House Speaker Johnson must choose business or politics in $78B bill

House Speaker Mike Johnson is hesitating to schedule a vote on a $78 billion tax deal as he weighs opposition from within his own party, the latest indication of the growing divide between Republicans and the business interests the GOP once unflinchingly championed. 

The package of business breaks and an expanded child tax credit is under attack from former Vice President Mike Pence and other conservatives concerned the deal hands President Joe Biden an important election-year victory. 

They’re joined by moderates from New York and other high-tax states who want any agreement to raise the state and local tax deduction cap that is a key to their political survival in Biden-friendly districts. Johnson was set to talk by phone Thursday evening to a group of those moderates, multiple sources said.

Caught in the middle of this intra-GOP turmoil are corporations like Amazon.com and Boeing Co., which have made this a top lobbying priority, and low-wage families, who would benefit from bigger child credits. 

The House’s tax-writing panel resoundingly endorsed the legislation on a rare 40-3 vote last week, and it would likely get strong support from both parties on the floor. But the bill’s fate is in the hands of the speaker, whose job security and majority hinge on the party’s two flanks.

House leaders have teed the bill up for a possible vote next week under a procedure that would require a two-thirds majority to pass. Supporters aim to have the bill enacted early in the tax season that begins Jan. 29. 

“It looks like support is growing,” Senate Finance Committee Chairman Ron Wyden, an author of the bill, said Wednesday. “If you get a big vote on the floor, it seems to me that you change the discussion.” 

But Johnson continues to waffle, House aides said, even as a coalition of 250 business organizations makes a full-court press on the Hill and buys ad time. Their argument: research and development investment contracted for the second straight quarter late last year, the first time that has happened since 2010.

“We are pulling out all the stops,” said Charles Crain, senior director for tax and domestic policy at the National Association of Manufacturers. 

The Republican divisions aren’t just in the House. 

Senate Republican top tax-writer Mike Crapo says he’s “obviously” concerned about a provision of the child tax credit that allows some parents without income to claim the break if they earned at least $2,500 the previous year. Critics contend that some workers may quit their jobs in the second year knowing they can still receive the tax credit. 

Supporters point out Congress’s official scorekeeper said this week the bill would have negligible effects on the labor market because it’s so small.

Crapo said that if the House passes the bill he expects Senate Republicans to offer up to hundreds of amendments, tying up the chamber’s business. Texas Senator John Cornyn, a Republican, said he’d demand the Finance panel make changes. 

Their arguments are being fueled by Pence’s group Advancing American Freedom, which argues that the children of undocumented immigrants can get the child tax credit. The group has also said the bill would allow refundable credits beyond the value of total taxable income for more than one child. 

The bill’s supporters counter that the immigration provision was already part of the 2017 tax cut bill that President Donald Trump signed.  

“I’m not sure the victories for small businesses are worth the price,” said Senator Kevin Cramer, a North Dakota Republican. 

Democrats meanwhile have been falling into line behind the compromise, despite a failed attempt to make the child tax credits more generous. The White House backed the deal Friday, following support from Senate Majority Leader Chuck Schumer. 

Enactment of the tax breaks could boost the stocks of US companies with large capital and domestic research expenditures.

Boeing, General Motors Co., Deere & Co., Caterpillar Inc., Amazon, Microsoft Corp. and Apple Inc. are among the companies that stand to benefit, according to Bloomberg Intelligence.

The measure would restore expired tax breaks allowing businesses to more quickly recoup the costs of domestic research and development, loan interest and equipment purchases. The research tax break would be retroactive to the 2022 tax year, so manufacturers and technology companies would see a large immediate benefit from the change. The provision allowing same-year deductions for equipment purchases would benefit companies that are highly capital intensive.

The bill also includes a double taxation agreement with Taiwan, a provision that irks Beijing.