This week, Congress is working to pass an “omnibus” general funding bill before the government’s temporary funding runs out. If they fail to pass it before midnight on Friday, the government could shut down, making this a must-pass bill.
Unfortunately, when everyone knows a bill has to pass, every lobbyist in Washington sees a golden opportunity to avoid debate and slide their own priorities at the last minute into a bill that is almost definitely going to become law.
That’s where we are this week, with many members of the business world pressuring Congress to include the renewal of an expired research and development tax break that would amount to about $125 billion in corporate tax cuts over the next four years alone. This effort has picked up steam in the last week, with dozens of CEOs of major companies signing onto a letter calling for the change, and a bipartisan group of fifteen Senators publicly fighting for its inclusion in the omnibus bill.
It should go without saying, but Congress should not pass over $100 billion in tax cuts for corporations without any strings attached. Another tax credit that recently expired, the expanded Child Tax Credit, is enormously more important than another corporate tax cut, yet Congress has been blocked from making that expanded credit permanent by some of the very same people who are now advocating to renew the R&D credit.
The change these CEOs are asking for, immediate expensing of R&D spending, is the renewal of a policy put in place by the 2017 Trump tax bill that expired at the end of 2021. Thanks to the Trump tax bill, for those four years businesses were allowed to deduct all of their R&D spending immediately from their tax bill, rather than spaced out over five years as they were required to do previously.
The amount corporations could deduct didn’t technically change, but being able to deduct R&D spending immediately actually ended up being a significant discount for most corporations. Simply put, money now is worth significantly more than money in the future, because money now can be invested to make more money in the future (this is known as the time value of money).
Now that this lucrative tax break has expired, the business world is arguing that it needs to be renewed in order for them to be able to innovate and remain competitive. This is clearly ridiculous. They had this tax break for only four years – corporate America was able to get by for decades before 2017 just fine, and they can do it again.
They know they can’t win with this argument, so corporate lobbyists are trying to sneak this multi-billion-dollar tax cut into the omnibus bill at the absolute last second in order to avoid scrutiny and debate. If Democrats cave and let that happen, they’ll be making a massive mistake.
As we mentioned earlier, immediate R&D expensing isn’t the only major tax credit that recently expired – so did the expanded Child Tax Credit (CTC), which gave hundreds of extra dollars per month to over 35 million needy American families thanks to the American Rescue Plan. The expanded CTC was one of the most impactful anti-poverty policies in the last several decades, so much so that child poverty in America spiked by 41 percent immediately after the program expired in December.
President Biden and most Democrats in Congress have been fighting to renew the expanded Child Tax Credit and make its additional aid permanent, but they’ve been blocked by a small number of Senators with close ties to the business community (many of whom are now fighting to renew the R&D tax credit change). It would be political malpractice for Democrats to just hand over this incredibly useful bargaining chip without demanding any sort of concessions from the pro-business wing of Congress, particularly when it comes to the Child Tax Credit.
Negotiating tactics aside, the optics are not great for Congressional Democrats to pass a significant tax cut for major multinational corporations while at the same time utterly failing to pass any sort of relief for normal working Americans. If you were writing a playbook on how to reinforce the belief among many Americans that there isn’t much difference between the two parties and that Democrats don’t actually care about working people, you’d be hard pressed to come up with something better than a Democratic Congress choosing to extend corporate tax cuts first passed by Donald Trump, Paul Ryan, and Mitch McConnell.
With a vote on the omnibus package likely coming in the next 24 hours, Democrats in Congress are being bombarded with calls from corporate executives and lobbyists – it’s time they hear from their constituents.
Please take a minute this afternoon to call your Representatives and Senators at (202) 224-3121 and tell them not to include immediate expensing of research and development tax credits in the omnibus package. You can also click THIS LINK and enter your zip code to find the contact information for your Representative.
Your voice can have a real impact at this critical time, please take a moment to use it.