Lawmakers Strike Tax Deal, but It Faces Long Election-Year Odds in Congress

Top Democrats and Republicans in Congress on Tuesday released a $78 billion compromise they have reached to expand the child tax credit and restore three popular expired business tax breaks, but the package faces a challenging road to enactment in an election year.

The plan includes $33 billion to partly extend a major expansion of the child tax credit that was initially beefed up for one year as part of the sweeping 2021 pandemic aid law, and another $33 billion to reinstate a set of expired business tax benefits related to research, business and capital deductions. Both would last through 2025.

It would also include an increase of a tax credit to encourage the development of low-income housing, tax relief for disaster victims and tax breaks for Taiwanese workers and companies operating in the United States. The package would be financed by reining in the employee retention tax credit, a pandemic-era program to encourage employers to keep workers on payroll that has become a hotbed of abuse.

The deal represents a rare bipartisan agreement spanning both chambers, brokered by the two top tax-writers in Congress: Representative Jason Smith, Republican of Missouri and the chairman of the Ways and Means Committee, and Senator Ron Wyden, Democrat of Oregon and the chairman of the Finance Committee. They have led an intensive round of discussions aimed at striking a compromise and pushing it into law in time for the start of tax filing season this month.