The House overwhelmingly approved a bipartisan tax package Wednesday night that includes improvements to valuable expensing provisions used by farmers, as well as an expansion of the child tax credit.
The bill, which passed 357-70 and now goes to the Senate, needed a two-thirds margin to pass under the fast-track procedure that GOP leaders used to bring the measure to the floor.
Some hard-line GOP conservatives argued that the expanded child tax credit would encourage parents to drop out of the workforce and that the money would go to illegal immigrants who have children who are citizens. On the other end of the political spectrum, some progressives complained that the child tax credit expansion wasn't large enough.
The bill's Republican backers argued the package’s business tax provisions were critical to many sectors, including agriculture. The bill is designed to serve as a bridge to next year’s scheduled expiration of a number of provisions in the 2017 Tax Cuts and Jobs Act.
Among other things, the House bill would restore 100% bonus depreciation through 2025 and expand the existing Section 179 expensing allowance.
“Our producers rely on these tools to buy farm equipment and invest in their operations,” said Iowa GOP Rep. Randy Feenstra, a member of both the Ways and Means, and the Agriculture committees. “This legislation is a victory for our farmers and rural communities.”
The existing Section 179 allowance allows businesses to write off up to $1.16 million of the cost of equipment and software for 2023, with the limit phased down dollar for dollar as spending exceeds $2.9 million. The House bill would raise the expensing limit to $1.29 million and increase the phaseout threshold to $3.22 million, with both indexed to inflation.
The bonus depreciation provision, which allows a business to immediately write off the cost of equipment or buildings, is scheduled to phase out under the TCJA: The provision dropped from 100% to 80% of the purchase price in 2023 and is scheduled to fall to 60% this year, 40% in 2025 and 20% in 2026 before ending in 2027.
Meanwhile, the limit on the child tax credit would rise retroactively from $1,600 to $1,800 per child for 2023 and then go to $1,900 for this year and $2,000 for 2025, along with an inflation adjustment for both those years.
The child credit retains the same rules that were in the TCJA, but conservative critics said that continuing to allow someone to get the credit by only working every other year would encourage people to drop out of the work force.
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Rep. Matt Gaetz, R-Fla., derided the bill’s expensing provisions as a “bunch of business welfare” that Republicans got in return for agreeing to the expanded child tax credit.
Rep. Chip Roy, a Texas Republican who led opposition to the bill, said the package would “continue to expand the welfare state” and fuel more illegal immigration.
Some Senate Republicans have voiced similar concerns, but the overwhelming House margin is likely to make it hard for many senators to oppose it.
Forty-seven Republicans joined 23 Democrats in voting against the bill.
The top Republican on the Senate Finance Committee, Idaho Sen. Mike Crapo, didn’t take part in negotiations of the bill, which were spearheaded by Finance Chairman Ron Wyden, D-Ore., and House Ways and Means Chairman Jason Smith, R-Mo.
The Association of Equipment Manufacturers welcomed passage of the House bill, which also restores immediate expensing for research and development.
"Ensuring that our tax code supports our ability to create jobs in the United States and compete in the global economy is a national priority, and we urge the U.S. Senate to finish the job by swiftly passing the bill and sending it to the President’s desk for signing," AEM said.
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