{H} ouse Ways and Means Committee chairman Jason Smith (R., Mo.) and Senate Finance Committee chairman Ron Wyden (D., Ore.) announced last week that their bicameral tax-writing committees had come to an agreement on a tax package designed to undo tax hikes that have recently befallen manufacturers and other businesses and to modestly expand the child tax credit. Passing this tax package — unlike the calls for protectionism we have seen from Washington regarding Nippon Steel’s acquisition of U.S. Steel — is the single most important thing Congress can do to help American manufacturers in particular and employers in general.

Several big improvements for employers included in the Tax Cuts and Jobs Act (TCJA) expired earlier than the bulk of TCJA (individual, family-business, and death-tax provisions will expire after 2025). The Smith-Wyden bill would retroactively eliminate these tax increases and preserve them until the TCJA’s general expiration. The bill is thus a setting of the table on TCJA negotiations that will occur after this year’s presidential and congressional elections, arguably the most important for taxpayers in more than a decade.

All of the employer-tax-relief provisions that the Smith-Wyden bill would restore incentivize American firms to invest in themselves to become more productive and hire more people. It is therefore vitally important to restore them to the tax code and lessen the tax code’s pro-consumption and anti-investment bias.

These provisions are: research expensing, which allows companies to deduct in full the costs of new domestic research and development rather than slowly deducting (“amortizing”) those costs over five years; full business expensing, which permits firms to deduct in full the cost of plant and equipment rather than slowly deducting (“depreciating”) those costs over up to 20 years; and a provision that allows firms that borrow for investment to deduct the interest on that debt more easily.

The bill also contains an increase in small-business full expensing (a close cousin of the full-expensing provision above), the indexing of the child tax credit to inflation, which would make it easier for the working poor to claim it, and an increase of the 1099-NEC and 1099-MISC reporting threshold (for nonemployee compensation and miscellaneous income) from $600 to $1,000 — some long-overdue paperwork-burden relief for entrepreneurs. All in all, this is a good bill, and it can be fully paid for by clawing back a Covid-era payroll-tax credit that has deformed into a tax shelter.

Not present in the Smith-Wyden agreement is relief for taxpayers who sell items via online platforms or who use payment apps. These taxpayers have lived under a $20,000 and 200-transaction threshold from the start of the 1099-K reporting regime. Unless Congress acts, in the 2024 tax year, the 1099-K threshold will be lowered to $600 and just one transaction — an outcome that would yield more than 40 million 1099-K forms next tax season, according to the Government Accountability Office. Congress should raise this dollar figure, as the Smith-Wyden bill proposes doing for the 1099-NEC and the 1099-MISC. Were the bill to pass as it currently is, taxpayers would face a lower threshold for triggering a 1099-K form — which often reports payments that are not taxable — than they would for reporting other types of income.

It’s important for the economy that Congress passes this bill. Business investment has slowed to a trickle since the tax increase on research expenses began. In the two years between the passage of the TCJA and Covid, research expensing exploded by $2 trillion, or 18 percent, according to the Ways and Means Committee. Over on the business-fixed-investment side, assets that benefit from full expensing grew by 20 percent in those early years. Since then, business investment, especially on breakthrough research, has cratered. It goes without saying that such healthy reinvestment in business productivity would lead to a lot of job creation, wage growth, and higher stock prices for our 401(k) accounts and IRAs.

The obvious pro-growth impact of these policies explains why the National Association of Manufacturers (along with many other employer groups) has been pushing them for years. Passing Smith-Wyden is the most effective and immediate step Congress can take if it cares about American manufacturing and jobs.

Contrast this, however, with many lawmakers’ truly irresponsible language surrounding Nippon Steel’s acquisition of U.S. Steel — a company that, as Scott Lincicome of the Cato Institute points out, is the size of the Texas Roadhouse restaurant chain, despite its lofty appellation. Dominic Pino in these pages points out that “U.S. Steel” is an impressive name for a pretty small company. Fairly measured, it’s the 925th biggest publicly traded company on the stock market. It hasn’t been a part of the S&P 500 index in nearly a decade, and it hasn’t been a part of the Dow Jones Industrial Average in over three decades. Its employment has declined from 340,000 during World War II to just 20,000 today.

That’s why it’s so odd to see Senators Marco Rubio (R., Fla), Josh Hawley (R., Mo.), and J. D. Vance (R., Ohio) partnering with protectionist and union-funded senators to oppose Nippon Steel’s acquisition of U.S. Steel. Here we have a company based in an allied country (Japan) seeking to plow $14 billion into buying an American firm. Nippon Steel then wants to keep making steel in U.S-based steel mills. This acquisition would create a real competitor to the Chinese-state-controlled steel industry, the largest in the world, and it would not outsource any American jobs — indeed, it would ramp up our domestic steel production. What’s not to like?

If these senators (and those who agree with them or pretend to) actually want to help U.S. manufacturers compete with China and the rest of the world, their first order of business should be to pass the Smith-Wyden tax bill, which would remove the IRS as an impediment to manufacturers and other hard-capital businesses. What they shouldn’t do is peddle government favoritism for select industries — a practice with a storied history of failure.