America’s national debt now exceeds $34 trillion. Four months into the current fiscal year, the Biden administration already is running an annual budget deficit of more than $500 billion. And what is Congress talking about? Tax cuts.

Democratic leaders in the Senate and Republican leaders in the House have reached an agreement on a nearly $80 billion tax cut and reform deal that would provide new benefits for children, businesses, research and development, and housing, among other things. 

“16 million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” the chairman of the Senate Finance Committee, Senator Wyden, said. He says his goal is to have the tax bill signed into law by the end of the month. 

The lead Republican negotiator, Congressman Jason Smith, who is chairman of the House Ways and Means Committee, said that the deal “strengthens Main Street businesses, boosts our competitiveness with China, and creates jobs. We even provide disaster relief and cut red tape for small businesses, while ending a Covid-era program that’s costing taxpayers billions in fraud.”

Mr. Smith’s comment refers to ending the Employee Retention Credit, a Covid-era tax credit for businesses that has proven to be rife with fraud.

Deficit hawks, however, do not have as rosy a view of the plan as the bipartisan group of lawmakers. The Committee for a Responsible Federal Budget says the deal will reduce federal revenues by more than half a trillion dollars over the next ten years if the tax deal is made permanent with no additional spending offsets. 

“With our debt approaching record levels, it’s incredibly important that any new policies be fully offset,” the president of the committee, Maya MacGuineas, says. “Even with these offsets, this package will add to the deficit over the next few years and could set the stage for substantially more debt over time. Because of timing issues related to business provisions, the official score significantly understates the plan’s costs.”

Tax cuts like the ones now being proposed, critics say, along with unchecked federal spending, have contributed a substantial amount to the growth in the national debt over the last 20 years. During the third quarter of 2023, the national debt to gross domestic product ratio climbed to more than 120 percent, which is down from 132 percent in 2020 but more than double what it was just 20 years ago. 

Mr. Wyden and Democrats say they are especially proud of the Child Tax Credit expansions, which they say will provide more money for poor families at levels similar to those of wealthier earners. Families with multiple children would also be able to receive larger benefits.

The most important change to the Child Tax Credit, however, would be tying the credit to inflation for 2024 and 2025, but only if inflation reaches a certain threshold. Should inflation hit 5 percent, then the tax credit would be increased by $100, but anything less than that inflation rate would result in no change to the credit. 

Messrs. Wyden and Smith’s deal also hopes to spur the development of hundreds of thousands of affordable homes across America by enhancing the Low-Income Housing Tax Credit and providing more money for state and local governments, as well as public-private partnerships for housing development. 

For Republicans, the business tax deductions are especially popular. For research and development, companies will now be able to deduct yearly expenses made for domestic research, compared to the current five-year date for those deductions. Companies will also be able to deduct interest payments if they take out high-interest loans for payroll and operations. 

In a move to compete with Communist China, the tax plan would also provide special benefits for laborers and businesses who operate in both America and Free China. 

The top Republican on the Finance Committee, Senator Crapo, and the top Democrat on the Ways and Means Committee, Congressman Richard Neal, were not a part of the negotiations and have not yet commented on the substance of the agreement. 

Senator Schumer has announced he will support the deal and hopes to have it passed before tax filing begins at the end of January. “It makes progress to expand the Child Tax Credit, address the affordable housing crisis, & stay competitive against” the Chinese Communist Party, the Senate majority leader said in a statement.