U.S. Senate Republicans on Monday unveiled proposed changes to President Donald Trump‘s sweeping tax-cut and spending bill that would make some business-related tax breaks permanent while making more limited the deduction for state and local income taxes, angering some colleagues in the House of Representatives.
The different versions of the bill in the two narrowly Republican-controlled chambers of Congress could complicate party leaders’ goal of passing the bill, which is the centerpiece of Trump’s domestic agenda, before a self-imposed July 4 deadline.
The new changes ran into early resistance from two separate Senate Republican camps: those who want deeper spending cuts to attack the growing federal deficit and others looking to preserve social-safety nets including the Medicaid healthcare program for lower-income Americans.
“The problem is, it just simply doesn’t meet the moment. It’s just inadequate,” said Senator Ron Johnson of Wisconsin, a leading deficit hawk who said he would oppose the bill without further spending cuts. “We’re not seriously addressing our long-term deficit and debt issue.”
One big change would involve maintaining the current $10,000 cap on federal deductions for state and local income taxes, well below the $40,000 limit in the version approved by the House last month. That drew immediate criticism from House Republicans whose constituents would benefit from the higher deduction.
But a committee document shows the amount is subject to continuing negotiations.
The Senate Finance Committee proposal would also cap tax breaks on tipped income and overtime pay that Trump promised during the 2024 campaign. The House version would allow deductions on tipped income for those earning up to $160,000 a year.
The bill would extend the 2017 tax cuts that were Trump’s main legislative achievement during his first term in office, and would also boost spending for the military and border security.
The measure raises the federal government’s self-imposed debt ceiling by $5 trillion, a step Congress must take by some time this summer or risk a devastating default on the nation’s $36.2 trillion in debt.
“I look forward to continued coordination with our colleagues in the House and the Administration to deliver President Trump’s bold economic agenda for the American people as quickly as possible,” said Republican Senate Finance Committee Chairman Mike Crapo of Idaho in a statement unveiling the revised bill.
With a 53-47 Senate majority and a 220-212 edge in the House, Republicans can afford to lose few votes to pass a bill that faces united Democratic opposition.
The Senate version provides a deduction of up to $25,000 on tip income, which would begin to phase out for incomes above $150,000 for individuals and $300,000 for married couples. For overtime pay, Senate Republicans propose a $25,000 deduction for joint filers.
On Medicaid, the Senate provisions riled some Republicans by effectively capping a health-care-related fee known as a provider tax at 3.5% by 2031, down from the current 6%, in states that expanded Medicaid coverage under the Affordable Care Act. Provider taxes, which are paid by Medicaid providers including hospitals and nursing facilities and which help finance states’ share of Medicaid, have been criticized as a gimmick or loophole by budget watchdogs, but rural hospitals and other healthcare providers have argued they are necessary to stay solvent.
“I’m alarmed by this,” said Senator Josh Hawley of Missouri, who has positioned himself as a champion of Medicaid beneficiaries. “This is a whole new system that is going to defund rural hospitals, effectively.”
Before the Senate revisions, the nonpartisan Congressional Budget Office said the legislation would leave about 4.8 million Medicaid recipients without health insurance.
Top Senate Democrat Chuck Schumer said the measure’s “cuts to Medicaid are deeper and more devastating than even the Republican House’s disaster of a bill.”
The Senate version also would more aggressively phase out subsidies for electric vehicles and green energy that were passed under Democratic former President Joe Biden. Shares of U.S. solar energy companies tumbled in extended trade on Monday.
The proposal also includes a key priority of Senate Republican leadership by making certain business tax breaks permanent, including full expensing for domestic research and development and new capital investment for machinery and equipment, according to documents released by the panel. Those tax breaks are temporary in the House version.
A retaliatory tax targeting foreign investors that has raised alarms among some business groups is largely the same as the House version, though it would be delayed by a year to 2027.
The Senate will now debate the modified text of Trump’s One Big Beautiful Bill Act. The Senate would need to pass the bill and send back to the House for another vote before Trump could sign it into law.
“It’s still a work in progress,” said Senator John Hoeven of North Dakota. “People are still offering up ideas. But each time, they’re going to improve it and getting us closer … it’ll still change some.”
Reprinted from Reuters