House Republicans have unveiled a major tax cut proposal as part of a broader package of measures that seek to grow jobs, bolster small businesses, and provide relief to inflation-squeezed households by leaving more of their hard-earned dollars in their wallets.
Smith said the proposals were derived from field hearings held across the country to sound out support for tax cuts and other measures.
"Americans from all walks of life—workers, parents, farmers, and small business owners—have shared their concerns with today’s chronically high prices, climbing interest rates, labor shortages, and supply chain failures, as well as the challenge of competing with China," he said in a statement.
Budgetary Effect Unclear
The proposals have yet to be assessed for their estimated effect on the budget, with the Joint Committee on Taxation expected to release its analysis of the package next week, according to Reuters.Democrats have already voiced opposition to the GOP proposal, foreshadowing an uphill battle in the Senate even if the bills clear the House.
Republicans have constructed a tax package that would "blow a massive hole in the deficit," Rep. Suzan DelBene (D-Wash.), a member of the Ways and Means Committee, told Reuters.
"On the heels of their debt crisis, this is the height of their hypocrisy," DelBene added, presumably referring to Republican calls for deficit-reducing spending cuts amid the recent debt-ceiling standoff.Even if the Republican bills don't become law, they will set the stage for bipartisan negotiations on a possible year-end tax deal, which is something Democrats say they want too.
While lawmakers seized on the opportunity of last year's massive end-of-year omnibus spending bill to push through some changes, including how retirement savings are treated, they mostly didn't take action on taxes.
For instance, Democrats advocated for a new expansion of the child tax credit during last year's talks, but Congress ultimately opted to leave the existing benefit unchanged.
The Ways and Means Committee said that there are hundreds of billions of dollars' worth of provisions included in the three bills, with some expanding tax breaks and others rolling them back or repealing them entirely to limit the bills' effect on budget deficits.
Tax Cuts for Working Families ActThe key thrust of this bill is to provide a new "guaranteed deduction bonus" on top of the existing guaranteed deduction (also known as the standard deduction) that Republicans doubled in the Trump-era tax reform law.
"To help working families struggling under Biden's inflation crisis, the Ways and Means Committee is helping Americans keep more of their hard-earned money," the committee said in a statement.
Small Business Jobs ActThis bill proposes several measures to bolster small businesses and foster job growth.
A key provision aims to reduce IRS reporting requirements, raising the reporting threshold for contractors from $600 to $5,000, which is meant to reduce administrative costs for small businesses.
The bill also seeks to protect gig workers by revoking a recent rule that lowered the IRS reporting threshold for small transactions from $20,000 to $600.
"Repealing this rule will ensure Americans aren’t saddled with a mountain of paperwork, confusion, or taxes that they don’t owe," the committee said.
The act also proposes giving investors in S corporation startups tax benefits that are currently available only to C corporation investors.
Committee Republicans said this expansion would foster greater investment in smaller businesses.
Census data show that startups less than five years old create a majority of new jobs in the United States.
The proposal also seeks to increase immediate expensing for small businesses to $2.5 million from $1 million, encouraging businesses to invest in new equipment and increase productivity.
This provision builds on a policy from the Trump-era 2017 tax reform, which doubled the expensing limit from $500,000 to $1 million.
Build It in America ActThe Build It in America Act aims to bolster and bring back home critical supply chains, especially those for food, medicine, and affordable energy.
"With the Build It in America Act, the Ways and Means Committee begins to secure our supply chains while growing our economy and countering efforts by China to gain a competitive edge over American workers and businesses," the committee stated.
The bill is aimed at strengthening U.S. competitiveness and innovation by extending companies' ability to immediately deduct research and development costs. Currently, companies are required to spread these costs over time, which the committee stated is an obstacle to growth for small businesses that can result in higher tax bills.
The act is also written to ensure that mid-sized businesses—which rely heavily on debt financing—can deduct borrowing costs amid rising interest rates by maintaining interest rate deductibility.
The bill also extends 100 percent expensing in a bid to incentivize businesses to re-shore operations from China to the United States.
Under current law, starting in 2023, job creators are able to immediately deduct only 80 percent of the cost of capital expenses such as machinery and vehicles.
The act would also repeal the Democrats' superfund tax on petroleum, with the committee arguing that such policies increase U.S. reliance on foreign countries and undermine affordable energy production.
The bill also proposes changes to energy programs that Democrats secured as part of last year's Inflation Reduction Act.
The proposal would introduce new limits on tax credits for the purchase of new electric vehicles and would eliminate federal aid to buy used ones.
It also proposes to revoke two sets of tax credits meant to boost the production of clean electrical energy.
"[The proposal] builds on successful tax policies enacted by Republicans that spurred higher economic growth—far more than projected—and sparked the fastest growth in real wages in 20 years," the committee stated.