Senate Republicans have proposed changes to President Trump’s tax and spending bill to make some business tax breaks permanent and limit the deduction for state and local income taxes, drawing criticism from House Republicans.
The differing versions in the Senate and House may make it hard to pass the bill before the July 4 deadline.
Senate Republicans want to keep the current $10,000 cap on state and local tax deductions, down from the $40,000 cap in the House version. That change upset House Republicans whose constituents favour the higher deduction. The Senate Finance Committee says negotiations are still underway.
The Senate version would also cap deductions on tipped income and overtime pay, offering a phase-out of the tipped income deduction above certain thresholds. The House version allows full deduction for tipped income up to $160,000.
The bill would extend Trump’s 2017 tax cuts, increase defence and border security spending, and raise the debt ceiling by $5 trillion to avoid default on the $36.2 trillion national debt.
Senate provisions would cap Medicaid provider taxes at 3.5% by 2031, lower than the current 6%, prompting concern from rural hospital advocates. Critics say the change could harm healthcare in rural areas.
The Congressional Budget Office estimated about 4.8 million Medicaid recipients could lose coverage under the earlier version of the bill.
Senate Democrats called the Medicaid cuts deeper than those in the House. The Senate bill would also phase out subsidies for electric vehicles and clean energy more rapidly than the existing law.
The proposal would make full expensing for domestic research and development and new machinery and equipment investments permanent, benefits that are temporary in the House version. A retaliatory tax aimed at foreign investors would be delayed until 2027, similar to the House plan.
Senate Finance Committee Chairman Mike Crapo said lawmakers will keep working with the House and the administration to move the bill forward. A debate in the Senate is expected before returning the text to the House.
