Congress has a chance to pass a bipartisan tax deal that works

For most, the new year kick-starts a renewed sense of purpose, often accompanied by a list of goals to accomplish over the next 12 months. But there’s one goal Capitol Hill tax writers want to reach within weeks, tied to this year’s filing season.

The IRS revealed last week that individuals and businesses can file their tax returns starting Jan. 29. More importantly, the announcement sets the timeline for Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means Chairman Jason Smith (R-Mo.) to agree on a tax deal to bring back tax benefits for working families and businesses.

Wyden and Smith have been leading negotiations on the package, with details being leaked as far back as late November. Last week, Ways and Means GOP staffers finally briefed the House Republican conference on the framework of the deal — to get something passed that would apply retroactively for tax season.

Congressional tax writers are looking to restore several tax provisions from the 2017 Tax Cuts and Jobs Act that expired as far back as December 2021. That bill proved economically meaningful, spurring domestic investment and boosting economic activity.

Lest anyone doubt, it is indisputable that the Tax Cuts and Jobs Act strengthened the economy that Joe Biden inherited. This may be the reason for our narrow escape from an official recession coming out of the pandemic.

Nonetheless, inflation increased the burden on households and businesses. The current tax deal, in some ways, replicates the economic gains in the years following the Tax Cuts and Jobs Act. Getting this deal done in time for the policies to be reflected in this year’s tax returns is good policy and better politics. It would mean Americans could see the impact of these pro-growth tax provisions as soon as this year, proving that bipartisan deal-making still has merit in the 118th Congress.

The main policies in the current framework of the package are provisions to extend the Childcare Tax Credit, renew interest deductions, allow full expensing of equipment and machinery and full expensing of research and development investments. If agreed to, the deal could help the nation as the economy right-sizes with higher interest rates and prices following prolonged, significant inflation.

The 2017 tax reform law raised the child care tax credit maximum from $1,000 per child to $2,000. Others can argue why its extension and expansion are problematic. As a political matter, it’s a reasonable price to pay for making essential growth-incentivizing parts of the Tax Cuts and Jobs Act permanent.

The research and development incentives in the deal balance our national interests globally. The full expensing of such investments allows American businesses to maintain access to capital for new investments, driving U.S. innovation and competition. The Tax Cuts and Jobs Act’s full research and development incentives expired in 2021.

Businesses, big and small, felt those repercussions. These provisions’ expiration raised taxes on businesses and lowered investment in domestic manufacturing. As a result, our nation’s competitive edge on the global stage stalled while countries like China forged ahead. One report suggested that, under the current tax provisions for research and development investments, 10,000 American jobs could be lost each year over the next decade. These pro-growth tax extenders will help create new jobs within our own borders rather than overseas.

There is strong support for the pro-business incentives supported by House Republicans. In December, nearly 150 Republicans signed a letter urging action to fix and make permanent key provisions of the 2017 tax reform law. The tax deal could help turn the tide in a shaky economic climate.

Wyden has noted that the package is 90 percent complete. All that stands between Americans and some much-needed relief this tax season is a few more “yeas” from both parties.

Although the distance between the aisles has continued to expand and stall congressional action on most issues, hope for rare bipartisan cooperation on taxes remains high. These tax extenders address our current economic needs while supporting future growth. Congress must act now before the economy begins to sink.

Peter Roff is a former UPI senior political writer and U.S. News and World Report columnist.