House Republicans on Friday introduced legislation providing new tax breaks for individuals and businesses in an attempt to outline a policy agenda for the rest of the congressional session after weeks of dealing with the debt limit standoff.
The tranche of legislation rolled out by Republicans on the Ways and Means Committee has several facets, but one of the most significant is a plan to temporarily increase the standard deduction.
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Reps. Nicole Malliotakis (R-NY.) and Michelle Steel (R-CA) released a bill that would increase the deduction by $4,000 for married couples and $2,000 for single filers during 2024 and 2025. Currently, the standard deduction is $27,700 for married couples and $13,850 for single filers.
In introducing the legislation, the lawmakers pointed out that red-hot inflation has made it more difficult for families to budget and has made life more expensive across the board.
“Americans can no longer keep up with price increases,” said Malliotakis, “which is why we’ve introduced this legislation to increase the standard deduction and allow millions of families to keep more of their hard-earned money, including more than 350,000 households across Staten Island and Southern Brooklyn. Considering Congress just passed the largest spending cut in history, it’s appropriate to pass these savings directly on to taxpayers.”
The Ways and Means Committee, which is chaired by Rep. Jason Smith (R-MO), has been holding field hearings in various parts of the country — for instance, West Virginia — to hear how average Americans are faring and inform decisions on the legislation that is being introduced.
Another bill includes several policy proposals geared toward helping small businesses. The legislation seeks to make life for business owners a bit easier by raising the threshold for filing 1099 forms.
The IRS currently requires that a form be filled out if a business pays a non-employee a minimum of $600 during a taxable year for business purposes. The Republican proposal would raise the threshold from $600 to $5,000 to reflect the cost of living increases since the reporting rule was enacted decades ago.
“Employers should be focused on creating jobs and growing their businesses instead of drowning in paperwork and bureaucratic red tape,” said Rep. David Schweikert (R-AZ), who introduced the legislation on Friday.
The Republican package also rolls back recent Democratic changes to reporting requirements for online and gig sales. As part of President Joe Biden’s American Rescue Plan, the 1099 reporting requirement threshold for sales was lowered to $600 from $20,000. The new GOP proposal would revert that threshold back to its previous level of $20,000.
Rep. Carol Miller (R-WV) has led the charge for increasing the reporting threshold. During remarks after she introduced legislation to raise the limit, she said the current $600 level “needlessly taxes hardworking Americans and independent contractors who use online services, payment platforms, and marketplaces.”
Also included in the legislative package is an expansion of opportunity zones, which were created as part of the 2017 Tax Cuts and Jobs Act and give tax breaks to businesses in impoverished neighborhoods to spur investment.
The plan additionally pushes for the reinstatement of the full deduction for research and development (R&D) expenses. Those full and immediate deductions are a major priority for Republicans and do have bipartisan support, so they are one of the more likely items to pass.
Starting this past tax year, companies had to amortize R&D expenses, meaning that they will face a higher tax burden. Those in favor of a legislative fix argue that spreading out the deduction over five years, instead of it being immediate, indirectly raises the cost of investing in R&D because the value of a deduction is worth more today than a deduction down the road.
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The exact cost of these legislative changes isn’t clear as the Congressional Budget Office hasn’t scored the plan. Democrats will undoubtedly hit Republicans for the cuts, highlighting how the GOP just went through the most intense debt limit negotiations in years in order to shave the deficit.
But Republicans will argue that the tax cuts are pro-growth and dynamic, meaning that the increased economic output will actually result in more tax revenue despite the headline that the measures are tax cuts.
