Senate releases Trump tax and Medicaid blueprint

Senate Finance Committee Chair Mike Crapo (R-Idaho) on Monday released the Senate’s long-awaited version of President Trump’s tax agenda, which would make the 2017 corporate tax cuts permanent, cut hundreds of billions of dollars in Medicaid spending and phase out renewable-energy tax cuts enacted under President Biden.

The legislative text crafted by Senate Finance Committee Republicans represents the core of Trump’s "big, beautiful bill" and includes the populist tax breaks that the president campaigned on, including provisions to shield tipped income from taxation.

But it includes several changes that puts Senate Republicans on a collision course with the House.

The measure encompasses the most controversial sections of the bill, such as proposals to impose stricter work and eligibility requirements for Medicaid and to reduce the federal government’s share of Medicaid spending in states.

It would raise the debt ceiling by $5 trillion, instead of the $4 trillion, the increase adopted by House Republicans.

The debt-ceiling language is a major problem for Sen. Rand Paul (R-Ky.), who has told his leadership he won’t support the bill if it includes such a large extension of federal borrowing authority.  

Sen. Ron Johnson (R-Wis.), an outspoken fiscal conservative, told reporters Monday evening that he would oppose the bill if it came to the floor in its current form because it doesn’t go far enough to cut the $2.2 trillion annual deficit.

“We’re not doing anything to significantly to alter the course of the financial future of this country,” he said. “We’re not seriously addressing our long-term deficit and debt issues.”

With Paul and Johnson opposed to the measure, Senate Republicans can afford only one more defection from their caucus and still pass the bill.  

Crapo presented the newly drafted provisions in the bill to Republican colleagues at a meeting Monday evening.

Two Republican aides familiar with the legislation drafted by the Finance panel say it will go further than House-passed language to tighten Medicaid eligibility requirements and to restrict states from using health care provider taxes to collect more federal Medicaid funding.

“It’s still f’d up,” a GOP aide said of the Senate’s changes to the House-passed Medicaid provisions.

The text includes a provision that would require states to conduct eligibility redeterminations every six months for individuals enrolled in Medicaid under the 2010 Affordable Care Act’s Medicaid expansion.

The Senate Finance panel has also drafted a provision that would prevent states that didn’t expand Medicaid under the Affordable Care Act from increasing the rate of health care provider taxes to gain more federal funding.

And, beginning in 2027, the legislation would lower health care provider taxes in states that chose to expand Medicaid to 3.5 percent.

Like the House bill, the Senate legislation imposes work requirements on Medicaid beneficiaries beginning at 19 years old. But the Senate version says adults with dependent children older than 14 will also have to prove they work, attend school or perform community service for 80 hours a month, while the House-passed version would exempt all adults with dependent children 

Several Republican senators have raised concerns about the Medicaid spending cuts endorsed by the House, including Sens. Susan Collins (Maine), Josh Hawley (Mo.), Jerry Moran (Kan.) and Lisa Murkowski (Alaska).

Hawley said he was not happy about the language in the bill to cap states’ use of health care provider taxes to attract federal funding for rural hospitals. And he took a shot at the bill for extending the time for phasing out clean-energy tax credits enacted under President Biden.

“It sounds like to me like we’re going to keep the Biden ‘green new deal’ subsidies and we’re going to pay for that by defunding rural hospitals. That’s going to be hard argument to make in Missouri,” he told reporters.

He said the language in the bill to require some people on Medicaid to pay higher co-pays is “not good.”

“It sounds like to me like this needs some work,” he said.

The Congressional Budget Office (CBO) estimated earlier this month that the House-passed bill would cut federal spending on Medicaid and the Children's Health Insurance Program (CHIP) by $863 billion over ten years.

The agency projected that the number of uninsured people in the country would increase by 10.9 million over the next decade if the House proposals become law. 

Collins told reporters after meeting with colleagues to discuss the bill that its restrictions on states’ use of health care provider taxes is a major concern but she declined to comment in more detail.

The Maine senator, who faces a competitive re-election race next year, said she had plenty of consultation from the Senate GOP leadership but she acknowledged with mixed results.

Asked if Crapo listened to her input in crafting the legislation, Collins laughed and replied: “Sometimes yes, sometimes no.”

The deeper cuts to Medicaid spending come in response to a large number of Republican senators, including Senate Budget Committee Chairman Lindsey Graham (R-S.C.), who called for the legislation to further reduce the deficit.

The House-passed bill would cut spending by $1.6 trillion over ten years but, according to the Congressional Budget Office, add $2.4 trillion to the federal deficit.

The Senate legislation does not include changes to cut spending on Medicare Advantage, an alternative to traditional Medicare offered by private companies. Senate Republicans had discussed achieving up to $275 billion in savings from that program, even though Trump had urged GOP lawmakers to stay away from the popular program.

The text appears to eliminate the most stringent green energy tax credit provision in the House bill, deleting a measure that would have required climate-friendly energy sources to start construction within 60 days of the bill’s enactment to qualify for the credits at all. And it adds some flexibility in how quickly green construction projects must be completed to qualify for tax credits.

But in what could be a red flag for Sen. Shelley Moore Capito (R-W.Va.), the bill would terminate the clean hydrogen production tax credit on Jan. 1, 2026, if hydrogen energy production facilities are not under construction by then.

Capito has said that the Appalachian Regional Clean Hydrogen Hub in her home state will not be under construction by that deadline.

The Senate bill locks in existing federal tax brackets, boosts the standard deduction and maintains the termination of personal exemptions — all without sunsets.

Different from the House version, the bill sets a lower increase for the child tax credit (CTC), raising it to $2,200 per child as opposed to the House’s $2,500.

Hawley called the child tax credit provided by the bill “too low,” although he said the Senate’s version is comparable to the House’s because the Senate would index the benefit to inflation.

The bill creates new deductions for taxes on tips, overtime pay and car loan interest but doesn’t make them fully deductible. Tips are deductible up to $25,000 through 2028. Overtime pay is deductible up to $12,500, or $25,000 for joint filers, through 2028. Auto loan interest is deductible up to $10,000, also through 2028.

The Senate bill as drafted would keep the cap on state and local tax (SALT) deductions at $10,000 a year, rolling back the deal that Speaker Mike Johnson (R-La.) painstakingly cut with blue state Republicans to raise the limit on SALT deductions to $40,000 a year for households earning less than $500,000 annually.

It would permanently extend the $10,000 cap, which is scheduled to expire at the end of this year.

Members of the House SALT Caucus have repeatedly warned the Senate against reneging on their deal with Johnson and on Monday seethed at the change.

"Instead of undermining the deal already in place and putting the entire bill at risk, the Senate should work with us to keep our promise of historic tax relief and deliver on our Republican agenda,” co-chairs Reps. Young Kim (R-Calif.) and Andrew Garbarino (R-N.Y.) wrote Monday.

Senate Agriculture Committee Chair John Boozman (R-Ark.) said the Senate softened the House-passed language cutting the Supplemental Nutrition Assistance Program (SNAP) by giving states an opportunity to get more federal funding if they reduce errors in paying out food assistance.

Boozman said he’s heard generally positive reaction to the Senate’s changes to the House language.

He said that while the House bill would cut federal SNAP funding by 5 percent “straight off the top,” the Senate bill would let states avoid federal funding cuts by getting their error rate “down to zero.”

Updated at 8:32 p.m.

Rachel Frazin, Nathaniel Weixel, Tobias Burns and Al Weaver contributed.