Tax Relief for American Families and Workers Act Is Must-Pass Legislation for U.S. Jobs and Competitiveness
Essential pro-growth tax policies have expired or are being phased out, making it more difficult for U.S. businesses to invest at home, create American jobs and compete globally. These policies include immediate expensing for R&D, full expensing of investments in new equipment, machinery and technology and a pro-investment business interest deduction.
Thankfully, tax writers in Congress came together in a bicameral, bipartisan manner and introduced the Tax Relief for American Families and Workers Act to restore these important tax provisions. The bill, spearheaded by Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO), passed out of the Ways and Means Committee in an overwhelmingly bipartisan vote of 40–3. The bill now awaits further action in the House and Senate. Business Roundtable welcomes this progress and urges both chambers to advance the bill swiftly because the cost of inaction is too high.
For example, for 70 years, businesses were able to expense R&D investments — experiments, employee wages, new patents, studies and supplies — in the same year in which the investments occurred. But since 2022, businesses are now required to expense those investments over five years. This change makes it more expensive for U.S. companies to invest in R&D in the U.S. while discouraging future investment. According to the most recent data, R&D spending in the U.S. contracted for the second consecutive quarter and has steadily trended downward since 2022 when immediate expensing expired. Meanwhile, China is doubling down on these incentives as the U.S. falls behind. American businesses want to invest more in America, and restoring this pro-growth policy will generate $70 billion in new domestic R&D investments.
Likewise, the tax code allowed for full and partial expensing of investments in new equipment, machinery and technology for 21 of the past 23 years. In 2023, however, the provision began to phase out. Companies now can only expense 80% of investments in new equipment, falling to 60% in 2024, 40% in 2025, 20% in 2026 and eliminated completely in 2027. This change discourages domestic investment and limits opportunities for U.S. businesses and workers. Studies have shown that restoring this important provision would create 73,000 jobs in the U.S.
Finally, the business interest deduction, which previously allowed companies to deduct 30% of their earnings before interest, taxes, depreciation and amortization (EBITDA), is now restricted to 30% of a company’s earnings before interest and taxes (EBIT). The details of this change are complicated but the effect is clear — it is a large tax increase on American businesses, making it more expensive for companies to invest in their employees and finance day-to-day operations. No other developed country in the world takes this approach, putting U.S. companies at a disadvantage against their foreign competition and costing the U.S. economy 867,000 jobs, $58 billion in lost wages and $108 billion in GDP.
Members of Congress on both sides of the aisle support the Tax Relief for American Families and Workers Act, and support for the legislation has poured in from across the country. Over 22,000 small businesses signed a petition urging action on the bill, writing, “[T]his tax deduction encourages them [small and medium sized businesses] to invest in their businesses by buying new equipment.” Some 261 trade associations, including Business Roundtable, representing a diverse range of industries across the U.S. economy wrote, “Congress must act to protect the thousands of small and medium businesses, hundreds of thousands of family-supporting jobs and billions of dollars of pro-growth investments supported by these provisions.”
The evidence is clear, restoring these provisions would strengthen the U.S. economy, create American jobs and increase America’s competitiveness. Business Roundtable urges Congress to pass the bipartisan Tax Relief for American Families and Workers Act as soon as possible.
