Economy

Congress Poised To Eliminate Key Tax Breaks For Middle Class, Provide Permanent Tax Breaks For Corporations

CREDIT: Shutterstock

Senate Majority Leader Harry Reid (D-NV) has reached a compromise with House Republicans on a package of tax breaks that would permanently extend relief for big multinational corporations without providing breaks for middle or lower-income families, individuals with knowledge of the deal tell ThinkProgress.

Under the terms of the $444 billion agreement, lawmakers would phase out all tax breaks for clean energy and wind energy but would maintain fossil fuel subsidies. Expanded eligibility for the Earned Income Tax Credit and the Child Tax Credit would also end in 2017, even though the Center for Budget and Policy Priorities estimates that allowing the provisions to expire would push “16 million people in low-income working families, including 8 million children into — or deeper into — poverty.” The proposal would help students pay for college by making permanent the American Permanent Opportunity Tax Credit, a Democratic priority.

Meanwhile, two-thirds of the package would make permanent tax provisions that are intended to help businesses, including a research and development credit, small business expensing, and a reduction in the S-Corp recognition period for built-in gains tax.

The costs of the package will not be offset.

“This Congress seems willing to give huge tax cuts to big businesses—who are already doing better than ever—but somehow can’t prevent tax increases on 50 million working Americans that will occur when expansions of the Earned Income Tax Credit and Child Tax Credit expire,” Harry Stein, the Associate Director for Fiscal Policy at American Progress Action Fund, told ThinkProgress. “This is a great deal for CEOs and a terrible deal for struggling families.”

On Monday, Treasury Secretary Jack Lew also blasted the emerging agreement as “fiscally irresponsible” and doing “very little for working families.” He said, “Any deal on tax extenders must ensure that the economic benefits are broadly shared. We are committed to working with Congress to address the issue in a manner that is fiscally responsible and extends critical tax benefits for working families.”

In April, the Senate Finance Committee extended most of the 56 expiring tax provisions through 2015, while the House voted to make permanent breaks that primarily benefit businesses.

Congress is expected to vote on the package next week.

UPDATE

The Wall Street Journal’s Damien Paletta reported on Twitter that the deal was falling apart and that a White House spokesperson said President Obama would veto it anyway. Sen. Reid’s office also contacted ThinkProgress and denied it “signed off” on any deal without commenting on the specifics of the story.

Share Update
UPDATE

A White House spokesperson has issued a statement saying that the president would veto this deal. Negotiations between the two parties are still ongoing.

Share Update