The Senate Finance Committee revealed some of President Trump’s “noteworthy and attractive bills” on Monday, highlighting provisions related to Medicaid, taxation, and green energy tax credits.
This text represents the final segment of the Senate’s version of the bill, which was highly anticipated. It encompasses some of the provisions that Senate Republican Holdouts have expressed concern about, particularly related to the potential setup impacting home affairs.
Last month, the House of Representatives passed a version of this legislation by a narrow margin. Here’s what the Senate bill entails.
Tax Reduction in 2017
The bill aims to make various key elements of the 2017 tax cuts permanent, although it incorporates additional reductions compared to the House’s proposal.
In its current form, the Senate bill maintains existing federal tax brackets to promote standard deductions and eliminate individual exemptions.
Unlike the House version, the Senate sets a lower increase for child tax credits, raising them to $2,200 per child, rather than $2,500 as proposed in the House.
Taxes for Tips
The proposed legislation introduces new tax deductions for tips, overtime pay, and car loan interest. This is a priority for Trump, but the deductions are not fully allowable.
From 2028 to 2028, tips can be deducted up to $25,000. Overtime pay may be deducted up to $12,500, or $25,000 for joint filers through 2028. Similarly, car loan interest can be deducted up to $10,000 until 2028.
Medicaid Funding
Senate Republicans are making more extensive changes to Medicaid in their version of the bill.
The law imposes a cap on provider taxes at 3.5% by 2031, reduced from the current 6%, applicable only to states that expanded Medicaid under the Affordable Care Act. This cap will decrease by 0.5% annually starting in 2027.
States that did not expand Medicaid are prohibited from imposing new taxes, with their tax rates frozen at current levels, similar to the House version. The lower cap will not affect nursing homes or intermediate care facilities.
The restriction on provider taxes aligns with conservative goals, as states argue against the increasing federal Medicaid expenditure on their current systems. This policy aims to distort Medicaid spending on paper, allowing states to access more federal reimbursement funds.
The Senate bill proposes cuts to payments for certain hospitals in existing states, significantly affecting hospital revenues. In contrast, the House version proposed limiting future payments while preserving existing agreements.
These changes in the Senate bill may provoke backlash among Republicans who have already voiced concerns about the freeze on the House-passed version, especially among key holdouts like Senators Susan Collins (R-ME), Lisa Murkowski (R-AK), and Josh Hawley (R-MO). Provider taxes are crucial for hospitals, particularly rural facilities facing cuts.
On Monday evening, Collins expressed her dissatisfaction with the newly published text.
Medicaid Eligibility
Similar to the House bill, the Senate version imposes work requirements on Medicaid beneficiaries starting at age 19.
However, the Senate stipulates that adults with dependent children over 14 must demonstrate work, educational engagement, or community service, whereas the House version exempts all adults with dependent children.
Green Energy Tax Credit
The bill proposes modifications to the Green Energy Tax Credit, which are more lenient than those put forth by the House, but still represent a significant rollback.
The Senate text appears to eliminate the stringent provisions in the House bill, removing requirements that necessitate climate-friendly energy sources to qualify for credit, allowing construction to commence within 60 days of the bill’s enactment.
Under the new guidelines, projects like solar panels and wind farms must start construction this year to qualify for full credits.
Projects commencing in 2026 will earn 60% of the credits, while those starting in 2027 will receive 20%. Projects built after 2028 will not be eligible for credits.
This initiative represents a more flexible stance than the House’s proposal, which mandated not just commencement but actual completion of projects by the end of 2028 to qualify for credits.
Nonetheless, the Senate’s provision signifies a major rollback of the tax credits established by Democrats in the Inflation Reduction Act of 2022, which allowed credits to last until 2032 or until U.S. emissions in the electricity sector fell 25% below 2022 levels.
The Senate text also introduces exemptions for hydro, nuclear, and geothermal energy sources, granting full credit if construction starts before 2034.
Salt
The proposed Senate bill will maintain the state and local tax (SALT) deduction cap at $10,000 per year, as Speaker Mike Johnson (R-LA) is engaged in ongoing negotiations with Blue State Republicans to raise the SALT deduction limit to $40,000 annually for households earning under $500,000.
This will permanently extend the $10,000 cap, which is set to expire at the end of this year.
Senate Majority Leader John Thune (R-SD) stated on Monday afternoon that the $10,000 deduction cap is a “marker” for discussions with House Republicans, aiming to identify a middle ground that accommodates both sides.
Nevertheless, House SALT Caucus Republicans are advocating for a $40,000 cap.
Representative Mike Lawler (R-NY), a significant member of the group, declared on social media platform X that the proposal was “dead on arrival,” labeling the $40,000 deduction cap as “a transaction” that he would not accept. He issued a statement indicating that “there are fewer pennies.”
Debt Cap
The bill proposes raising the debt cap by $5 trillion, as opposed to the $4 trillion increase approved by House Republicans.
The language surrounding debt caps is a contentious issue for Senator Rand Paul (R-KY), who has indicated he will not support the bill if such a significant extension of federal borrowing authority is included.
Mychael Schnell and Al Weaver contributed.
Source: thehill.com