A Longshot Bipartisan Deal In Congress Could Unexpectedly Help Children

WASHINGTON — A longshot bipartisan tax deal under negotiation on Capitol Hill could deliver extra cash to parents in exchange for business subsidies.

The top tax lawmakers in the House and Senate — Rep. Jason Smith (R-Mo.) and Sen. Ron Wyden (D-Ore.) — have been working on a deal expanding the child tax credit alongside business tax breaks.

The deal isn’t final, and even if Wyden and Smith reach an understanding, it’s not clear that the rest of Congress would go along.

Still, an agreement would be a long-sought bipartisan breakthrough that could serve as a template for a future deal delivering on priorities for both parties.

“I’m trying to get the biggest tax cut possible for these working families and there are a host of ways in which you can do it,” Wyden told HuffPost on Tuesday, declining to offer any specifics about the policy.

Republicans expanded the child tax credit as part of their 2017 tax cut law, doubling the credit’s value to $2,000, expanding eligibility to high-earning households. The law required parents to earn at least $2,500 annually to receive even a portion of the credit.

The GOP tax law also boosted a business writeoff for capital expenses, but only temporarily, and now Republicans hope to revive it while also restoring a deduction for research and development that they watered down to help pay for the 2017 law.

Democrats, meanwhile, built on the expanded child tax credit in their 2021 American Rescue Plan, increasing its maximum value to $3,600 and getting rid of its earnings requirement, so that even parents who earned no money could receive refunds, and for the full amount rather than just a portion of the credit. The bill also directed the IRS to distribute the refunds as monthly payments, effectively creating the kind of child benefit available to parents in every other developed country. The changes expired after one year, but Democrats have vowed they would bring them back.

The expanded tax credit funneled tens of billions of dollars to low-income parents, drastically reducing child poverty — an achievement Democrats have touted often. Wyden suggested he may be focused on expanding the credit’s refundability and broadening eligibility rather than increasing its value.

“We want the biggest cuts in child poverty possible,” he said. “We want to help as many families as possible.”

Wyden, chairman of the Senate Finance Committee, said he planned to speak Tuesday with Sen. Mike Crapo (R-Idaho), the committee’s top Republican, about the nascent deal. It would need significant Republican support in both the House and Senate in order to become law.

Crapo said he supported the concept of the deal but that lawmakers needed to nail down the specifics ― and that it could be difficult to make it law.

“We have to put together a bipartisan, bicameral agreement that will be able to not only survive a filibuster, but survive the dynamics in the House,” Crapo told HuffPost.

The negotiation comes as Congress faces a government funding deadline this month, and as lawmakers are debating whether to send billions in foreign aid to Israel and Ukraine, not to mention whether to do a comprehensive reform of U.S. immigration law. And far-right House Republicans are again grumbling about their leader and threatening to throw him out of the speaker’s office.

So there’s a lot going on already, it’s a presidential election year, and it’s unclear if party leaders will want to add a potentially controversial tax bill to the mix.

Republicans generally disliked the child tax credit changes Democrats enacted in 2021, especially allowing parents to claim benefits even if they had no income. Some Republicans derided the expanded eligibility for the tax credit as welfare without a work requirement.

A spokesman for Smith, Wyden’s Republican negotiating partner and the chairman of the House Ways and Means Committee, did not respond to a request for comment.

Despite the obstacles, Democrats on the outside of the negotiation are watching hopefully.

“In the end, the part of it that’s most important to me is full refundability to try to make sure that the poorest kids who’ve been excluded from the credit benefit from the credit,” Sen. Michael Bennet (D-Col.) told HuffPost. “I think there have been some promising discussions about it. We’re going to have to see what the details are.”