Senate Republicans Target Changes in Trump Tax Overhaul/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Senate Republicans propose key changes to Trump-era tax cuts, adjusting deductions for state and local taxes, health savings, and business incentives. They seek permanent permanent enhancements but exclude EV fees and gym allowances. House and Senate now prepare to reconcile their versions ahead of a July 4 target.
Trump Tax Break Changes Quick Look
- Senate and House Republicans differ on key tax provisions in Trump’s new bill.
- Senate proposes a smaller, permanent child tax credit increase; House offers a larger, temporary bump.
- Differences emerge on state and local tax (SALT) deduction caps and vehicle loan interest deductions.
- Senate sets stricter limits on deductions for tips and overtime, compared to broader House allowances.
- Medicaid funding changes in the Senate bill raise concerns for rural hospitals and healthcare providers.
- House supports temporary business deductions; Senate wants permanent tax breaks for R&D and equipment.
- Clean energy tax credits face phase-outs in both chambers, though timing varies.
- Other debates include health savings account gym payments and fees on electric and hybrid vehicles.
Senate Republicans Target Changes in Trump Tax Overhaul
Deep Look
Tax Break for Families
The House version of the tax accord temporarily increases the child tax credit from $2,000 to $2,500 for 2025–2028, with inflation indexing beginning in 2027. The Senate, instead, proposes a permanent $2,200 credit starting next year, with full indexing. The permanent but smaller Senate boost may appeal to long-term budget goals, while the House’s larger expansion offers near-term relief.
Campaign Promise Deductions
Both bills respond to Trump’s campaign commitments to exempt tips, overtime, car loan interest, and Social Security from income taxes—though with notable differences:
- Tips & Overtime: The House allows full deduction; the Senate caps tip deductions at $25,000 and overtime deductions at $12,500.
- Auto loan interest: Both allow up to $10,000 in deductions, but only on domestic vehicle purchases.
- Social Security / Age 65 deduction: House sets $4,000; Senate raises it to $6,000, with both phasing out income over set thresholds.
State and Local Tax (SALT) Cap
A central point of divergence is SALT: the House lifts the cap to $40,000 for households earning under $500,000, phasing it out above that. The Senate opts to maintain the existing $10,000 limit. Negotiations will need to settle on a compromise acceptable to both parties before the July deadline.
Medicaid Provider Taxes
The House prohibits states from expanding provider taxes, which fund Medicaid via provider reimbursement. The Senate, however, plans a gradual reduction in provider tax caps—from 6% to 3.5% by 2031, exempting nursing homes and care facilities. Rural hospitals and providers of Senator Josh Hawley (R‑Mo.) expressed concerns this reduction could harm healthcare access in underserved regions.
Business Tax Breaks
The House would provide a five-year window for businesses to fully deduct equipment and domestic R&D expenditures; the Senate has proposed making this permanent—a priority for business groups like the U.S. Chamber of Commerce.
Clean Energy and EVs
In rolling back Biden-era clean energy tax credits, the Senate phasing is slower than the House’s quicker sunset schedule. Meanwhile, the House proposes annual fees of $250 for EVs and $100 for hybrids, while the Senate omits any EV fee provision.
Other Provisions
- Gym memberships: The House allows up to $500 (individual) or $1,000 (joint) using health savings accounts; the Senate excludes this provision entirely.
- Charitable deductions: The House reinstates a $150 deduction for non-itemizers; the Senate increases it to $1,000.
Next Steps
The Senate is advancing its tax-spending package, aiming to pass soon to allow negotiations with the House text. Both chambers must resolve discrepancies in SALT caps, energy credits, Medicaid funding, and gym or EV provisions. President Trump continues pushing for a finalized bill by July 4, which would require swift reconciliation.
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