Tax Package That Boosts Child Credit and Business Deductions Would Be Fully Offset: JCT

Tax Package That Boosts Child Credit and Business Deductions Would Be Fully Offset: JCT


A proposed tax package that would temporarily boost the child tax credit while providing more generous deductions for business investments would be fully paid for by the early elimination of a pandemic-era employee retention credit, the Joint Committee on Taxation said late Wednesday.

The combination of tax cuts in the Tax Relief for American Families and Workers Act of 2024, which would expire after three years, would reduce revenues by $79 billion, JCT said. Limiting payouts from the troubled Employee Retention Credit program, which paid businesses that kept employees on their payrolls during the pandemic, by ending the program in January rather than on April 15, 2025, would fully cover that loss in revenue.

Specifically, the increase in the child tax credit would cost about $33 billion over three years, JCT said. The business tax breaks, which include more generous deductions for research and development costs, as well as depreciation, would cost about the same. A handful of miscellaneous provisions covering disaster relief and low-income housing construction add another $13 billion, bringing the total projected revenue loss to $79 billion.

Low-income households would benefit most: An analysis by the Urban-Brookings Tax Policy Center found that about half of all households with children in the lowest 20% of the income distribution would get a tax cut from the legislation, while just 2.6% of those in the middle quintile would benefit. Overall, 16.6% of households with children would get a tax cut. Among households that would benefit, the average tax cut would come to $680 in 2023.

The Tax Policy Center has not yet provided a distributional analysis of the business tax cuts, although it has done so in the past on a similar proposal, when the changes were thought to be permanent rather than temporary. The American Prospect’s David Dayen said Thursday that Republicans appear to be assuming that the business tax cuts will be made permanent in the end (which is how House Ways and Means Chair Rep. Jason Smith could assert that the bill “locks in over $600 billion in proven pro-growth, pro-America tax policies,” rather than $33 billion, as the JCT reports.) If that’s the case, then the business tax cuts in the proposal will likely cost far more than projected; an analysis by the Committee for a Responsible Budget estimated the 10-year cost of fully extended business tax cuts would come to about $525 billion over 10 years.