House-passed tax bill heads into Senate GOP buzzsaw

A bipartisan tax relief bill that passed with an overwhelming majority in the House is headed for a buzzsaw in the Senate, where Republicans are threatening to block it.

Senate Republicans are angry they were cut out of negotiations between Senate Finance Committee Chair Ron Wyden (D-Ore.) and House Ways and Means Committee Chair Jason Smith (R-Mo.).

They say the bill would make the child tax credit (CTC) available to tens of thousands of migrants who are being paroled into the country by the Biden administration.

They argue most of the benefits delivered through the expanded child tax credit would take the form of cash welfare, instead of tax relief for working families, undermining the welfare reforms enacted in the mid-’90s.

And they say it could add nearly $400 billion to the federal deficit over the next decade.

“Most of the problems that have been identified from our standpoint have been on the [child tax credit side],” Senate Republican Whip John Thune (S.D.) said. “There’s a significant expansion of some of the provisions, including delinking the CTC from the work requirement, which gives a lot of our folks heartburn.”

Thune said the bill “should go through the Finance Committee” or there should be an open amendment process on the floor to allow Republicans a chance to change the bill.

He said the legislation won’t get the 60 votes it needs to advance on the floor if Senate Majority Leader Chuck Schumer (D-N.Y.) blocks Republicans from a chance to offer and vote on amendments to the bill.

“We need a process that allows for some amendments to try to tweak and fix some of the issues,” he said.

Without amendments, Thune warned Schumer “won’t get 60 on that.”

Thune’s comments poured cold water on the prospect of the Senate quickly passing the House legislation, known as the Tax Relief for American Families and Workers Act.

The House passed the $78 billion tax package overwhelmingly, 357-70, Wednesday evening.

The stiff opposition from Senate Republicans sets the stage for another major policy clash with Speaker Mike Johnson (R-La.), who praised the legislation as “important bipartisan legislation to revive conservative pro-growth tax reform.”

Sen. Thom Tillis (R-N.C.), a member of the Senate Finance Committee, said he found it ironic that House Republicans voted for a bill that would pay benefits to hundreds of thousands of migrants being paroled into the country.

He noted that at the same time, House GOP leaders are threatening to defeat a Senate border security deal that would halve the number of migrants entering the country.

“I have been convinced that we will have significant numbers of checks going to families with children who are illegally present,” he said. “Why that would be lost on Republicans in the House [is] just shocking.”

Tillis argued that blocking the Senate border deal will wind up “increasing the base of people” who have entered the country illegally who would be eligible for the expanded child tax credit.

“It makes no sense to me,” he said. “I don’t know why we would do it now.”

Tillis also criticized the pay-for that negotiators used to get a favorable score from the Joint Committee on Taxation, which judged it won’t add substantially to the federal debt.

“It’s a fake pay-for,” he said of the proposal to crack down on fraudulent payments of the COVID-era employee retention tax credit.

The Congressional Budget Office estimates the bill would add $44.7 billion to the federal deficit from 2024 to 2028 and $399 billion to the deficit from 2024 to 2033.

Sen. Mitt Romney (R-Utah) raised alarm over the fiscal impact of the bill.

“If you look over a long period of time, it’s very, very expensive. I would far rather see the child tax credit paid for,” he said. “Adding more and more spending is getting us deeper and deeper into a hole that’s going to be hard to ever get out of.”

Wyden, who negotiated the bill with his House Republican counterpart during the second half of 2023, pushed back on some Republican criticisms.

He argued the language expanding the child tax credit is largely the same as what was included in then-President Trump’s 2017 Tax Cuts and Jobs Act.

“The language here is exactly the language that was the law six years ago with the Trump tax bill,” he said. “Lots of Republicans voted for it.”

He said the big bipartisan vote for the bill in the House “changes the complexion of the debate, because it’s been a long time since there’s been a bipartisan tax bill around here.”

He also pushed back on the criticism of the Joint Committee on Taxation’s (JCT) estimate that it won’t add much to the deficit.

“We’re using official scores from the Joint Committee on Taxation. Everybody is speculating, ‘The 10-year cost is this.’ I said, ‘Come on. This is a three-year bill,’” he said, noting that the official JCT score estimates that the benefits of the legislation are divided roughly equally between families and businesses.

Sen. Mike Crapo (Idaho), the top-ranking Republican on the Finance Committee, who was left out of the negotiations, is not on board with the bill, Senate GOP sources say.

He said he’s aware that Republican colleagues are upset at the prospect of the child tax credit going to the children of paroled migrants but said he’s more focused on the absence of a strong work requirement.

“I’ve made it clear that I have concerns with the watering down of the work requirement,” he said.

And he doesn’t support requiring a pay-for to offset the cost of business tax breaks — even though fellow Republican critics argue it’s just a gimmick.

“I don’t believe pro-growth tax policies should be subject to offsets. We’ve never done that,” he said.

Senate Republican staff informed a senior aide to House Majority Leader Steve Scalise (R-La.) in a meeting last week that many Senate Republicans viewed the House bill as “trash,” according to a GOP aide familiar with the discussion.

The aide cited the lack of a work requirement for the child tax credit, the availability of the child tax credit to migrants being paroled into the country and the political boost it would give President Biden before the election.

The aide noted that then-Speaker Nancy Pelosi (D-Calif.) blocked a stimulus bill that Republicans tried to pass to help then-President Trump’s reelection bid in 2020.

Pelosi at the time argued that the $300 billion economic relief bill that Senate Republicans wanted to pass would not address the needs of her constituents.

A spokesperson for Pelosi rejected the GOP aide’s characterization as “false” and pointed out the House passed the HEROES Act in May of 2020 to help the economy. The spokesperson said that in contrast to the much smaller Senate GOP-favored proposal, the House bill would have fully met the needs of people suffering during the pandemic.

Some Senate Republicans are also criticizing the bill for being overly generous to huge companies that rely on debt financing to run their operations, such as Anheuser-Busch, Apple, Ford, AT&T, and Verizon, to name a few examples.  

The legislation would increase the interest-deduction limitation, which some Republican critics argue would serve as a disincentive for big companies to raise capital in the equity markets.

Updated at 1:51 p.m.