The bipartisan child tax credit and business tax legislation set to advance this week would cost nearly $650 billion over a decade if its provisions were made permanent, according to a new analysis.
The bill is written so that its tax cuts sunset in 2025, but if they were instead made permanent, it would cost $645 billion through 2033, according to the Committee for a Responsible Federal Budget, an outside group that advocates lower deficits.
The analysis adds context to an estimate put out Wednesday evening by the Joint Committee on Taxation, Congress’s official scorekeeping outfit for tax legislation. The JCT found that the bill would cut taxes by about $80 billion by expanding the child tax credit and renewing prized business investment deductions, but it would be fully paid for by changes to the pandemic-era employee retention credit.
The plan, which faces an uphill battle to passage, was crafted between Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR). It would expand the child tax credit by changing the calculation of the credit on a per-child basis and increase the refundability of the credit, helping the poorest recipients.
As is common in Congress, changes to the tax code are often made temporarily in order to keep headline costs down. For instance, some of the business provisions included in Wyden-Smith legislation were tax policies that were part of the 2017 Trump tax cuts and have since expired.
CRFB President Maya MacGuineas said she was encouraged that the current tax deal, as written, is fully paid for but condemned the temporary nature of how Congress often crafts legislation.
“We need to stop the practice of passing temporary tax and spending policies with arbitrary sunsets that exist only to hide the true costs,” she said. “Policymakers already face nearly $4 trillion of policy expirations at the end of 2025, and this package would lead this cost to grow massively.”
The legislation faces hurdles on Capitol Hill. Some Democrats wanted to see a much bigger expansion akin to the temporary one that happened in 2021 as part of President Joe Biden’s coronavirus relief package.
At the time, Congress raised it to $3,600 for children under 6 and $3,000 for older children, with perhaps the biggest change being the removal of an income threshold for those who receive the funds. Thus, a family with no income or head of household working would also receive the full $3,600 or $3,000 payments. The boosted tax credit ended at the end of 2021.
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The new expansion includes work requirements, which were a must-have provision for Republicans.
While Congress will not hold votes on Friday because of a snowstorm in Washington, D.C., the Ways and Means Committee is still planning to hold a markup on the legislation. The committee could end up amending the bill and send it to House vote following the Friday hearing.
