The Tax Relief for American Families and Workers Act will be good for the economy, small businesses, and millions of American families.
The Tax Relief for American Families and Workers Act (H.R. 7024) is a major breakthrough in bipartisan legislating for this Congress. It will be good for the economy, small businesses, and millions of American families.
We need more efforts like this in which Republicans and Democrats reach across the aisle and work together to make Americans’ lives better. Not everything has to be a big fight.
People often ask me how to break the gridlock which seems to dominate so much of Washington politics. We passed a lot of bipartisan reforms when I was Speaker of the House, including welfare reform, the largest capital gains tax cut in history, and the only four consecutive balanced budgets in our lifetime.
The truth is: You can have a large Republican majority – and bipartisan solutions. They are not mutually exclusive. I outlined the process for achieving a huge Republican electoral victory with the Contract with America in 1994 and then working with a Democratic president to turn political victory into legislative achievement in my latest book “March to the Majority.”
When you have divided government, everyone must win something for anything to move forward. Each side must lean forward and listen to the other side to find common ground.
Republican House Ways and Means Chairman Jason Smith (R-MO) and Democrat Senate Finance Committee Chairman Ron Wyden (D-OR) have shown they can listen to each other and find solutions that are good for both sides.
A key to America’s future is the steady investment in research and development to create better technology and a more powerful economy. In fact, increasing American research and development is crucial to restoring American competitiveness and innovation. It is a major requirement if we are going to compete with China. Under the bill, American companies will be able to immediately deduct U.S. research and development costs while also reducing borrowing costs. The legislation will also promote greater investment in new equipment and machines.
These same tax policies were key to President Donald Trump’s economic revolution. Boosting productivity is a cornerstone of growth and rising wages.
Along those lines, the bill also restores the original intent of the Republican-created child tax credit – helping families and rewarding work. The tax legislation increases the value of the child tax credit for the first time since 2017. It eliminates the penalty for larger families – and increases the refundable portion for the next few years. It provides greater flexibility by allowing taxpayers to use a prior year’s income to calculate the credit. Contrary to some criticisms, the bill preserves all the Trump-era protections against illegal immigrants accessing the credit. (No one currently crossing the border illegally would be eligible for anything in this bill.) Finally, it maintains the $2,500 minimum work requirement and cuts off monthly checks. This should be considered a real victory. And the real experts agree.
The Tax Foundation, the Center for a Free Economy, and even economists at the American Enterprise Institute have looked at the child tax credit proposal and concluded that these modest changes have little to no impact on labor force participation or work hours. Some have even concluded the changes will have a positive impact on the workforce by providing greater incentive to work for those below the poverty line by increasing the value of the next dollar earned. Taxpayers will be motivated to work that extra hour or two, gaining experience and skills at the same time they are rewarded financially. Within the context of these changes, providing temporary flexibility is unlikely to discourage work. In fact, in the last 15 years, Congress has given this kind of flexibility six times, each time with strong support by both Republicans and Democrats.
In exchange for this modest expansion in the child tax credit, the American economy will be supercharged. The R&D provisions of the bill alone would mean over $70 billion in investment over the next decade, according to some estimates. Consider that China gives its companies a 200 percent “super deduction” subsidy for their R&D costs, while the U.S. is one of only two developed nations requiring businesses to spread out R&D expenses over five years. Permanent full expensing would increase investment by $400 billion. This means more orders for equipment and machines from American manufacturers.
This legislation fulfills President Trump’s transformational framework for economic growth that was part of the 2017 Tax Cuts and Jobs Act. We know the results: 50-year record unemployment, higher wages, and an end to companies moving overseas.
In the first two years after Trump’s signature tax cuts, companies increased their capital investment by 17 percent while cutting their debt by 35 percent. However, small businesses spent 6 percent of their revenues on interest expenses, compared to 2 percent for large businesses. The Tax Relief for American Families and Workers Act will help level that playing field for small and medium-sized businesses. It will also generate 867,000 jobs and $58 billion in additional take-home pay. No one should be against that.
This new proposal by Chairmen Smith and Wyden strikes the right balance. It doesn’t resurrect the Democrats’ misguided version of the child tax credit. It expands what Republicans created within the Trump tax cuts blueprint.
In total, this legislation locks in $600 billion in pro-growth, pro-America tax incentives. Hesitant Republicans should embrace this opportunity to pass pro-growth policies that are likely to create more innovation, jobs, and prosperity.
The benefits far outweigh the costs. The Tax Relief for American Families and Workers Act (H.R. 7024) should be passed with a big bipartisan majority.
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