Letter for the Record: House Committee on Ways and Means Subcommittee on Tax Hearing

December 6, 2023

The Honorable Mike Kelly
Chairman, Subcommittee on Tax
Committee on Ways and Means
United States House of Representatives
Washington, D.C. 20515

The Honorable Mike Thompson
Ranking Member, Subcommittee on Tax
Committee on Ways and Means
United States House of Representatives
Washington, D.C. 20515

 

Letter for the Record: House Committee on Ways and Means Subcommittee on Tax Hearing on “Tax Policies to Expand Economic Growth and Increase Prosperity for American Families”

 

Dear Chairman Kelly, Ranking Member Thompson, and Members of the Subcommittee:

On behalf of the Bipartisan Policy Center, thank you for holding today’s hearing. Since BPC’s founding in 2007, we have engaged Congress on tax policy, advancing actionable reforms capable of bridging the partisan divide. We work with stakeholders to promote tax reform that fosters economic growth, provides support for workers and families, and brings in sufficient revenue to meet the nation’s spending needs.^[i] BPC has offered a variety of proposals for the Subcommittee’s consideration.^[ii]

The next two years represent a pivotal opportunity for lawmakers to shape tax policy for a generation as they prepare to confront trillions of dollars in expiring policies from the 2017 Tax Cuts and Jobs Act (TCJA) affecting nearly every taxpayer.^[iii] In the immediate term, momentum to address some provisions on both sides of the aisle, namely businesses’ research and development (R&D) investments and the Child Tax Credit (CTC), could bring a bipartisan approach back to tax policymaking ahead of 2025.^[iv]

Near-Term Opportunity

Congress should advance tax policies in the weeks ahead that are pro-growth, pro-family, and reflect priorities for both parties. These include:

• Full R&D Expensing: Congress could pass bipartisan legislation to restore full R&D expensing.^[v] Such a move could grow the economy and decrease the cost of investing in R&D, thereby incentivizing businesses to expand investments that are vital to America’s global competitiveness.^{[vi], [vii]}
• Child Tax Credit: Congress could pursue targeted expansions to the CTC—with a faster phase-in rate, full refundability, a small expansion to the base credit amount, and a bonus credit for young children—that, in turn, could aid low- and middle-income families while actually increasing work incentives relative to current law.^[viii]
• Low-Income Housing Tax Credit: Congress could increase federal housing credit allocations and reduce the amount of bond financing needed to access credits.^[ix] Among other provisions, these recommendations have strong bipartisan support in Congress and would help to produce or preserve an additional two million affordable rental homes over the next 10 years.^[x]

BPC, along with numerous stakeholders, have offered proposals that could help offset the cost of these policies.^{[xi], [xii], [xiii]}

2025 and Beyond

This Subcommittee, and the full Congress, face an even greater challenge in 2025: addressing TCJA expirations in a manner that promotes economic growth, supports workers and children, and avoids dramatically worsening the nation’s debt and deficit trajectory.^[xiv]

Indeed, several provisions that were expanded or enacted under TCJA or in subsequent years to support working families—the CTC, the employer credit for paid family and medical leave (45S) tax credit, and the child and dependent care tax credit (CDCTC), for example—should remain priorities.^{[xv], [xvi]}

But with nearly $27 trillion in debt held by the public, the latter challenge may be the most critical.^[xvii] We urge Congress to pursue TCJA offsets capable of garnering bipartisan support in 2025 and to avoid partisan-driven outcomes that would undermine U.S. economic growth and innovation.^{[xviii], [xix]}

Conclusion

BPC appreciates the Subcommittee’s consideration of bipartisan solutions that improve the nation’s tax code, and we share your commitment to reforms that expand economic growth and help American workers and their families thrive.

The next two years may determine the future of U.S. tax policy, economic competitiveness, workforce development, and family support for years to come. We stand ready to work with you on tax proposals capable of bridging the partisan divide, in 2024, 2025, and beyond.

Sincerely,

Shai Akabas
Executive Director of Economic Policy
Bipartisan Policy Center

cc: The Honorable Jason Smith, Chairman, House Committee on Ways and Means

The Honorable Richard Neal, Ranking Member, House Committee on Ways and Means

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[i] Andrew Lautz, “How Does U.S. Tax Policy Affect Our National Competitiveness Strategy?” Bipartisan Policy Center, June 26, 2023. Available at: https://bipartisanpolicy.org/blog/tax-policy-national-competitiveness-strategy/.

[ii] Bipartisan Policy Center, “Coming Together to Support Workers and Families: A Pragmatic Agenda for the New Congress,” December 11, 2020. Available at: https://bipartisanpolicy.org/report/2021-pragmatic-agenda/; Dane Stangler and Michelle Kumar, “From Pandemic to Prosperity,” Bipartisan Policy Center, March 14, 2022. Available at: https://bipartisanpolicy.org/report/from-pandemic-to-prosperity/; Linda Smith, Caroline Osborn, and Brittany Walsh, “The Employer-Provided Child Tax Credit (45F),” Bipartisan Policy Center, November 2022. Available at: https://bipartisanpolicy.org/download/?file=/wp-content/uploads/2022/11/WEB_BPC_ECI-45F-Explainer_R01.pdf.

[iii] JCT, “List Of Expiring Federal Tax Provisions 2022 – 2034,” January 18, 2023. Available at: https://www.jct.gov/publications/2023/jcx-1-23/.

[iv] Andrew Lautz, “Congress Eyes Tax Changes in 2023. Is a Bipartisan Deal Possible?” Bipartisan Policy Center, July 28, 2023. Available at: https://bipartisanpolicy.org/blog/tax-changes-2023-bipartisan-deal-possible/.

[v] Congress.gov, “H.R.2673 – American Innovation and R&D Competitiveness Act of 2023,” Introduced April 18, 2023. Available at: https://www.congress.gov/bill/118th-congress/house-bill/2673; Congress.gov, “S.866 – American Innovation and Jobs Act,” Introduced March 16, 2023. Available at: https://www.congress.gov/bill/118th-congress/senate-bill/866.

[vi] JCT, “Macroeconomic Analysis Of H.R. 3938 The “Build It In America Act,” As Ordered To Be Reported By The Committee On Ways And Means, On June 13, 2023,” July 11, 2023. Available at: https://www.jct.gov/publications/2023/jcx-34-23/.

[vii] Jack McGee, “Research and Development Expensing: Impacts of Recent Changes on Energy Innovation,” Bipartisan Policy Center, November 14, 2023. Available at: https://bipartisanpolicy.org/blog/research-and-development-expensing-impacts-of-recent-changes-on-energy-innovation/.

[viii] Emily Wielk, Andrew Lautz, and Rachel Snyderman, “Assessing the Potential Employment and Poverty-Reduction Effects of an Expanded Child Tax Credit,” Bipartisan Policy Center, September 21, 2023. Available at: https://bipartisanpolicy.org/report/employment-poverty-reduction-effects-ctc/.

[ix] Francis Torres, “Preserving Long-Term Affordability in LIHTC Housing,” Bipartisan Policy Center, May 17, 2023. Available at: https://bipartisanpolicy.org/blog/preserving-lihtc-housing/.

[x] Congress.gov, “S.1557 – Affordable Housing Credit Improvement Act of 2023,” Introduced May 11, 2023. Available at: https://www.congress.gov/bill/118th-congress/senate-bill/1557. Congress.gov, “H.R. 3238 – Affordable Housing Credit Improvement Act of 2023,” Introduced May 11, 2023. Available at: https://www.congress.gov/bill/118th-congress/house-bill/3238.

[xi] Bipartisan Policy Center, “Restoring America’s Future: The Domenici-Rivlin Debt Reduction Task Force Report,” November 17, 2010. Available at: https://bipartisanpolicy.org/report/restoring-americas-future/; Bipartisan Policy Center, “Domenici-Rivlin Debt Reduction Task Force Plan 2.0,” December 3, 2012. Available at: https://bipartisanpolicy.org/report/domenici-rivlin-debt-reduction-task-force-plan-20/.

[xii] Committee for a Responsible Federal Budget, “Budget Offsets Bank.” Available at: https://www.crfb.org/budget-offsets-bank.

[xiii] Congressional Budget Office, “Budget Options,” December 2022. Available at: https://www.cbo.gov/budget-options.

[xiv] Margot L. Crandall-Hollick, Donald J. Marples, Brendan McDermott, “Reference Table: Expiring Provisions in the “Tax Cuts and Jobs Act” (TCJA, P.L. 115-97),” Congressional Research Service, November 21, 2023. Available at: https://crsreports.congress.gov/product/pdf/R/R47846.

[xv] Linda Smith and Caroline Osborn, “Interactions between the CDCTC, DCAP, and 45F,” Bipartisan Policy Center, July 12, 2023. Available at: https://bipartisanpolicy.org/download/?file=/wp-content/uploads/2023/07/BPC_Child-Care-Tax-Credits-Interactions.pdf.

[xvi] Emily Wielk, “Supporting Working Families Through the Tax Code,” April 6, 2023. Available at: https://bipartisanpolicy.org/blog/supporting-working-families/.

[xvii] U.S. Treasury Department, “Debt to the Penny,” November 28, 2023. Available at: https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny.

[xviii] Bipartisan Policy Center, “Inflation Reduction Act (IRA) Summary: Energy and Climate Provisions,” Available at: https://bipartisanpolicy.org/blog/inflation-reduction-act-summary-energy-climate-provisions/.

[xix] Andrew Lautz, “Pillar 1 and Pillar 2 – Risks and Opportunities the Global Corporate Tax Agreement Poses for Competitiveness,” July 18, 2023, Available at: https://bipartisanpolicy.org/blog/pillar-1-pillar-2-risks-opportunities-global-corporate-tax-agreement-competitiveness/.