WASHINGTON—House Republicans advanced a measure to lock in last year’s tax cuts on individuals beyond their scheduled expiration date at the end of 2025, moving to build on their biggest legislative victory ahead of the midterm elections.
The Ways and Means Committee voted 21-15 Thursday along party lines, after lawmakers debated whether last year’s tax cut has helped the country and considered the consequences of adding further to federal budget deficits. The full House plans to vote by the end of the month, though the lack of interest in the Senate means the bill’s fate is uncertain.
Republicans say the 2017 tax law is spurring economic growth and that the extension would offer certainty to businesses and households and put money into families’ pockets.
“The economic recovery that passed over so many individuals and families in our country is now reaching them,” said Rep. Carlos Curbelo (R., Fla.). The tax law is “certainly a part of the story, and anyone who fails to recognize that is just not sharing a complete picture of what’s happening.”
Democrats said some of their constituents would pay more in taxes, highlighted sluggish growth in real wages and warned that Republicans would use growing deficits as a reason to argue for future cuts in Medicare, Social Security and other programs.
“We have something that is truly disastrous headed our way and it’s not just a hurricane,” said Rep. Lloyd Doggett (D., Texas). “It is a deficit-busting tax giveaway.”
The bill would remove the 2025 expiration date from the individual tax cuts that Republicans enacted last year. The larger standard deduction, expanded child tax credit and lower tax rates that took effect this year would continue beyond that point.
So would the shrunken alternative minimum tax and estate tax and the new deduction for businesses such as partnerships that report their earnings on their owners’ individual tax returns. Limits on tax breaks would get extended, too, including the $10,000 cap on the deduction of state and local taxes and the repeal of the deduction for personal exemptions.
“We must keep building off the momentum from last year’s tax reform to ensure our economy keeps booming,” said Rep. Kevin Brady (R., Texas), the committee’s chairman.
Republicans turned aside Democrats’ amendments to restore the state-and-local tax deduction and expand or extend deductions for medical expenses and casualty losses.
On top of last year’s $1.5 trillion tax cut, the new proposal would reduce federal revenue by $631 billion over the next decade, according to the nonpartisan Joint Committee on Taxation. Most of that cost is packed into the end of the decade, and the cost beyond that would be much larger.
Lawmakers sparred Thursday over who would benefit the most.
Republicans pointed to data showing that middle-income families would see the biggest decrease in their federal tax bills on a percentage basis. Households making between $40,000 and $50,000 would get an 8.1% tax cut in 2026, according to the Joint Committee on Taxation.
Democrats focused on where the bulk of the tax cut goes—to high-income households. Taxpayers making more than $200,000 would get 44% of the benefits, according to the same analysis.
“The sequel is just more of the same failed trickle-down economics,” said Rep. Bill Pascrell (D., N.J.), comparing the bill to the critically panned 1987 movie “Jaws: The Revenge.”
To assess the effects of tax legislation, many experts favor measuring the size of a tax cut as a share of after-tax income. By that metric, households in the 95th through 99th percentile of income would get the biggest benefit, seeing their taxes drop by 3.3% of income, according to the Tax Policy Center, a research group run by a former Obama administration official. That is more than double the benefit for households in the middle of the income distribution.
Last year’s tax law included the expiration dates because of the way Republicans passed it. They used a fast-track process known as reconciliation, which let them enact the tax law without Democratic votes in the Senate. But it came with restrictions, including a requirement that it not increase budget deficits beyond 2027, which led them to include the expiration of the individual tax cuts.
Republicans did make a corporate-tax cut permanent, and they enacted revenue-raising provisions to remove the penalty for not purchasing health insurance and change the inflation metric for tax-code provisions.
Any move now to get rid of the individual expiration would require 60 votes in the Senate and thus Democratic support, and Republican leaders have shown little interest in holding a vote.
The committee also voted 21-14 on Thursday to approve a separate bill designed to make it less costly for small businesses to offer 401(k)-type plans and allow individuals to save more and make their savings last longer.
For example, the bill would eliminate the required minimum distributions that individuals age 70½ or older must take from their IRAs and 401(k)-type accounts—although the provision would only apply to those with a cumulative balance of up to $50,000. It would also allow individuals to contribute as much as $2,500 a year of after-tax money into a new type of universal savings account, where the money would grow tax-free and could be used for nonretirement purposes.
A third bill approved Thursday would expand tax breaks for startup businesses.
—Anne Tergesen contributed to this article.
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