After Democrats spent the last two years pushing, with some success, to raise business taxes, they could end up striking a deal with Republicans by year-end on a roughly $100 billion tax-cut package.
Republicans — who are expected to control the House as of January — want tax breaks for private equity, manufacturers and businesses. For their part, Democrats want to expand the child tax credit, using their final weeks controlling both congressional chambers to reinstitute a policy they see as critical to reducing child poverty.
In the wake of a bruising midterm election campaign, it's unclear whether the two sides can secure a compromise. Failure would see interests harmed on both sides, an augur for an all the more tense alignment in Congress once the two chambers have divided control next year.
Practically, an agreement depends in part on Democrats scaling back their original goal of nearly doubling the current $2,000-per-child credit and paying it in monthly installments.
Democrat's Focus
Democrats could secure a more modest child tax credit in return for extending the soon-to-expire business tax breaks that Republicans support — affecting research and development costs, investment deductions and debt write-offs.
The resulting package would benefit a swath of stakeholders ranging from private equity firms and pharmaceutical companies to the parents of young children.
Dell Technologies Inc., Ford Motor Co. and Netflix Inc. have urged lawmakers this month to reach a deal on the research benefit, which they say will cost jobs if it is allowed to lapse.
"There's going to be a clear debate about tax choices, and this whole debate about child tax credit is front and center on that discussion," Senate Finance Committee Chairman Ron Wyden told reporters on Tuesday, adding that he'd also support some business tax breaks in a larger package.
Any year-end deal could be the most significant tax legislation for years to come, since a Republican House majority would be unlikely to engage with the Biden administration on legislative priorities.
While the party controls both chambers until the new Congress sits, Democrats will still need at least 10 Republican votes in the Senate for any deal to pass, given the filibuster.
Democrats' opening offer was to revive the 2021 credit that boosted the tax break to as much as $3,600 per child and distributed it in monthly payments — a proposal that costs more than $1 trillion over a decade. They would have to settle for a much lower benefit to get enough GOP support for an agreement.
