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Ways and Means Advances Tax Changes in Relief Bill

Posted on Feb. 12, 2021

The House Ways and Means Committee advanced along party lines portions of a relief package that would make changes to the tax code, but the process showed areas of common concern among lawmakers.

The proposals are part of President Biden’s American Rescue Plan being advanced by Democrats through a parliamentary procedure known as budget reconciliation, which allows the measure to be adopted by a simple majority in both chambers. The measures approved by the Ways and Means Committee will now be combined with proposals being marked up by other House committees before the bill moves to the House floor for a vote.

The Ways and Means Committee focused February 11 on proposals that would expand unemployment insurance, provide emergency assistance to families and children, and offer tax incentives to help families and businesses navigate the current economic climate. Republicans criticized the tax proposals for not being targeted and for increasing the deficit without properly helping those in need.

Rep. Adrian Smith, R-Neb., said many of the tax proposals in the legislation were being advanced by Democrats before the COVID-19 pandemic, alluding to proposals to expand the child tax and earned income tax credits. The bill would expand the child tax credit to $3,000 per child and make it fully refundable, and expand the EITC to workers without children.

Smith also questioned the size of the $1,400 payments in the relief package that would be sent to qualifying individuals making less than $75,000 per year or married couples earning up to $150,000.

The bill would extend the employee retention credit that was implemented by the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136).

Rep. Stephanie N. Murphy, D-Fla., one of the architects behind the retention credit, said she was happy about its inclusion and would continue to raise awareness of the provision among the business community.

But not all Democrats agreed with every part of the relief package.

Rep. Lloyd Doggett, D-Texas, questioned why his party didn’t repeal the net operating loss provision in the CARES Act. He said the NOL provision helped hedge fund managers and real estate speculators the most and did little to help the entire economy. But Doggett, who has been urging his colleagues to repeal the provision, didn’t offer an amendment and ended up voting for the package.

“I support this legislation today for what it does, not for what it doesn’t,” Doggett said.

Reps. Thomas R. Suozzi, D-N.Y., and Bill Pascrell Jr., D-N.J., did not include an amendment to repeal the $10,000 cap on the federal state and local tax deduction. Both have said on several occasions that they would like to see a SALT cap repeal measure included in the legislation.

Flurry of Amendments

Republicans offered 12 amendments to the tax section under consideration by the Ways and Means Committee, none of which were adopted. Democrats rejected an amendment offered by Rep. Jodey C. Arrington of Texas that would tie economic impact payments to proof that a taxpayer’s wages had decreased by 10 percent.

An amendment by Rep. David Schweikert, R-Texas, to improve IRS safeguards to prevent fraud associated with the EITC was also rejected, with Democrats arguing that the safeguards already exist.

Rep. Tom Rice, R-S.C., wanted an amendment that would encourage U.S. pharmaceutical companies to produce drugs in the United States by offering increased incentives to reduce the country’s dependence on China. But this was quickly rejected by Rep. Earl Blumenauer, D-Ore., who said he categorically stands against bribing U.S. companies that shirk their tax obligations to produce drugs domestically while making most of their profits by increasing their prices for U.S. consumers. Blumenauer suggested that a change in the international tax system to prevent companies from profit shifting might be a better option.

But there was some agreement. Some of the amendments may find their way into the relief bill, or could surface in a future package.

Rep. Mike Kelly, R-Pa., offered an amendment that would improve customer service at the IRS to help taxpayers who haven’t received their economic impact payments. Kelly said his office has been inundated with calls from taxpayers who were unable to reach the IRS.

Committee Chair Richard E. Neal, D-Mass., said that Kelly’s amendment may violate the budget reconciliation process but that it would be something he would consider.

Similarly, Rep. Tom Reed, R-N.Y., said he wants the IRS to better handle relief payments to victims of domestic abuse. Reed said he has heard from constituents who were concerned that their abusive partners have control of the payments because they were sent to joint bank accounts. Rep. Gwen Moore, D-Wis., said she appreciated Reed’s interest in the issue and said she would work with Reed to make changes to how the IRS handles those situations.

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