Senate blocks bipartisan tax package

The Senate blocked a once-promising $78 billion tax package on Thursday in the chamber’s last vote before lawmakers headed out of Washington for August recess.

The bill went down in a vote of 44-48, with the vast majority of Republicans, one Democrat and two independent voting against a procedural motion to limit debate on the package, which includes an expansion of family tax credits and would revive a trio of lapsed business breaks. It would have required 60 votes in favor to succeed.

The vote came a full six months after the House passed the legislation by an overwhelming bipartisan vote of 357-70 — and greatly reduces any chance that Congress will put together any major tax legislation before lawmakers have to reckon with the expiration of the trillions of dollars of the Trump tax cuts in 2025.

It also came amid a heated national debate over family policy stoked by controversial comments that Sen. JD Vance (R-Ohio), Donald Trump’s vice presidential running mate, made in the past that denigrated Democrats who don't have children. Vance, who was absent for the vote on the legislation, has said his comments were taken out of context.

Though the vote will give Senate Democrats fodder in their campaigns to preserve their slim majority in the chamber, as Majority Leader Chuck Schumer suggested several times in his remarks leading up to the vote.

“Sixteen million kids will be worse off and half a million will remain in poverty because Senate Republicans decided they’d rather wait around and hope Trump wins in November than take a bipartisan victory today,” said Finance Chair Ron Wyden (D-Ore.), a prime negotiator of the package, in a statement after the vote.

Republicans derided Democrats in equal measure for their motives.

“With election politics front of mind, doomed-to-fail ‘show votes’ have become an all too frequent occurrence in this chamber,” said the Senate's top GOP tax writer, Mike Crapo of Idaho. “But there is no more obvious ‘show vote’ than the one scheduled to happen today, immediately before August recess.”

Three Republicans, Sens. Markwayne Mullin (R-Olka.), Rick Scott (R-Fla.) and Josh Hawley (R-Mo.), ended up voting for the procedural motion.

Meanwhile, Sens. Bernie Sanders (I-V.t.) and Joe Manchin (I-W.Va.) broke with Democrats to vote against the motion.

Sanders argued that the package would provide at least three times as many benefits for corporations as families in a release after the vote explaining his decision. Manchin has previously expressed concerns that the child credit provisions would disincentivize work.

At the end of the vote, Schumer changed his vote from a "yes" to a "no" to allow the legislation to be reconsidered at a later date.

The package included an expansion of the Child Tax Credit, larger tax credits for affordable housing and a restoration of business tax provisions that would have allowed for more generous deductions for equipment, interest costs and research and development activities.

Wyden and House Ways and Means Chair Jason Smith (R-Mo.), the tax chiefs who crafted the package, proposed paying for it by cracking down on a pandemic-era tax credit for businesses that has been rife with fraud.

The legislation once appeared to have a brighter future, having garnered 169 votes from members of the fractious House Republican majority.

Democrats have long wanted to bring back the American Rescue Plan’s version of the expanded Child Tax Credit, which provided families with monthly checks and slashed child poverty nearly in half in 2021.

They said they wouldn’t help Republicans restore business deductions, which were curtailed to help pay for the 2017 Tax Cuts and Jobs Act, without also bringing back the expanded CTC.

Making the ARPA version permanent would also be expensive, coming in at around $1.3 trillion over 10 years, according to one 10-year estimate by the Joint Committee on Taxation.

What Democrats ended up getting amounted to much less: a roughly $33 billion expansion that allowed low-income, larger families to get more of the credit and a slight bump in the “refundable” portion.

The structure of the child credit allowed Smith to sell it to a Republican caucus that is otherwise extremely wary of such tax benefits, since many GOP lawmakers believe they disincentivize work. And supportive Democrats pointed to estimates, produced by the left-leaning Center on Budget and Policy Priorities, that the expansion would still benefit around 16 million children in low-income households in its first year of enactment.

Smith also tacked on a popular disaster relief bill by Rep. Greg Steube (R-Fla.), which would have provided tax benefits for victims of wildfires, hurricanes and other natural disasters in 45 states.

In the end, Senate GOP tax writers had a litany of complaints about the package that proved insurmountable. They voiced concerns that they didn’t get their own committee mark-up of the legislation, that it had a fake “pay-for,” and that the CTC provisions would create new welfare programs or exacerbate inflation.

Several Republican senators admitted that electoral politics also had a hand in the bill’s defeat.

House Republicans “thought they had a plan that would be a good step forward at that time. But with everything going on during an election year, I think that time of that possibly moving forward has passed,” Sen. Mike Rounds (R-S.D.) told POLITICO.