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US Lawmakers Debate $70 Billion in Tax Breaks for Businesses, Families

Congress

U.S. lawmakers are engaged in discussions over a potential deal that could provide $70 billion worth of tax breaks for businesses and families. 

The proposal, which includes renewing expired business tax breaks and boosting the child tax credit, has the potential to provide an unexpected fiscal boost to the U.S. economy, Bloomberg reported Sunday (Jan. 14). 

However, the passage of the proposal is not assured, as Republicans and Democrats continue to negotiate amidst a deeply divided Congress, according to the report. 

If the proposed tax breaks are passed, they could provide a double-edged sword for the economy, the report said. On one hand, the additional cash would boost consumer spending, providing a potential stimulus to economic growth. However, economists have noted that this could also reignite inflation pressures, complicating the Federal Reserve’s ability to lower interest rates this year. 

The final details of the agreement and how the tax breaks will be structured will play a crucial role in determining their impact on the economy, per the report. 

While the tax breaks have the potential to provide a boost to the economy, some analysts say that they may not encourage additional corporate investment, according to the report.

The proposed deal includes reviving tax breaks for research and development (R&D) spending, boosting the deductibility of investment in equipment, and business loans. However, concerns have been raised that the fiscal cost of these measures may not generate significant new investment, particularly at a time when inflation pressures are still present. 

The proposed tax breaks could prove to be a political win for President Joe Biden, whose poll numbers have been affected by voter anxiety over the economy, the report said. The boost of the child tax credit, in particular, has been emphasized as a powerful tool in reducing child poverty. 

However, there are ongoing debates among lawmakers over the details of the proposal, including the state-and-local tax deduction cap, the low-income housing tax credit and the child tax credit itself, per the report. 

The restoration of the child tax credit would add more cash to the pockets of parents at a time when PYMNTS Intelligence has found that 66% of households with children are living paycheck to paycheck. 

About 44% of those with children under 18 in the household are living paycheck to paycheck without issues paying bills, while about 23% are living paycheck to paycheck with issues paying bills, according to “New Reality Check: The Paycheck-to-Paycheck Report: The Household Finances Deep Dive Edition,” a PYMNTS and LendingClub collaboration.