Parties posture on debt limit, tax extenders on backburner


The White House and congressional Republicans eschewed substantive negotiations over the debt limit last month to compete for the political high ground, while discussions over the tax extenders continued quietly in the background.


House Speaker Kevin McCarthy, R-Calif., recently sent a letter to President Joe Biden on April 28 criticizing him for refusing to negotiate. Biden responded by challenging Republicans to first put out a comprehensive budget, as he has.


Republicans have highlighted a range of potential priorities, but have not yet put together a formal offer sheet. McCarthy recently said that House Republicans will not pass a budget before addressing the debt ceiling.


Despite the lack of ongoing substantive negotiations, the debt limit continues to dominate Capitol Hill and has made it difficult for any other legislative priorities to grain traction. Discussions on the tax extenders nonetheless continue in the background, and congressional leaders have signaled optimism on a potential future tax deal.


The biggest challenges remain identifying a legislative vehicle to carry a tax title and finding a balance between business the tax provisions favored by Republicans and child tax credit relief favored by Democrats. Tax writers in both parties have begun discussing a potential housing package that would include low-income housing tax credits. Republicans would like to pair it with other business provisions, like retroactively restoring expensing of research and experimental costs under Section 174, extending 100% bonus depreciation (which reverted to 80% for property placed in service after 2022), and retroactively providing relief from the limit on interest deductions under Section 163(j). Such a trade would likely still need an agreement with Democrats on some sort of individual tax relief.


House Republicans are also discussing an economic growth package in April or May that could include tax priorities, but this may be more of a messaging exercise. 




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