Senate Version Of ‘Big Beautiful Bill’ Sets Up Showdown With House Over Taxes, Medicaid And SALT

Senate Republicans on Monday unveiled the final and most contentious component of President Trump’s sweeping legislative package, the “Big, Beautiful Bill.” The Finance Committee’s long-awaited text – covering tax policy, Medicaid, and energy provisions – sets the stage for difficult negotiations between the Senate and the narrowly Republican-controlled House.

The Senate proposal scales back or reconfigures several measures passed by the House last month, particularly around health care funding and green energy. It also reveals stark policy divides that could derail GOP unity in the upper chamber.

Making the 2017 Tax Cuts Permanent – with Limits

A core pillar of the Senate’s bill is the permanent extension of key provisions from the 2017 tax overhaul. The legislation would lock in current federal tax brackets, boost the standard deduction, and continue the repeal of personal exemptions — all without expiration dates.

However, the Senate scaled back additional cuts proposed by House Republicans. Notably, the child tax credit would rise to $2,200 per child, short of the $2,500 outlined in the House bill.

New Deductions for Workers, with Caps

The bill introduces targeted deductions for tipped workers, overtime earners, and car owners — a nod to priorities championed by President Trump during his re-election campaign. But the deductions are temporary and capped.

• Tips: Deductible up to $25,000 through 2028

• Overtime Pay: Deductible up to $12,500 (or $25,000 for joint filers) through 2028

• Auto Loan Interest: Deductible up to $10,000 through 2028

While the House bill sought broader relief, Senate Republicans opted for a more measured approach.

A Sharper Knife to Medicaid

In a significant departure from the House version, the Senate bill aggressively targets Medicaid financing, particularly in states that expanded the program under the Affordable Care Act.

The legislation would reduce the allowable provider tax rate – a key funding mechanism for state Medicaid programs – from 6 percent to 3.5 percent by 2031. This reduction, phased in beginning in 2027, would apply only to expansion states.

Meanwhile, non-expansion states would be barred from introducing new provider taxes, though existing rates would be preserved. Nursing homes and intermediate care facilities are exempt from the cuts.

Unlike the House version, which protected existing hospital payment arrangements, the Senate bill eliminates some current state-directed payments altogether. The move drew immediate criticism from rural-state Republicans. Sen. Josh Hawley (R-Mo.), whose state relies heavily on provider taxes, expressed concern about the impact on hospitals.

Work Requirements, With Tighter Conditions

Both chambers support requiring certain Medicaid recipients to meet work requirements, but the Senate version goes further. Adults with children over the age of 14 would now be required to work, attend school, or perform community service at least 80 hours a month.

The House version would exempt all parents of dependent children — a difference likely to stir debate during reconciliation talks.

Green Energy Credits Rolled Back, but Less Harshly

The Senate’s approach to green energy tax credits appears less stringent than the House’s, though it still represents a rollback of the 2022 Inflation Reduction Act.

Under the Senate bill:

• Projects must begin construction in 2025 to qualify for full credits.

• Projects starting in 2026 would receive 60 percent of the credit.

• Those beginning in 2027 would receive 20 percent.

• After 2028, no credit would be available.

Unlike the House version, the Senate bill removes a requirement that projects produce electricity by 2028. It also extends eligibility to hydro, nuclear, and geothermal projects starting before 2034 — additions not included in the House’s text.

SALT Deduction Fight Reignited

The Senate text would make permanent the existing $10,000 cap on state and local tax (SALT) deductions, a dramatic rollback of a compromise secured by Speaker Mike Johnson (R-La.) with blue-state Republicans to raise the cap to $40,000 for households earning under $500,000.

Majority Whip John Thune (R-S.D.) acknowledged that the $10,000 figure is a negotiation starting point. But House moderates are not budging.

“This proposal is DEAD ON ARRIVAL,” Rep. Mike Lawler (R-NY) posted on X, adding that “$40,000” is what was agreed upon after ‘good faith negotiations.’ 

I, along with my fellow SALT Caucus members, are actively engaging with Senators, House Leadership, and the White House and am confident the deal as previously negotiated will be in the final bill that is signed into law. https://t.co/LZovYoFs7O pic.twitter.com/scC1jj4oXe

— Congressman Mike Lawler (@RepMikeLawler) June 16, 2025

A Larger Debt Ceiling Hike Triggers Backlash

Perhaps the most contentious provision of all: the Senate bill would increase the debt ceiling by $5 trillion, surpassing the House’s proposed $4 trillion hike.

The move drew immediate opposition from fiscal conservatives. Sen. Rand Paul (R-KY) said he had informed Senate leadership he could not support the bill with the current debt ceiling language.

Section 899

As Goldman Sachs notes, the Senate version of the “Section 899” provision to impose taxes on certain foreign individual, corporations, and governments makes four important changes from the House version:

1. The application of higher US taxes would be delayed one year until the start of 2027.
2. The same 5pp increase in tax rates but explicitly limit the total increase to 15pp after 3 years.
3. The “portfolio interest exception” would exclude individual and corporate holders from increased tax withholding on interest payments.
4. Small technical change that should result in the exclusion of foreign governments including central banks from interest withholding along with corporate and individual holders of US debt.

Collision Course Ahead

With the Senate bill now public, Republicans face an uphill climb in reconciling the two chambers’ positions. Deep ideological divisions remain on Medicaid reform, tax relief structure, and the scale of federal borrowing.

Negotiations are expected to intensify in the coming weeks as Republicans seek to deliver on Trump’s legislative priorities while avoiding a GOP family feud that could fracture the party ahead of November.