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Tax Relief for American Families and Workers Act Restores Proven Pro-Growth Tax Policies to Support Workers, Help Small Businesses Grow & Compete Against China

January 17, 2024

WASHINGTON, D.C. – The recently released Tax Relief for American Families and Workers Act will provide American workers, families, farmers, and small businesses much needed tax relief to help grow and prosper at home while strengthening our competition versus China. The commonsense tax agreement restores key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) – including research and development expensing, interest deductibility, and 100% expensing for investments in facilities, equipment, and machines.  These three pro-growth, pro-worker provisions have a proven track record of increasing wages, creating more job opportunities, and helping American businesses become more competitive, more productive, and expand economic opportunity in their communities. 

At Ways and Means Committee hearings in Georgia, West Virginia, and Oklahoma, witnesses testified to the financial and economic damage American small businesses, workers, and communities will suffer if these provisions are not restored. In fact, economists predict 1 million jobs will be lost if these provisions are not extended.

Restoring Expensing for Research and Development

Under the Tax Relief for American Families and Workers Act, American companies will be able to immediately deduct R&D costs, restoring American competitiveness and innovation.

  • TCJA Record: Following the enactment of TCJA, R&D investment grew by 18 percent with $2 trillion invested in new facilities and research and development activities – the highest level on record. When looking at the five years prior, R&D investment was stagnant, growing at less than a point a year at just 4.7 percent.
  • More American Innovation: Economic analysis shows that restoring this provision will preserve over $70 billion in R&D investment over the next decade.
  • Compete Against China: Chinese companies get a 200 percent “super deduction” for R&D costs, while the United States is one of only two developed nations requiring businesses to spread out R&D expenses.
  • Lower Taxes: Losing the immediate deduction has led to higher tax bills for small, hardworking businesses – forcing them to slow their growth, reduce their workforce, or borrow funds to pay big tax bills to the IRS.
  • Help “Blue Collar” Industries: 55 percent of R&D deductions are claimed by U.S. manufacturers.

Restoring Full Interest Deductibility
The highest interest rates in 23 years are making borrowing too expensive for American small businesses. The Tax Relief for American Families and Workers Act restores interest deductibility before expenses, taxes, depreciation, and amortization for small- and mid-sized businesses.

  • TCJA Record: In the first two years after TCJA, companies increased their capital investment by 17 percent while cutting their debt by 35 percent.
  • Biggest Winner – Small Business: Small businesses spend six percent of revenue on interest expenses, compared to two percent for large businesses. 
  • Create Jobs: This fix will generate 867,000 jobs and $58 billion in additional take-home pay, helping workers stuck in an uncertain economy.
  • Strengthen American Competitiveness: Ensures that the United States is a competitive location to hire, invest, and grow for manufacturing, energy production, and other critical industries.
  • Protect Americans’ Pocketbooks: Failure to act would lead to $58 billion in lost wages. 

Expanding 100% Expensing
Under the Tax Relief for American Families and Workers Act, employers will be able to fully deduct the cost of capital investments in equipment, machinery, and facilities, that make American businesses more innovative and productive.

  • TCJA Record: Under TCJA, investment in American businesses changed course, growing 20 percent when previously U.S. companies had been cutting investment.
  • Invest More in America: Making full expensing permanent would increase investment by $400 billion, boosting orders for equipment and machines from American manufacturers.
  • Create Jobs: According to economic analysis, 73,000 new jobs would be created by permanent expensing.
  •  Increase Wages: Wages would increase by 0.3 percent because of permanent expensing, taking some of the sting out of high prices for working families. 
  • Help Small Business Productivity: Lowering the cost to purchase new equipment gives small businesses a boost in productivity.
  • Cut Dependence on China: Full expensing further incentivizes American companies to bring their manufacturing facilities and operations back to the United States.

READ: Smith, Wyden Announce Agreement on Tax Framework to Help Families and Main Street Businesses