WASHINGTON, D.C. – American workers and businesses will finally receive the tools needed to directly respond to China’s growing global economic influence thanks to the Tax Relief for American Families and Workers Act (TRAFWA). The bill, passed by an overwhelming majority of the U.S. House of Representatives, builds on the success of the 2017 Trump tax cuts by extending key policies that support growth, innovation, and competition for American workers and businesses to combat China’s grip on global supply chains and technology development.
Absent further action to advance this legislation to the President’s desk, the U.S. runs the risk of falling further into a research and development (R&D) recession – as evidenced by the dramatic decline in R&D investment seen since the expiration of that provision of the Trump tax cuts:
Also included in TRAFWA is a provision eliminating double taxation on cross border investments between the United States and Taiwan. This policy will lead to further expansion of foreign direct investment between the U.S. and Taiwan and strengthen the U.S.-Taiwan relationship in the Indo-Pacific region.
“Over the years as China’s economy has expanded so, too, have their malign tactics. China’s aggressive subsidization of their industries and predatory trade practices have undercut U.S. workers and put American businesses at a major disadvantage in the global economy. At a time when families, workers, and businesses are struggling under record inflation and high interest rates, we need pro-growth policies that will help America confront these challenges and reestablish our economic competitiveness. Congress has a duty to respond by passing the Tax Relief for American Families and Workers Act to support our economy and give workers and businesses the tools they need to compete and win against China,” said Ways and Means Chairman Jason Smith (MO-08)
Supports research & development (R&D) expensing for U.S. workers and employers to counter China’s economic aggression.
- Allows businesses of all sizes to immediately deduct 100 percent of the cost of their U.S.-based R&D investments instead of amortizing over five years.
- Generates over $70 billion in new R&D investment and supports 21 million jobs.
- Improves our competitive position versus China, which aggressively subsidizes companies through a 200 percent “super deduction.”
Locks in pro-growth policies to help U.S. Economy compete against China.
- Interest deductibility: generates 867,000 new jobs and increases take-home pay for American workers by $58 billion, allowing businesses to meet their payroll obligations and expand their operations.
- 100 percent expensing: restores full and immediate expensing for investments in machines, equipment, and vehicles.
- Expand small business expensing cap: increases the amount of investment that a small business can immediately write off to $1.29 million, indexed for inflation, an increase above the $1 million cap enacted in 2017.
Stands with our Ally Taiwan by Providing relief from double taxation.
- Removes the current double taxation that exists for businesses and workers with a footprint in both the United States and Taiwan.
- The United States is currently the top destination for outbound Taiwanese investment, which creates more jobs for U.S. workers and spurs research and development spending.
- As of 2022, total Taiwanese foreign direct investment in the United States was $16 billion and trade flows between the U.S. and Taiwan totaled $161 billion in goods and services.
- These important investments led to 22,100 U.S. jobs and $185 million in U.S. research expenditures in 2021 by Taiwanese firms.
- Last year, Ways and Means legislation, the United States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act was signed into law, confirming Congress’ support for the “Initial Agreement” that was negotiated by the Biden Administration and Taiwan, and stipulates that the agreement and future agreements with Taiwan cannot take effect without congressional approval.