Sen. Todd Young has a pitch to clear a path forward on tax legislation after a partisan standoff last year gave way to a monthslong chill. He’d pair a more generous research and development benefit for businesses with affordable housing measures to aid low-income families.
Both are bipartisan projects Young leads on the GOP side. Tying them together, he hopes, could satisfy Democrats’ demand to pair tax breaks for companies with provisions to boost the social safety net while avoiding an expansion of the child tax credit that currently lacks Republican backing.
“I think that might be a sweet spot where we can come to terms and everyone can accomplish something important for the country,” the Indiana Republican said in an interview.
A select crew of senators is known for doing the work to cut deals across the aisle, and Young is positioned to emerge as a key player in tax talks this year.
He’s the lead Republican on a bill with Sen. Maggie Hassan, D-N.H., to restore full, upfront deductions for companies’ research and development costs and expand tax credits for small businesses, and on a proposal with Sen. Benjamin L. Cardin, D-Md., to create a tax credit for building or rehabilitating homes in higher-poverty areas.
Young also leads bipartisan bills — yet to be reintroduced this year — that would expand a tax credit for affordable rental units housing low-income tenants and require disclosure on zoning-related policies from state and local governments receiving housing grants, which is meant to discourage discriminatory regulations.
While Young remains a conservative voice, his voting record in 2022 shifted to his most bipartisan yet, according to CQ Vote Studies data. He voted with his party 76 percent of the time, his lowest mark since joining the House in 2011 and Senate in 2017.
In contrast, Indiana’s other Republican senator, Mike Braun, stuck with the GOP in 98 percent of votes, as did Rep. Jim Banks, R-Ind. Braun is running for Indiana governor in 2024, and Banks is among those making a bid for his Senate seat. Inside Elections with Nathan L. Gonzales rates both races “solid Republican.”
Young has also notched recent wins as a bipartisan negotiator focused on foreign policy and competitiveness issues, including a repeal of Iraq-related military authorizations that passed this week and a package to boost domestic microchip manufacturing and scientific research that became law last summer.
Young’s role in the chips bill and other bipartisan negotiations stemmed from an interest in maintaining U.S. competitiveness and growing high-quality, high-paying domestic jobs, according to an aide, who also noted the interest in R&D back home in Indiana.
Manufacturing companies employed almost 18 percent of Indiana’s workforce as of 2021, according to the National Association of Manufacturers, which has lobbied for the bigger R&D benefit.
Young’s campaign donors also include companies pushing for the R&D change, according to a review of OpenSecrets.org data for the 2022 election cycle. Indianapolis-based drugmaker Eli Lilly and Co. reported lobbying on the issue last year and was among Young’s 10 biggest funders. The company is also among the top employers in Indiana, according to the Indianapolis Business Journal.
Other Young donors that lobbied on the R&D deduction include Masimo Corp., a medical device maker, and Honeywell International Inc., a manufacturer.
Sweating together
After the chips package passed, Senate Majority Leader Charles E. Schumer, D-N.Y., recounted a central plank of the legislation coming together thanks to chats with Young while the two worked out on exercise bikes at the gym. It wasn’t the first time Young, a 50-year-old former Marine, forged bonds while working out at the Capitol’s member-only gyms.
Young said he and new Ways and Means Chairman Jason Smith, R-Mo., used to “sweat together” in the House gym as part of a morning workout group, calling him an “incredibly sharp” lawmaker who believes in the power of the market even though he won’t always do businesses’ bidding. Young met with Smith earlier this year and said Smith supports his work to revive full R&D expensing, though the two have yet to discuss a specific path forward.
Young argued the R&D provision fits well in Smith’s vision of a “working class” GOP. He said allowing companies bigger tax breaks for investing in R&D boosts manufacturing and agriculture jobs that help people earn higher wages and improve their financial positions.
Young also said the R&D issue is urgent for competition with China, noting it shouldn’t be forgotten as lawmakers delve into debate on social media app TikTok and Chinese spy balloons.
While it’s widely backed among lawmakers and corporate lobbyists have been leaning on Congress to act, restoring full R&D deductions isn’t that simple.
At the start of last year, companies began having to spread those deductions over five years due to a cost-saving measure in Republicans’ 2017 tax law, instead of full deductions in the year the expense is incurred. That “scores” as an upfront tax savings to the Treasury, but it hits companies’ bottom lines.
Last year, Democrats said they want to reverse that change but only if the GOP also agreed to bring back some element of a larger child tax credit, which provides benefits to low and middle-income families with kids, after Democrats’ 2021 expansion lapsed.
Some Democrats have been more specific on that demand, while others have said any aid for lower-income families could be acceptable. While Republicans generally support the child credit, they reject Democrats’ version and wouldn’t consider an expansion last year, which dashed all hope of a year-end tax package.
Young said he doesn’t believe a bipartisan expansion of the child credit is possible right now, citing the price tag of Democrats’ 2021 version and some Republicans’ discomfort with its generosity.
“I’m open to the conversation,” Young said. “I think it should go through regular order. I think if carefully crafted — and that would mean crafted in a way that would encourage people into the workforce — we could get a lot of Republican support for a well-crafted child tax credit, but I don’t believe that’s what’s being put forward here. And I think there’s still a lot of separation between Republicans and Democrats on this issue, so I think it’s a bad fit for us.”
Aviation bill eyed
Instead, he’s been listening carefully to what Senate Finance Chair Ron Wyden, D-Ore., is saying about his expectations for a tax package and plans to pitch him on the housing and R&D-based option. He’s eyeing the Federal Aviation Administration reauthorization measure, which is due by Sept. 30, as a legislative vehicle because it would likely include a tax title.
Asked Tuesday, Wyden didn’t box himself into a particular option to pair with R&D and appeared open to something beyond the child credit, emphasizing the need to expand the social safety net and have a balanced package. He declined to give a stance on a housing and R&D-based package specifically, saying he wouldn’t get ahead of his colleagues and is having conversations about how a tax title could look.
Wyden also said he’s been pitching business groups on the importance of addressing the social safety net, arguing it’s critical to addressing businesses’ own complaints about difficulty hiring workers, particularly for high-skill, high-wage jobs.
Wyden has already convened a hearing on tax incentives for affordable housing this year — unveiling his own package in conjunction — and said the only option “off the table” is failing to pass legislation this year to address the persistent shortage of affordable housing.
Another top Democrat, Michigan Sen. Debbie Stabenow, didn’t close off the option of other safety net initiatives, such as housing riding with the R&D revival, but pointed to the child tax credit as the best option.
Meanwhile, House Republicans could be receptive to Young’s pitch. When asked about it, Ways and Means Tax Subcommittee Chairman Mike Kelly, R-Pa., said Young has done good work on affordable housing and that he planned to call him to discuss it.
Young suggested the contours of a housing package could take form in the Republican-controlled House.
“In short, what I’ve sort of outlined for you is I think not just a GOP-friendly but a market-oriented housing affordability agenda,” Young said. “Those would be the sorts of initiatives that I think — if warmly embraced by Democrats as initiatives in parallel with the R&D provisions — might give us a path to victory.”
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