House September Agenda Includes Potential Tax Changes

Majority Leader Kevin McCarthy recently sent a memo to the House of Representatives indicating the agenda for the fall session. In his memo, he advocates for an, “honest, simple and effective” approach to government, and bundles up previous jobs and tax bills into his economic package for the fall.

Key tax and job highlights of the package include:

• The Hire More Heroes Act (H.R. 3474)—Allows employers to be exempt from providing healthcare coverage to an employee given the employee already receives healthcare through a Department of Defense Program. The bill prevents double coverage on certain employees (i.e. military veterans) and could save a business, on average, $2.36 per hour, totaling $4,531.20 per year for each employee that qualifies.
• Permanent Internet Tax Freedom Act (H.R. 3086)—Creates a permanent ban on state and local taxation of internet access. Given a similar system to how states currently tax other expenditures, internet connections would have an approximate 8 percent tax. This bill aims to end discriminatory taxing practices on the internet, but will also decrease sales tax revenue by $1.7 billion. Our previous research discussed the potential economic harm from and the lack of an economic reason for internet taxation.
• America’s Small Business Tax Relief Act (H.R. 4457)—Permanently allows taxpayers to deduct expenses for certain business investment. Expensing limitation would remain at $500,000 rather than dropping to the pre-2010 level of $250,000 and levels would be adjusted accordingly each year to match inflation. Such tax exemptions and benefits will incur growth in small and medium sized businesses and inspire confidence to invest in the future, as we talked about in a previous blog post.
• Making Permanent 50 Percent Expensing (H.R. 4718)—Permanently extends 50 percent expensing, often called bonus depreciation, which allows businesses to expense 50 percent of their investments in equipment and software in the year they are purchased before depreciating the remaining cost. According to our previous work, 50 percent expensing helps mitigate the tax code’s bias against capital investment and, if made permanent, it would boost investment, wages, GDP, and federal revenues.

These small and measurable changes can certainly contribute to economic growth, although many of these provisions have previously failed in the senate on individual votes.

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