Senate Republicans Block Tax Credit Expansion, Democrats Claim Political Motive to Deny Biden Victory

Senate Democrats accuse Senate Republicans of blocking an expansion of the child tax credit and a corporate tax credits package, despite significant support from business groups, to prevent President Biden from securing a legislative win five months before Election Day.

This marks the second instance this year where presidential politics have caused a divide between Senate Republicans and major business trade groups like the U.S. Chamber of Commerce and the Business Roundtable.

Earlier this year, Senate Republicans overwhelmingly voted against a bipartisan border security deal endorsed by the U.S. Chamber of Commerce and the Business Roundtable, among others, following former President Trump’s instructions to avoid giving Biden a victory on border security.

Democrats allege Republicans are once again obstructing a major bipartisan initiative to aid Trump. “The business community still really wants that; we really want it. It’s all presidential politics — they don’t want to give Biden a win. That’s 100 percent what it is,” stated a senior Senate Democrat regarding the opposition to the House-passed Tax Relief for American Families and Workers Act of 2024.

The senator noted that Senate Democrats are intensifying efforts to break through the Republican blockade. “We are trying very hard. There’s no real reason they’re objecting,” the source said.

The proposed package aims to reinstate research and development expensing for businesses, which expired in 2022. The U.S. Chamber of Commerce has urged the Senate to approve the package, warning that failing to restore research and development expensing retroactively would cause “irreversible harm to U.S. innovation and competitiveness.”

The Business Roundtable has also pushed for the Senate to pass the legislation. Joshua Bolten, the CEO of the Business Roundtable, emphasized that it would “boost business investment at home, create American jobs and strengthen U.S. competitiveness.”

The bill also enhances the child tax credit to help low-income families manage inflation and increases tax relief for victims of disasters like the 2023 toxic rail derailment in East Palestine, Ohio.

Senate Finance Committee Chair Ron Wyden (D-Ore.) supports his colleagues’ view that Senate Republicans are blocking the tax package to boost Trump’s prospects by denying Biden a legislative success. “No question about it. They said that right from the get-go,” Wyden told The Hill.

Sen. Chuck Grassley (Iowa), a senior Republican on the Senate Finance Committee, previously indicated that Senate Republicans did not want to help Biden “look good” and improve his reelection chances. He expressed concerns that Biden’s reelection would eliminate any possibility of renewing Trump’s 2017 tax cuts before they expire at the end of next year. “Passing a tax bill that makes the president look good, mailing out checks before the election, means he could be reelected and then we won’t extend the 2017 tax cuts,” Grassley told Semafor on the day the House passed the tax bill.

For Democrats, this situation mirrors the fate of the bipartisan border security deal negotiated by Sens. Chris Murphy (D-Conn.), Kyrsten Sinema (I-Ariz.), James Lankford (R-Okla.), and the White House. Only four Senate Republicans supported the deal after Trump advised his Senate allies to reject it to deny Biden a victory.

Wyden crafted the stalled $79 billion tax package with House Ways and Means Committee Chair Jason Smith (R-Mo.), and it passed the House with overwhelming support, 357-70. The package would restore Section 174 expensing for research and development investments and 100 percent “bonus” depreciation, allowing businesses to deduct more depreciation costs than normally allowed. It also includes a low-income housing tax credit to increase affordable housing supply.

The package is nearly fully funded by advancing the deadline for filing backdated pandemic-related employee retention tax credit claims, according to a PwC analysis.

Amanda Critchfield, spokesperson for Sen. Mike Crapo (Idaho), the top-ranking Republican on the Finance Committee, said her boss “fully supports extending the pro-growth business provisions” and “also supports expanding the child tax credit to provide additional tax relief to working families.” However, she noted that Crapo “has policy concerns with the current bill, as do other Republican members, and he has been clear that he would like to find a compromise that a majority of Republican senators can support.”

A tax lobbyist familiar with the bill’s passage efforts said the business community has intensified its lobbying efforts towards Senate Republicans. “The Chamber and other business groups are very firmly for it, and they are making the rounds,” the source said. “The business community has upped its effort, and they’re saying because of the expiration of 174 and expensing, we really do have tangible economic harm. Companies are doing grasstops lobbying at home, and that’s starting to sink in. The business community is upping the ante,” the source added.

Watson McLeish, senior vice president for tax policy at the U.S. Chamber, warned in a statement on Monday that the Senate’s failure to advance the tax package is burdening employers. “As the tax extenders package remains stalled in the Senate, some small and midsize businesses have been forced to take out high-interest loans, raise prices, pare back operations, and even cut jobs just to survive and pay their taxes,” McLeish said. “We urge the Senate to take up this legislation immediately after the Independence Day recess and send it to the President’s desk to be signed into law.”

A Senate Republican aide mentioned that Senate GOP leaders are deferring to Crapo on handling the issue and pointed out that he might prefer to delay action on expired tax breaks until after the election, by which time Republicans will know if they will control the Senate in 2025. Some Republican senators believe they will secure a better deal on extending expired provisions if they control the White House and Senate, though waiting until after the election carries the risk that Democrats could retain the White House and regain control of the House.

Senate Majority Leader Chuck Schumer (D-N.Y.) told reporters earlier this month he hopes to bring the bill to the floor if it garners more Republican support. “I supported it the minute it was announced. I think it’s a good bill; I was very proud that I pushed hard and got into the bill the low-income housing tax credit,” Schumer said last week. “I’m currently working with Chairman Wyden to try and get something done. It’s not dead.”