As the year-end approaches, congressional lawmakers enjoy their holiday break, leaving behind a quiet Capitol but stirring anticipation for potential tax changes in mid-2024. While the odds stand at a cautious 50-50, there’s a behind-the-scenes shuffle hinting at a tax package. Lawmakers returning in January face a hefty to-do list, including vital negotiations on military funding, security enhancements at the U.S.-Mexico border, and averting a government shutdown.
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Republicans’ Push for Business Tax Breaks
Republicans advocate for the full restoration of three business tax breaks, emphasizing Research and Development (R&D) expensing, bonus depreciation adjustments, and interest deductions on business debts for large companies. The proposed changes aim to stimulate economic growth and provide relief to businesses grappling with evolving tax regulations.
However, these proposals face scrutiny and negotiation, with the bonus depreciation gradually decreasing over the next few years. The fate of interest deductions and R&D expensing hangs in the balance, reflecting the ongoing tug-of-war between Republicans and Democrats.
Democrats, on the other hand, prioritize an expanded child tax credit, driven by the commitment to alleviate child poverty. Despite the potential cost and limited GOP support, Democrats explore narrower avenues, such as increased credits for working parents or full refundability of existing credits.
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Bipartisan Consensus and Future Exclusions
Surprisingly, bipartisan support emerges for certain tax-related measures, including relief for disaster victims and expanded tax credits for low-income and middle-income housing builders. Technical corrections to the SECURE 2.0 legislation also find common ground, promising a collaborative approach in specific domains.
Yet, two notable exclusions from the 2024 tax deal surface—extensions of individual provisions from the 2017 tax law and the introduction of a mark-to-market tax regime targeting the ultra-rich. These exclusions underscore the complexity of navigating partisan divides and the nuanced landscape of tax policy debates.
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