SO NOW WHAT? Friday’s committee vote suggests that the tax deal would sail through the full House, even under a procedure used for less controversial measures that requires a two-thirds majority for passage. So far, the GOP lawmakers who have caused trouble for Johnson on spending issues haven’t said much of anything about this tax deal — perhaps another illustration that it’s not at the top of the list of concerns for many members not on the tax-writing committees. But there is still plenty of time for those more hardline Republican members to make more of a stink about this tax agreement, which would pair that more generous Child Tax Credit with several expanded tax breaks for business. Certainly, some prominent people on the right, from Senate GOP tax writers to American Enterprise Institute scholars to The Wall Street Journal editorial page, have been skeptical of this deal — arguing, among other things, that the child credit expansion could incentivize parents to drop out of the workforce. The tax deal is basically fully paid for over a decade, with its $78 billion in new tax benefits offset by new restrictions on the pandemic-era Employee Retention Credit. But for the more deficit-minded lawmakers, the agreement would increase the deficit in the first year, as Donald Schneider of Piper Sandler pointed out — because a lot of those benefits, including some retroactive tax breaks for business, would be shoveled out more quickly than the revenue-raising changes. So there are definitely arguments against this tax deal that House Freedom Caucus members might make, in a way that could make Johnson question whether to move forward with a vote. They just haven’t made them, at least yet. Looking even further ahead: In the end, House Democratic tax writers fell in line with the agreement between Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means Chair Jason Smith (R-Mo.), even though they weren’t particularly impressed by it. Still a decent-sized if here, but Senate GOP tax writers will face similar pressure to support a deal they’ve got issues with if the House does end up passing it. And looking even beyond that: Wyden jumpstarted this process two weeks ago, when he said that he wanted a tax deal enacted by Jan. 29 — the start of the tax filing season — to allow people to claim new child credit benefits practically at once. Clearly, that’s not going to happen now, with the House able to pass the bill next week at the earliest. But interestingly enough, the latest version of the tax bill has a provision that would allow the Treasury to amend returns on its own to increase child credit benefits, so that taxpayers wouldn’t have to do that themselves. THE FUNDING DEBATE: The House and the Senate both passed a short-term spending punt last week, giving appropriators until early March to flesh out the bipartisan spending deal agreed to as the year got underway. That agreement, as you’ll recall, accelerated IRS spending cuts that President Joe Biden and then-House Speaker Kevin McCarthy agreed to last year as part of an agreement to raise the debt ceiling. The newest spending accord would pull back $20 billion in IRS funding in fiscal 2024, out of the $80 billion that the agency received from the Democrats' tax-and-climate bill in 2022. (Biden and McCarthy’s original agreement called for those cuts to be spread out over two years.) Now, progressive activists are pressing Democrats not to move forward with those agreed-to cuts at all. “As budget negotiations continue, lawmakers must stop using the IRS as a piggy bank and ensure that the agency is able to crack down on the ultra-wealthy and corporations that do not pay their fair share,” said Igor Volsky of Groundwork Action. A MINORITY POINT OF VIEW: One of the big questions about the big tax negotiation of 2025, perhaps somewhat counterintuitively, is how narrow it might be. That’s because Republicans largely want to preserve all of the individual provisions from their 2017 tax law, while President Joe Biden repeatedly has vowed not to raise taxes on any households making less than $400,000 a year. Other Democrats haven’t really pushed to dissuade the White House from that position, though it’s clearly also quite possible that Donald Trump will be in the Oval Office for those 2025 talks. In any event, Ben Ritz of the Progressive Policy Institute is out with a new paper arguing that Democrats should get rid of that pledge, even if it means that more middle-income people pay more in taxes. There are fiscal reasons for that, according to Ritz, who argues that deficits currently at an unsustainable path, with long-term mismatches between spending and revenues that will require higher taxes on more than just the wealthiest. But it’s not just a numbers issue either, Ritz maintains — a government where the very few end up providing the money to pay for a wide range of services just won’t work over the long haul, because those who aren’t providing the resources won’t care enough about whether those services are needed or well run. “Pragmatic progressives must pressure the Biden administration to soften the president’s misguided tax pledge heading into a potential second term. They must start making the case to voters why progressive programs are worth paying for,” Ritz writes. TIME TO EXIT: Lily Batchelder is leaving her position as Treasury’s assistant secretary for tax policy after more than two years on the job. Batchelder will be returning to New York University, where she was a law professor before joining the Biden administration. Before that, she was also a tax aide to both the Obama White House and Democrats on the Senate Finance Committee. Batchelder will be leaving government as the Treasury Department continues to work through a range of key regulatory issues, many of them stemming from the Inflation Reduction Act that Democrats passed in 2022.
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