WASHINGTON (Reuters) - U.S. lawmakers on Friday advanced a bill to enhance tax breaks for businesses and low-income families in a strong show of bipartisan support for the largely revenue-neutral measure, despite their deep divisions over federal spending levels.
The House of Representatives Ways and Means Committee approved the measure in a 40-3 vote, just three days after its Republican chairman announced the deal with his Democratic Senate counterpart.
The "Tax Relief for American Families and Workers Act of 2024" would increase the child tax credit and restore the full value of declining business tax deductions for investments in research and development and plant and equipment.
The changes would be effective through 2025, when Republican-passed tax cuts for individuals expire and Congress is expected to embark on a massive tax code revamp that will be hotly debated during this year's presidential election campaign.
Democrats have been seeking to restore the full annual amount of a COVID-era expansion of the child tax credit of up to $3,600 per child that expired in 2021. Republicans, meanwhile, have been seeking to restore immediate expensing of R&D and capital expenditures that were part of the Republican-passed tax cuts in 2017 but began to phase out in 2022.
While the business tax breaks were restored in the deal, the child tax credit expansions fell short, reaching only $2,000 per child in 2025. The measure also includes tax breaks for affordable housing and people hit by disasters, including wildfires and a train derailment in Ohio last year.
Republican Ways and Means Committee Chairman Jason Smith, a Republican, said the bill contains "common-sense fixes to the tax code that will rebuild our communities, support better jobs and wages, and grow our economy."
The Joint Committee on Taxation estimates that the measure will increase U.S. deficits by $399 million over 10 years, with $77.5 billion in added costs offset by $77.1 billion in savings by beefing up enforcement of fraudulent claims on the troubled COVID-era Employee Retention Tax Credit and ending the processing of claims early.
While the vote indicates strong congressional support for the measure, including from Senate Majority Leader Charles Schumer, it remains unclear whether it will move to the House floor as a stand-alone bill or attached to other, "must-pass" fiscal legislation.
The vote came after Congress late on Thursday averted a shutdown of some government agencies with stopgap measures that buys just over a month to reach an elusive deal on government funding for the fiscal year that began on Oct. 1.