The US economy is set for an unexpected fiscal boost if lawmakers back a potential deal for $70 billion worth of tax breaks for businesses and families Congressional negotiators are locked in talks over renewing expired business tax breaks and boosting the child tax credit.
The proposal will need to pass through a Congress that is deeply divided over the nation’s fiscal trajectory. If passed, the tax breaks offer a double-edged sword for an economy that appears on course for a soft landing. While the extra cash would boost consumer spending, it would also risk reigniting inflation pressures.
Data for December show that inflation picked up at the end of 2023, fueled by services costs while a decline in goods prices petered out. The consumer price index increased 3.4% in the year through December, the most in three months.
The proposed deal would revive tax breaks for research and development spending, boost the deductibility of investment, such as in equipment, and business loans. Lawmakers are discussing restricting benefits for foreign research investments in order to target the benefits to companies conducting such activities in the US.
