What House and Senate Republicans can’t agree on in Trump’s tax bill
Congress is moving toward passing the centerpiece of President Donald Trump’s tax and spending agenda – but that doesn’t mean all Republicans agree on some of its most crucial components.
Trump’s massive tax and immigration measure would extend nearly $4 trillion in tax cuts from his first term, while also ending taxes on tips and overtime and spending hundreds of billions on immigration enforcement and national defense.
Republicans broadly agree on those proposals, but GOP lawmakers in the House and the Senate have struggled to reach consensus on how to pay for them and on other policies that touch on child care, business investments and climate change – programs that could dramatically alter the economy and the federal government.
Here are Republicans’ biggest areas of disagreement, and what they could mean for you.
Child tax credit
Each chamber has a slightly different approach here, but over time, both versions would wind up at about the same place. The House would increase the maximum child tax credit to $2,500, from the current $2,000. The Senate would raise it to $2,200, then index the payment to inflation, so as the cost of living goes up, so would the credit. Republican lawmakers in both chambers appear to be mostly content with the Senate’s version.
Medicaid cuts
Changes to Medicaid, the federal health insurance program for low-income individuals, have sparked some of the sharpest disagreements among Republicans.
In the House, the bill calls for new requirements for beneficiaries, including co-pays for those earning above 100% of the federal poverty level and work requirements for many able-bodied, childless adults. It would tighten eligibility verification rules and penalize states that provide health coverage to immigrants.
The Senate’s bill proposes more aggressive cuts, incorporating much of the House’s framework and reducing federal support for states that expanded Medicaid coverage under the Affordable Care Act; 44 million people get their health insurance through the law’s marketplaces or Medicaid expansion, according to the KFF. The Senate would also limit taxes that states charge medical providers as a roundabout way of collecting more federal Medicaid dollars. That has some lawmakers particularly concerned about rural hospitals, which rely heavily on Medicaid patients.
Limits on anti-hunger assistance
The House’s legislation would cap future expansion of SNAP, the Supplemental Nutrition Assistance Program formerly known as food stamps. It would also pass on more of the cost for administering the program to state governments, potentially forcing local officials to decide whether to cut benefits or dig into their state and municipal budgets.
The Senate’s bill cannot keep that provision; it was ruled out of order by the parliamentarian. That takes a big chunk out of the savings Republicans had hoped to find to cover the costs of extending the tax cuts: The Congressional Budget Office found that change would have saved the federal government more than $128 billion over 10 years by shifting those costs to states.
Tips, overtime, senior bonus
The House’s bill is slightly more generous than the Senate’s when it comes to some of Trump’s campaign promises for new tax breaks. The House would allow workers in certain industries – mostly food service and hospitality – to exempt all of their tipped income and overtime wages from federal taxes so long as they are not considered “highly compensated employees.” The Senate would cap tip and overtime deductions at $12,500 for single filers or $25,000 for married couples filing jointly.
The Senate, though, is slightly more generous when it comes to seniors. Trump ran on a campaign promise to exempt Social Security benefits from taxes. His bill does not include that; instead, Republicans added several thousand dollars to the standard deduction for filers aged 65 and up.
The Senate would offer a $6,000 bonus, the House a $4,000 bonus.
State and local tax deduction
The state and local tax deduction, or SALT, is perhaps the largest wedge between the House and the Senate. The policy allows itemizing filers to deduct what they paid in state and local taxes from their federal taxable income, reducing their overall tax burden. The House’s bill would allow filers earning no more than $500,000 to deduct $40,000 on SALT, a product of hard-fought negotiations that nearly tanked the legislation in the lower chamber. The Senate’s bill would limit the SALT deduction to $10,000, where it stands under current law; the limit was imposed in 2017 to offset some of the costs of Trump’s tax cuts.
Blue-state Republicans in the House say they will vote against the legislation if it arrives back in their chamber without the $40,000 deal.
Rescind money to fight climate change
The House was more aggressive about gutting elements of President Joe Biden’s signature 2022 climate law, the Inflation Reduction Act. It would eliminate a federal tax credit of up to $7,500 that consumers can receive for buying an electric vehicle. Republicans are also seeking to phase out incentives for the production of clean energy, such as wind and solar power.
The Senate’s bill would temporarily preserve some of those credits. Wind and solar energy producers would maintain their tax breaks until 2026 and would then see the benefit phase out over two years. For hydropower, nuclear and geothermal energy firms, the phaseout period wouldn’t begin until 2034.
Business tax deductions
For a trio of business tax deductions – bonus depreciation, research and development expensing, and asset depreciation – both versions of the bill are similar. The main difference is that the House would sunset those deductions after 10 years, while the Senate would make them permanent, which would be more expensive.
The two chambers have a more substantial disagreement on a “duty drawback” provision that provides tax rebates for tobacco companies that import their products. The House would immediately eliminate that rebate. The Senate, under pressure from Sen. Thom Tillis (R-North Carolina), would preserve it.
Weakening federal courts
The House included a provision that would block federal courts from imposing contempt citations unless the plaintiff posted a bond as collateral. The result, legal experts say, would be to significantly reduce the power of judges to train accountability, especially on civil rights issues.
The Senate bill does not include this provision – and the final legislation won’t, either. The Senate parliamentarian ruled that the proposal violates the procedures that govern “budget reconciliation,” the procedure Republicans are using to bypass a Democratic Senate filibuster.
Debt ceiling
The House and the Senate are $1 trillion apart on raising the debt ceiling, a cap on how much the government can borrow to pay for spending Congress already approved. The House wrote its bill with a $4 trillion debt limit increase; the Senate proposes $5 trillion.
Trump is the animating force behind this policy; he wants to eliminate the debt limit, something that cannot be accomplished through the reconciliation process. The next best option, lawmakers have said, is raising the debt ceiling enough to cover spending through the end of his term.