A bipartisan bill to expand the child tax credit and reinstate a set of business tax breaks has stalled in the Senate after winning overwhelming approval in the House, as Republicans balk at legislation they regard as too generous to low-income families.
The delay of the $78 billion tax package has imperiled the measure’s chances and reflects the challenges of passing any major legislation in an election year. Enacting a new tax law would give President Biden and Democrats an achievement to campaign on, something that Republicans may prefer to avoid.
The House approved the measure in January by a vote of 357 to 72 — a major bipartisan feat in a Republican-led body that has toiled to legislate — and its backers had hoped to get it across the finish line around the start of tax-filing season at the end of that month. But with just over a month before the filing deadline, it has not moved in the Senate.
The package, which would be in effect through 2025, would expand the child tax credit and restore a set of tax breaks related to business research costs, capital expenses and interest. It would also include a boost to a tax credit encouraging the development of low-income housing, tax relief for disaster victims and tax breaks for Taiwanese workers and companies operating in the United States.
The bill would be financed by reining in the employee retention tax credit, a pandemic-era program that has become a magnet for fraud. The package was brokered by the top two congressional tax writers, Representative Jason Smith, Republican of Missouri and chairman of the Ways and Means Committee, and Senator Ron Wyden, Democrat of Oregon and chairman of the Finance Committee.
“The American people want to see a bipartisan effort that gets to yes,” Mr. Wyden said. “The clock is ticking, and families are waiting for this help. They’re telling members of Congress they want to see this done.”
Senate Republicans have expressed a variety of concerns, fixating primarily on a so-called look-back provision that would allow parents to use their previous year’s earnings to claim a larger child tax credit. Republicans argue the measure would weaken work incentives because it would allow parents who had little to no income in the current year to still claim a credit of up to $2,000 per child.
The G.O.P. also has portrayed the mechanism for financing the bill as a sham, since the program that would be ended to pay for the tax provisions has cost the government far more than expected.
“The fundamental problem with the bill is that Republicans made a major concession to Democrats — allowing the child tax credit to begin to transition into a de facto welfare program — in return for something Democrats already wanted: research-and-development tax breaks for businesses,” Senator Thom Tillis, Republican of North Carolina and a vocal opponent of the package, wrote in an op-ed in The Wall Street Journal.
He added: “How can any fiscal conservative defend using phony savings to pay for more spending? It’s like paying off a credit card balance with another credit card. It’s fiscally irresponsible and unsustainable.”
Senate Republicans have also complained that they were cut out of the deal, since it was reached and presented by Mr. Smith and Mr. Wyden without an endorsement from Senator Michael D. Crapo of Idaho, the top Republican on the Finance Committee, who opposes it. The negotiators tried months ago to get Mr. Crapo on board, including by limiting the look-back provision in the child tax credit, but ultimately announced the bill without his backing.
Now Senate Republicans have said they want the chance to overhaul the bill in the Finance Committee.
“Efforts to pressure Senate Republicans to rubber stamp the Wyden/Smith tax deal have been counterproductive,” Mr. Crapo said in a statement outlining some of his objections. “With each week that has passed, members have strongly voiced additional calls for numerous modifications, and there are also increasing concerns about making 2023 changes this far into the I.R.S. tax filing season. While I remain committed to seeking a bipartisan resolution that a majority of Senate Republicans can support, I hope the bill’s proponents commit to pursuing a more constructive strategy.”
Any major changes to the bill would most likely sap support among Democrats, who overwhelmingly back the package as is. And they would punt the bill back to the chaotic House, which has struggled for months to conduct regular legislative business.
Mr. Wyden said he was open to hearing Republicans’ concerns but was worried that they had yet to winnow a “smorgasbord of ideas” for changes they were requesting.
“Depending on how you handle this, a tax bill can become a Christmas tree in 20 minutes around here, and we’ve really got just a couple of weeks,” Mr. Wyden said.
While Senator Chuck Schumer, Democrat of New York and the majority leader, has said he supports the bill, he has yet to commit to a floor vote.
A handful of Republicans have come out in support of the bill and are eager to move it forward. They include Senators Steve Daines of Montana, the head of the party’s campaign committee, and Todd Young of Indiana, both of whom sit on the finance panel.
“I want to see something get done,” Mr. Daines said, emphasizing his support for the bill’s business tax provisions. “I think we stand a good chance to pass it.”
Even so, the politics of an election year are hanging over the bill, raising the question of whether G.O.P. leaders really want to advance a measure that would give Mr. Biden and Democrats an achievement to tout on the campaign trail.
Republicans see an opportunity to win the Senate majority in November, a shift in control that would position Mr. Crapo to be chairman of the Finance Committee. Some, including Mr. Tillis, have argued that Republicans will have more leverage to negotiate a tax bill next year, when former President Donald J. Trump’s 2017 tax law is set to expire.
“That’s one of the things we’re talking about,” Senator John Kennedy, Republican of Louisiana, said on Thursday after Republicans discussed the bill during a closed-door meeting.
The bill could carry political benefits for both parties. It would be a political victory for Mr. Biden and vulnerable Democrats whose seats Republicans are looking to claim, such as Senator Sherrod Brown of Ohio, who has made expanding the child tax credit a signature issue. Republicans, some of whom also back expanding the child tax credit, could trumpet the business tax breaks and point to a new tax law as proof that they are capable of governing.
Mr. Crapo insisted that he was not seeking to slow-walk the bill.
“I’ve always said we should do this,” he said last week. “I’ve been working to get this done for three years. And I think we should do it as soon as we can.”
Mr. Young, who has worked behind the scenes to help advance the package, said that there was broader G.O.P. support for the existing bill than had been publicly expressed and “a reasonably good chance” that it could move forward in the Senate.
Rohit Kumar, a former Senate Republican leadership aide who is now a leader of national tax services at PWC, said that several G.O.P. senators “definitely want to get to yes on the bill” but have refrained from endorsing it out of deference to Mr. Crapo.
“This thing does have a clock on it,” Mr. Kumar said. “Nobody knows how much time is on that clock, but there is a clock. And at some point, the political will to do this will expire.”
