Last evening, House Republican Leadership posted bill text of H.R. 7024, the bipartisan and bicameral tax package, on the list of possible items for consideration on the House floor next week. Marked up last Friday on a bipartisan 40-3 vote in the House Ways and Means (W&M) Committee, the “Tax Relief for American Families and Workers Act of 2024” represents a long-negotiated compromise between W&M Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR). The bill includes extensions of popular business tax provisions relating to:
- Research and development (R&D) expensing,
- Deductibility of business interest expense, and
- 100 percent bonus depreciation of certain capital expenditures.
In addition, the package provides for an increase in low income housing tax credits (LIHTC); a modest expansion of the child tax credit (CTC); disaster tax relief; and favorable treatment for cross border investments with Taiwan. Those provisions are offset by early termination of the Employee Retention Tax Credit (ERTC) program, which has been heavily criticized for contributing significantly to pandemic fraud.
By posting final text of the legislation last night, House Republican Leadership has successfully met its self-imposed five-day notice requirement for suspension bills by the time Members return on Monday, January 29. While the House could take up the bill as early as Monday (a “fly-in” day), we expect consideration to take place no earlier than Tuesday, January 30.
Suspension of the rules remains the only viable option for House floor consideration of the tax bill at this time. House Freedom Caucus (HFC) Members continue to threaten bringing down rules as a response to their displeasure with the latest continuing resolution (CR). And specific to this bill, Blue State Republicans-particularly the New York delegation-continue to express their opposition to tax legislation that does not remove or alleviate the cap imposed by the Tax Cut and Jobs Act (TCJA) on deducting state and local taxes (SALT). Both HFC and Blue State Republicans are likely to pressure Speaker Mike Johnson (R-LA) at next Tuesday morning’s GOP Conference Meeting to allow for amendment votes or otherwise change course.
But the HFC is not monolithic, nor are Blue State Republicans. Both factions are evenly divided on the measure. And nearly 150 House Republicans, not including those on W&M, have signed onto a Rep. Rudy Yakym (R-IN) letter expressing support for Chairman Smith’s bill.
Meanwhile, House Democrats have signaled their broad support for the bill, following the lead of Senate Majority Leader Chuck Schumer (D-NY). We therefore predict that the bill will surpass the 2/3rds threshold for passage if the Speaker allows for an up-or-down suspension vote.
Suspensions, unlike bills brought to the House floor under a rule, allow for expedited procedures of historically non-controversial and non-substantive legislation. The procedures include just 40 minutes of debate and no amendments. Thus the higher vote threshold required for passage. Given the narrow House Republican majority, and the appointment of three House conservatives to the Speaker’s Rules Committee at the beginning of the Congress, suspensions are now acting as Leadership’s main legislative tool for moving bipartisan and substantive legislation across the House floor.
The next benchmark for progress of the package will be whether House Majority Leader Steve Scalise (R-LA) includes the H.R. 7024 on his Friday afternoon release of the House’s Weekly Schedule. Specifically, we will be watching to see whether the bill’s consideration (if listed) is couched in any caveat language such as “possible consideration.” Such language would signal uncertainty for the prospects of the bill coming to the House floor next week.
Even if the House moves forward next week, obstacles in the Senate-both procedural and substantive-remain, significantly clouding the bill’s future. Senate Finance Committee Ranking Member Mike Crapo (R-ID) and the Senate GOP Leadership have concerns with the CTC expansion and neither have agreed to help expedite the process in the Senate. To the contrary, Crapo has called the bill a good “starting point,” and has stated that he would like a Committee markup, a step that Wyden has not agreed to.
Even if Members skip the markup process in the Senate, moving a standalone tax bill in the upper chamber is not a quick or easy process. Majority Leader Chuck Schumer (D-NY), who supports the bill as written, has intimated to House Republicans that he is unlikely to be able to pass the bill without a lengthy floor process that includes amendments. But floor time is scarce over the next six weeks with the Senate scheduled to be in recess for two weeks in February and already preoccupied with spending items that have looming deadlines.
Further to all of that, with tax filing season set to open early next week, delay is the enemy of this bill. Chairs Smith and Wyden may therefore make another run at attaching their tax agreement to one of the spending bills in March. Such a move would require agreement from all four corners among the tax-writers, as well as the four corners of the congressional Leadership.
OUTLOOK/ANALYSIS. While Chairman Smith’s determination to enact substantive tax law during a presidential election year has been impressive to say the least, his efforts face an uphill climb in the United States Senate, despite his bicameral and bipartisan partnership with Finance Chairman Wyden (and Leader Schumer’s endorsement). Both Minority Leader Mitch McConnell (R-KY) and Finance Committee Ranking Member Mike Crapo (R-ID) remain cool to the agreement, and procedural obstacles remain.
Meanwhile, outside conservative groups are mixed on the proposal, with traditional groups both for (e.g., Americans for Tax Reform) and against (e.g., the Wall Street Journal editorial board). At the same time, the individuals and groups most influential with conservatives, including Heritage Action and Trump-aligned pundits (as well as the former president), have been publicly mum on the proposal. Any shift in how the conservative base views the Smith/Wyden bill over the coming week could have significant implications for how Speaker Johnson decides to proceed.
For this reason, Chairman Smith and his staff continue to aggressively engage with outside conservatives to gain their support or keep them neutral. As a counterbalance to conservative pressure, we expect supportive trade associations and companies to push hard for Members to support. The business community’s lobbying push thus far has had a positive impact, but grassroots conservative voices will hold more sway with the HFC, as well as those House Republicans facing potential primaries from the Right.
Should Chairs Smith and Wyden prevail, it will mark an unusually substantive tax victory in an otherwise partisan legislative environment. Should the process succumb, however, to the Senate’s slow process and outside naysayers, all eyes will immediately turn to 2025 when the individual provisions of TCJA expire. Much of that debate will depend upon the outcome of the election, including control of the House and Senate, as well as the Executive Branch. Regardless, there will be major tax legislative consequences for small businesses, individuals, and the overall economy in 2025 when Congress is forced to act, whether or not the Smith-Wyden bill is enacted now.