Fact Sheet on the Wyden-Smith Tax Relief for American Workers and Families Act

July 31,2024

Fact Sheet on the Wyden-Smith Tax Relief for American Workers and Families Act

The Tax Relief for American Workers and Families Actwas introduced by Chairman Wyden and Chairman Smith of the House Ways and Means Committee in January. The House passed the bill on January 31st with 357 votes in favor, including 188 Democrats. The first procedural vote on the bill will occur on Thursday, August 1st.

By expanding the child tax credit, the bill will help 16 million kids from low-income families and lift 500,000 out of poverty. The bill will raise the cap on the child tax credit for low-income families, making them eligible for a full $2,000 CTC. The bill will also stop the longstanding discrimination against low-income families who have multiple kids. Today they're often prohibited from claiming the full credit for each of their kids. Wyden-Smith will fix that. State-by-state data on the number of kids and families who stand to benefit is available here along with further analysis, and a demographic breakdown is available here.

Millions of small businesses, particularly those focused on R&D, will benefit from the bill. According to Treasury data, 3.8 million small businesses claimed bonus depreciation or used the deduction for R&D costs in tax year 2021. The Trump tax law cut the value of the deduction for R&D beginning in 2022 and bonus depreciation beginning in 2023. Following those changes, small businesses are now paying higher costs for investments in things like new equipment, software, and innovative research. The bill will restore the value of those tax incentives.

The bill will help reduce housing costs by increasing the supply of affordable housing. The low-income housing tax credit is the premier federal tax incentive for the construction of affordable housing. By expanding it, the bill will add more than 200,000 affordable housing units nationwide, a much-needed down payment to address the housing crisis. State-by-state data on housing units added is available here.

The bill is paid for by shutting down a major source of tax fraud. The Employee Retention Tax Credit was an emergency program passed in early 2020. It expired in 2021, but retroactive claims are still coming into the IRS in astounding numbers. This is fueled by "ERTC mills," shadowy organizations that rip off small business owners and con them into filing fraudulent or improper claims. According to the IRS, the share of these fraudulent or improper claims could be as high as 80 to 90 percent. Chairmen Wyden and Smith announced upon the bill's introduction that it would cut off ERTC claims as of January 31st, and by doing so, it will help the IRS identify and process legitimate claims.

The bill will strengthen the U.S.-Taiwan economic partnership. The bill includes new policies to advance the economic partnership between the U.S. and Taiwan, providing expedited double-tax relief and a path for a comprehensive double-tax relief agreement.

The bill will provide tax relief to victims of disasters. The bill incorporates bipartisan legislation that will help communities and families hit by disasters, including hurricanes and wildfires, by expanding casualty loss deductions and exempting certain compensation payments from income.

The Joint Committee on Taxation and outside experts agree that the bill will not discourage work. Several Senate Republicans have argued that the bill's expansion of the child tax credit will reduce the incentive to work. According to their flawed logic, a modest CTC increase of at most a few thousand dollars will result in Americans quitting their jobs in large numbers, but that Republican argument is out of touch with the reality of everyday life for working-class families. The Joint Committee on Taxation, the nonpartisan expert analysts of all tax legislation, found that the bill would have no significant effect on labor supply, and outside experts from progressive- and conservative-leaning organizations agree.

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