Lawmakers unveil bipartisan tax framework

Key Takeaways

On January 16, U.S. Senate Finance Committee Chair Ron Wyden (D-Ore.) and U.S. House Ways and Means Committee Chair Jason Smith (R-Mo.) unveiled a bipartisan tax framework after months of negotiations. The plan, which will be introduced as The Tax Relief for American Families and Workers Act of 2024, includes roughly $80 billion in provisions expanding the Child Tax Credit (CTC), affordable housing subsidies, and tax breaks for business and research and development, among others. After offsets from reductions to the Employee Retention Credit, a pandemic-era relief program, the deal is estimated to be revenue neutral over ten years. Highlights for counties include:

• Modest CTC expansion: the package would make incremental changes to the CTC for the 2023, 2024 and 2025 tax years to expand access for low-income families, especially those with multiple children. The total value of the CTC would also be indexed to inflation in tax years 2024 and 2025. While these provisions fall short of the major temporary expansion previously authorized under the American Rescue Plan Act, they are projected to increase resources for an estimated 15 million children and lift an additional 400,000 children out of poverty. As key partners in efforts to combat intergenerational poverty, counties support structural changes to the CTC to increase the number of eligible households and provide higher benefit amounts.
• Incremental LIHTC enhancements: the package would make two modest changes to the Low-Income Housing Tax Credit (LIHTC), including the restoration of the 12.5 percent cap increase, up from nine percent, for calendar years 2023 through 2025. The other change would lower the bond-financing threshold from 50 percent of the aggregate basis of the building and land to 30 percent for projects financed by bonds. While these provisions fall short of those included in the NACo-supported Affordable Housing Credit Improvement Act, they are projected to support the construction of more than 200,000 affordable homes. As key partners in addressing our nation's growing housing affordability and inventory crisis, counties support further enhancements to the LIHTC to strengthen our nation's most successful tool for encouraging private investment in the development and preservation of affordable housing.
• No SALT cap relief: notably, the package would not provide relief from the $10,000 cap on the state and local tax (SALT) deduction established by the Tax Cuts and Jobs Act of 2017 (P.L. 115-97). The SALT cap limits taxpayers' ability to deduct mandatory state and local property, sales and income taxes from their federal tax payments and limits control of state and local tax systems. State and local taxes finance critical infrastructure and key county services and as such counties support the deductibility of state and local taxes and urge Congress to provide relief from the $10,000 cap on the SALT deduction.

Legislative Outlook: Sen. Wyden and Rep. Smith have yet to announce their plan for moving this tax package through Congress. While the lawmakers have indicated their goal to pass the legislation prior to the beginning of tax-filing season on January 29, Congress must also focus on funding the government for Fiscal Year (FY) 2024. NACo will continue to monitor action on a tax package and advocate for its inclusion of key county priorities.