Mike Crapo deals major blow to deal on child tax credit, business tax cuts

The top Republican on the Senate‘s tax policy committee dug in Wednesday against a bipartisan tax deal, saying he has no intention of signing off on the House-passed measure without significant changes.

Sen. Mike Crapo of Idaho, the ranking Republican on the Finance Committee, slammed lobbying efforts aimed at him and his GOP colleagues as “counterproductive” to passing a nearly $80 billion package that would slash business taxes and expand the child tax credit.

“Efforts to pressure the Senate to ‘take it or leave it’ and categorically dismiss a Senate regular order process have only amplified calls for changes and amendments,” Mr. Crapo said in a statement. “This was the risk of announcing a deal without my support and with no near-term path forward in the Senate.”

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The House passed the bipartisan legislation — crafted by Senate Finance Chairman Ron Wyden, Oregon Democrat, and House Ways and Means Chairman Jason Smith, Missouri Republican — last month in a 357-70 vote.

“Notwithstanding my stated concerns, Chairman Wyden and Chairman Smith chose to move forward,” Mr. Crapo said.

The bill would expand the child tax credit for lower-income families and reinstate expired credits for corporations from the 2017 Trump tax cuts. It is retroactive and would apply for three tax years: 2023, 2024 and 2025.

Conservatives griped about the child tax credits while liberals assailed reviving Trump-era business cuts.

The child tax credit would increase by $100 from the annual $2,000 per child for most families. Those with lower incomes who have little or no tax liabilities would, for the first time, receive the full amount of the credit as a cash payment.

The business tax provisions would allow corporations to immediately expense research and development investments, fully expense new equipment and technology, and ease restrictions on interest expense deductions.

With the child tax credits, Mr. Crapo worried the changes could “undermine the work requirement and represent a significant shift” into a government subsidy. He cited a Joint Committee on Taxation analysis that more than 90% of the benefits would go to taxpayers who don’t owe federal income tax compared to the 10% who wouldn’t see the benefit until the 2026 tax filing season.

The measure includes a “lookback rule,” which Mr. Crapo demanded be changed. It allows families to use their prior-year earnings to qualify for the maximum credit if they are more than the family’s current-year earnings. The rule would not apply to tax year 2023.

Mr. Crapo suggested time was running out to make changes and pass retroactive tax laws.

“With each week that has passed, members have strongly voiced additional calls for numerous modifications, and there are also increasing concerns about making 2023 changes this far into the IRS tax filing season,” he said.

Mr. Wyden struck a more optimistic tune, citing recent favorable comments from key holdout Republicans, including Sens. Todd Young of Indiana and Steve Daines of Montana, who chairs the Senate GOP campaign arm.

But Senate Democrats likely still lack the votes to reach the 60-vote filibuster threshold.

Mr. Wyden emphasized the legislation needs to pass before the 2023 tax filing deadline on April 15 and expressed an unwillingness to make major changes, calling the deal a “balanced package.”

“I’ve been reading that there were negotiations that are taking place,” Mr. Wyden said. “If somebody knows where those negotiations are taking place, or the planet that they’re on, refer me to it, because I’m not up on that.”