Proposals to expand the new tax law by adding incentives for savings and startup businesses have passed the House as Republicans push legislation forward ahead of the approaching midterm elections.
The votes Thursday were 240-177 and 260-156, mostly along party lines, to approve a pair of Republican-written measures. The action was a prelude to an expected vote Friday on broader legislation to make permanent the individual tax cuts now set to expire in 2026 under the tax law.
House Republican leaders are portraying the second crack at tax cuts as championing the middle class and small businesses. Prospects for the legislation are unclear in the Senate.
One of the measures would create a "universal savings account" for families that could be used for a range of purposes.
Democrats unanimously opposed the $1.5 trillion tax law signed into law in December by President Donald Trump, and they similarly oppose the new legislation.
With the midterm elections looming in less than two months, polls have shown only lukewarm support among voters for the package of individual and corporate tax cuts that became Trump's signature legislative achievement. House Republican leaders are portraying the second crack at tax cuts as championing the middle class and small businesses.
But support for the legislation has been diminished by election pressures faced by GOP lawmakers from high-tax states where residents are hurt by the tax law's limits on state and local tax deductions. About a dozen Republican House members, facing tough re-election fights in the high-tax, Democratic-leaning states of New York, New Jersey and California, voted against their party's tax law and are likely to oppose the new legislation. The GOP lawmakers are pushing to hold onto their seats in relatively affluent suburban districts where Trump is unpopular. Residents in those states could see substantial increases in their federal tax bills next spring because of the $10,000 cap on state and local deductions in the tax law.
The legislation to be voted on Friday would make the cap permanent.
One of the measures cleared by the House Thursday would create a "universal savings account" for families that could be used for a range of purposes and would allow the tax-free earnings to be more easily withdrawn than is the case with existing retirement accounts. In addition, it would allow the popular, tax-free 529 college savings accounts to also be used to pay for apprenticeship fees and home schooling expenses, as well as to pay off student debt. Workers would be able to tap their retirement savings accounts without tax penalty to cover expenses from the birth of a child or an adoption.
A second measure would allow startup businesses to write off more of their initial costs against their federal taxes. New businesses would be permitted to deduct more of their expenses for setting up in the first year—up to $20,000, double the current maximum level.
The proposal "will allow more businesses to move from their kitchen table to their first office," said Rep. Kevin Brady, R-Texas, chairman of the tax-writing House Ways and Means Committee.
Democrats said there were some positive elements in the legislation, but that overall they would not help average Americans. "Probably not your family," said Rep. Lloyd Doggett, D-Texas, referring to the proposed new savings accounts. "It's all about helping those at the top."
The accounts would mainly benefit wealthy taxpayers, with about $100,000 in annual income needed to take full advantage of it, Doggett maintained. He said people with more modest incomes likely would end up shifting savings from other kinds of accounts into the new one.