Medicaid cuts, other details from Senate committee's tax bill text
The GOP-led Senate Finance Committee on Monday released its proposal for President Donald Trump's agenda bill that calls for enacting sweeping cuts to Medicaid and preventing a multi-trillion dollar tax hike on Americans.
The committee would maintain many of the provisions contained in the legislation that the House narrowly approved last month, including making permanent essentially all the individual income tax cuts contained in the 2017 Tax Cuts and Jobs Act, which are set to expire at year's end, and instituting work requirements in Medicaid for the first time.
But the committee is calling for some notable changes to the package, including lowering the cap on state and local tax deductions, instituting deeper cuts to Medicaid, slowing the elimination of some clean energy tax credits and making permanent several business tax breaks and a beefed-up child tax credit.
Senate committees are racing to release their versions of the 'Big, Beautiful Bill' in hopes of passing their package next week so the two chambers can work out a final deal and send it to Trump by July 4.
In the legislative text unveiled Monday, the Senate Finance Committee would permanently extend the current $10,000 cap on state and local tax deductions, potentially blowing up a carefully constructed deal in the House to lift the cap on state and local deductions to $40,000 for married couples. However, the committee noted in a summary of its provisions that the cap is 'the subject of continuing negotiations.'
The $10,000 cap, which was instituted by the 2017 Tax Cuts and Jobs Act, was a major sticking point in the House negotiations. Speaker Mike Johnson worked out an agreement with GOP lawmakers from high-tax states to raise the cap to $40,000 for those making $500,000 or less.
But Senate Republicans have expressed disdain for the deal because of its price tag and because it primarily benefits taxpayers from blue states.
Rep. Mike Lawler, a New York Republican, issued a stern warning to Senate Republicans earlier on Monday: Any changes to pare back the deal, he said, would cause the bill to collapse in the House.
'After engaging in good faith negotiations, we were able to increase the cap on SALT from $10,000 to $40,000,' Lawler said in a statement. 'That is the deal, and I will not accept a penny less. If the Senate reduces the SALT number, I will vote NO, and the bill will fail in the House.'
Republicans on the Senate Finance Committee are also calling for making permanent several tax breaks for businesses, including allowing companies to immediately deduct the cost of equipment and research and development in the year the expense was incurred. These are designed to enhance the economic growth potential of the package but would also increase the cost.
The committee would also permanently beef up the child tax credit to $2,200, in contrast to the House, which would increase the credit to $2,500 from 2025 through 2028.
And while the Senate committee would keep Trump's campaign promises to eliminate taxes on tips and overtime, it would place caps on that relief –- allowing tipped workers to deduct only up to $25,000 in tip income and limiting the deduction for overtime pay to $12,500 for a single worker. Those tax breaks would only be in place from 2025 through 2028, as in the House version.
But the Senate measure would provide a more generous deduction for senior citizens than the House bill: $6,000 versus $4,000. The provision would be in effect from 2025 through 2028 in both versions of the bill.
In a contentious move, the committee would cap most states' ability to levy provider taxes on certain health care providers – notably, hospitals – to 3.5% by 2031, down from the current 6% limit. However, that provision would only apply to the 40 states and the District of Columbia that have expanded Medicaid to low-income adults.
States that have not expanded Medicaid, which are largely GOP-led states, would be restricted from increasing the rate of their current provider taxes, which would not have as sizable an impact.
The issue of provider taxes has divided GOP lawmakers, with conservatives arguing that states use these taxes to get more federal Medicaid matching funds, while more moderate members worry that limiting such taxes could hurt hospitals, particularly those in rural areas.
States use the revenue they raise from taxing providers to boost provider rates and fund health-related initiatives, among other uses. Every state except one levies at least one type of provider tax.
Also, the Senate would require more parents to work, volunteer, go to school or participate in job training for at least 80 hours a month to maintain their Medicaid benefits. The committee would mandate that parents of children ages 15 and older would be subject to the work requirement, while the House version exempted parents of dependent children.
The Senate's changes would likely result in even more people losing their Medicaid coverage than the House provisions, which would increase the number of uninsured Americans by 7.8 million in 2034, according to the Congressional Budget Office.
The Senate Finance Committee text would kill a consumer tax credit for electric vehicles and quickly phase out tax credits helping homeowners defray the cost of energy efficient appliances and rooftop solar, ending those by next year.
The Senate text differs somewhat from the House bill on energy tax credits for businesses producing electricity. Like the House bill, it hits wind and solar producers particularly hard, phasing out clean energy tax credits for those projects starting next year, with the credit ending by 2028. However, companies generating electricity with zero-emission sources like nuclear, geothermal or hydropower can claim the credit for a longer period of time.
The Senate text would also terminate a tax credit for companies that make clean hydrogen, something favored by the oil and gas industry.
The Senate committee would raise the debt limit by $5 trillion, compared to $4 trillion in the House version, providing more time for Trump to enact his policies without needing to negotiate a deal with Democrats to address the cap.
The US hit its roughly $36 trillion debt ceiling in January. Treasury Secretary Scott Bessent has urged Congress to address the cap before its August recess to allow the agency to continue paying the nation's bills in full and on time, preventing a default that would likely have catastrophic global economic consequences.
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