A bipartisan bill to slash taxes for businesses and enhance the child tax credit is one step closer to becoming law.
The legislation passed the House on Wednesday evening by an overwhelming 357-70 vote, with Republicans backing the bill by 169-47 and Democrats by 188-23.
The vote gave House Speaker Mike Johnson a much-needed win but underscores his struggles with a divided Republican Party. It now heads to the Democratic-run Senate, where its prospects are less certain.
The bill would expand the child tax credit for lower-income families and reinstate expired credits for corporations from the 2017 Trump tax cuts. The bill is retroactive and would apply for three tax years: 2023, 2024 and 2025.
“Parents and Main Street communities across this country will see lower taxes, more opportunity, and greater financial security after we pass this legislation,” said House Ways and Means Committee Chairman Jason Smith, a Missouri Republican who brokered the bipartisan deal.
Despite the broad bipartisan support in the House, the bill’s passage wasn’t without hiccups.
To avoid GOP amendments that could sink the bill, Mr. Johnson, Louisiana Republican, used a maneuver that requires a two-thirds majority to pass.
He also had to cut a side deal with four New York Republicans who threatened to jam the chamber on other unrelated votes because the bill didn’t increase federal deductions for state and local taxes (SALT) that would deliver big savings to residents in high-tax blue states.
The speaker committed to the New Yorkers, who are in swing districts, to work with them on changing SALT but in separate legislation.
The SALT-cap opponents want to nix the “marriage penalty” by raising SALT deductions for married couples from $10,000 to $20,000 and leaving the individual $10,000 deduction unchanged.
SALT caps were imposed under the Trump tax cuts.
“To not include a SALT fix is idiotic, and it’s political malpractice,” said Rep. Mike Lawler, a Republican from a New York swing district. He said denying him a win on SALT would risk his reelection and Republicans holding the majority.
“It’s an issue that matters to districts like mine, which is the reason Jason Smith even has a gavel. If Jason Smith would prefer to be a ranking member, then by all means knock yourself out,” he said.
Meanwhile, the Freedom Caucus disliked the child tax credits, which for most families would increase by $100 from the annual $2,000 per child. Those with lower incomes who have little or no tax liabilities would also for the first time receive the full amount of the credit as a cash payment.
Progressives said the child tax credit was not boosted enough and said the bill gave Republicans too many concessions on Trump-era cuts.
The business tax provisions would allow corporations to immediately expense research and development investments, full expensing of new equipment and technology, and easing restrictions on interest expense deductions.
The bill’s fate is by no means a slam dunk in the Senate, which will need bipartisan support to clear the 60-vote filibuster threshold.
Senate Majority Leader Charles E. Schumer, New York Democrat, gave it his seal of approval Wednesday but declined to offer a timeline for the vote.
He said he too opposes a SALT cap and said it’s been “detrimental to my state and many blue states” that have high property taxes.
“We’re going to figure out the best way to undo it,” Mr. Schumer said.
An array of Senate Republicans have expressed reservations about the costs of the bill and lack of input from members. They questioned whether the elimination of the pandemic-era employee retention tax credit would offset the costs and feared that illegal immigrants would be able to receive the child tax credit.
“I’m just not going to make it easy,” said Sen. Thom Tillis of North Carolina, who is a member of the GOP leadership team. “It’s amazing to me that we have Republican members who are voting on something that would without question provide child subsidies to illegally present people.”
Sen. John Cornyn, Texas Republican, described the tax bill as “just an agreement between two guys,” referring to Mr. Smith, the House Ways and Means chairman, and Senate Finance Committee Chairman Ron Wyden, Oregon Democrat.