A 1 percentage point increase to the corporate tax rate could be used as a pay-for to expand family tax credits in a plan under development by House Democrats.

Such an increase could help fund the broadening of the earned income tax credit, child tax credit, and child and dependent care credit—an issue that is a top priority for House Ways and Means Committee Chairman Richard Neal (D-Mass.). The expansion would be attached to legislation renewing expired tax breaks, several aides and lawmakers familiar with the package told Bloomberg Tax.

A markup of the package could happen as soon as the week of June 17, the aide said.

Neal acknowledged June 11 that the package could be a marker in future negotiations.

“It’s always easier to negotiate when you have a product,” Neal said.

‘Non-Starter’ for Republicans

Lowering the corporate tax rate to 21% was a hallmark of the 2017 tax law, and any plan to alter that rate reduction would face fierce criticism from Republicans. Neal is also considering paying for the renewal of extenders by altering the estate tax exemption of $11.18 million per person, an idea that Republicans are sure to attack.

“Nothing makes working families get hurt more than taking away their jobs, or encouraging investment in other countries, which is what raising taxes on American businesses do,” Ways and Means ranking member Kevin Brady (R-Texas) said June 11 when asked about the idea of hiking the corporate tax rate.

Brady and Senate Finance Chairman Chuck Grassley (R-Iowa) said such a proposal would be a non-starter for Republicans.

“We hope that House Democrats instead choose to work with us to end business-as-usual as it concerns these temporary tax provisions and not use these provisions as leverage in unrelated tax policy disagreements,” Grassley and Brady said in a joint statement.

Sen. Sherrod Brown (D-Ohio) said at a Washington event June 11 that there has been discussion, including with House Majority Leader Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.), about attaching the EITC expansion to an extenders package.

“We’ll make a determination when it gets closer where we move on this,” Brown said. “We expect this to become part of a bigger package.”

Three-Year Plan

Extending expired tax perks for up to three years is an option Ways and Means Democrats mulled during a June 11 meeting, according to people familiar with the discussions.

Tax breaks that expired at the end of 2017 and 2018, as well as those expiring at the end of this year would be extended through Dec. 31, 2020, according to an aide. Breaks that expired at the end of 2017 include a credit for biodiesel and a credit for short-line railroad track maintenance.

Rep. Lloyd Doggett (D-Texas) said that he remained committed to paying for a tax extenders package.

Addressing extenders has been a top priority in the House and Senate so far this Congress. Grassley and Sen. Ron Wyden (D-Ore.), the top Democrat on the panel, introduced a bill renewing the perks (S. 617) in February.

Democrats have said that they want their extenders package to reflect their priorities, including those that help working families.

Rep. Mike Thompson (D-Calif.) said he was in favor of a permanent tax break for disaster-stricken areas.

“When Americans experience disaster, they need to know that the federal government is there for them,” he said June 11.

—With assistance from Kelly Zegers.