidst the current political climate.