Senate Opts for Deeper Medicaid Cuts in Its ‘Big, Beautiful Bill’

WASHINGTON — Senate Republicans unveiled their version of President Trump’s big bill on Monday, offering up a package that includes deeper cuts to Medicaid, but slows the elimination of some renewable energy tax credits.

Though the bill text released by the Senate Finance Committee is similar, in many respects, to the package passed by an exceedingly narrow 215-214 vote in the House last month, it contains enough changes to virtually ensure an intra-party battle on the path to a final bill.

In a statement intended to put the most positive spin on the bill as possible, Sen. Mike Crapo, R-Idaho, chairman of the Senate Finance Committee, said the bill would prevent over $4 trillion in tax increases, while making Trump’s 2017 tax cuts permanent.

 “I look forward to continued coordination with our colleagues in the House and the administration to deliver President Trump’s bold economic agenda for the American people as quickly as possible,” Crapo continued.

That GOP script called for the bill to be delivered to Trump’s desk by July 4. But given the changes in the Senate bill, final passage in the House will be far more fraught than Speaker Mike Johnson, R-La., had hoped.

Already, Chip Roy, R-Texas, a member of House Freedom Caucus, has said via the X social media platform that he flatly will not vote in favor of the Senate plan.

But other Republicans in the House have been slower to criticize the Senate measure, perhaps because most are back in their districts for a shortened work week due to Thursday’s Juneteenth Holiday.

Medicaid

When it comes to Medicaid, the Senate proposal imposses far deeper cuts to the program than House Republicans could agree on for their bill.

The House measure included a new work requirement to Medicaid for childless adults — a stipulation the Congressional Budget Office has estimated would cause about 5.2 million adults to lose their Medicaid coverage over the next decade.

The Senate plan would expand the work requirement to the parents of children aged 14 and over, requiring them to work or volunteer at least 80 hours a month to qualify for the insurance program.

Senate Democratic Leader Chuck Schumer, D-N.Y., never known for his understatement, called the proposal advanced by his Republican colleagues “more devastating than even the Republican House’s disaster of a bill.”

The Senate proposal also takes a harder line than the House measure in dealing with states that have expanded their Medicaid programs by taxing certain health care providers.

The change would reduce the cap on those taxes from 6% to a new top rate of 3.5%, though the change would be phased in over a number of years.

The taxes, part of an “aid formula readjustment” by the states, have enabled them to secure increased federal funding for their programs.

Every state but Alaska uses some form of the “readjustment,” and a large number of states could see significant shortfalls in their Medicaid budgets if the measure were to be advanced as is.

Clean Energy Tax Credits

The Senate bill takes a far slower approach to phasing out clean energy tax credits included in the Biden-era Inflation Reduction Act than the House bill.

That’s a particular sore point with Roy, who complained on X that these “Godforsaken subsidies are killing our energy, killing our grid, making us weaker, destroying our landscape, undermining our freedom.”

Under the Senate plan, tax credits for businesses that develop solar and wind farms would wind down rapidly.

To qualify for the full tax credits, they would have to begin construction of their project this year, meanwhile companies unable to start construction until 2026 will only be eligible for 60% of the current tax credit, and the number drops to 20% if work on the projects doesn’t begin until 2027.

After that, the tax credit would disappear completely.

But even that’s more generous than the House bill, which would have eliminated the tax breaks in their entirety by the end of the summer.

The Senate bill also preserves existing tax credits for companies that build nuclear reactors, geothermal plants, hydropower dams or battery storage through 2033.

The House bill would have slashed these credits, but senators chose instead to make a distinction between so-called base load electricity sources that can operate at all hours, and intermittent sources like wind and solar energy

The Senate measures would also make solar leasing companies ineligible for federal tax credit, a proposal that mirrors language in the House bill.

And also like the House bill, the Senate measure would end the current $7,500 tax credit for buyers of electric cars, phasing out within 180 days of the bill’s enactment.

Tax credits for homeowners who install solar panels on their rooftops or install heat pumps and induction stoves would also end within that time frame.

A subsidy for making hydrogen fuels would also expire this year.

The Senate measure also adds new restrictions on tax breaks for both power plants and factories that build solar panels, batteries or other low-carbon technologies by disqualifying companies that use certain components from China.

Democrats and clean energy groups on Monday claimed the Senate proposal would destroy jobs and manufacturing across the United States and drive up consumers’ energy bills.

“As we continue to review the Senate Finance Committee text, the proposed draft undermines long-term American energy and economic security and presents a tremendous step backward for companies onshoring the entire solar value chain,” said Mike Carr, executive director of the Solar Energy Manufacturers of America.

“This bill will end any hope of onshoring domestic manufacturing. It would eliminate the market advantage for non-Chinese domestic products that would level the playing field for American manufacturers which is critical for justifying investments in new factories,” Carr continued.

“Instead, it will upset existing contracts for products from domestic factories opening up in the next few months and jeopardize billions in factory investments and thousands of jobs, conceding an important market to heavily subsidized Chinese products.”

State and Local Tax Deduction

The Senate proposal does not have a definitive answer on how to deal with the limit on the state and local tax deduction, an issue critical to any plan garnering the support of lawmakers from high-tax blue states.

Those House and Senate members have been lobbying hard to raise the cap.

The earlier House bill would raise the cap to $40,000 from the current $10,000 limit, and would be based on a scale, reducing the limit for people making more than $500,000 annually.

Other Taxes

Throughout his campaign and into his early weeks in office, Trump promised to do away with taxes on Social Security benefits.

Neither bill does that directly.

The House plan would create a bonus $4,000 deduction available to Americans 65 and older, with the benefit shrinking at higher income levels.

The Senate bill would grant them a $6,000 tax deduction.

The child tax credit is also handled differently by each chamber.

Senate Republicans proposed to permanently increase the credit to $2,200 per child beginning in the 2025 tax year.

House Republicans had proposed to bump up the credit to $2,500, but only through 2028.

The House bill boosted the deduction for pass-through businesses to 23%. The Senate makes the 20% deduction permanent but adds other adjustments.

The Senate’s version of Trump’s “no tax on tips” promise caps deductions at $25,000. Benefits start phasing out for people making more than $150,000 per year.

As for the president’s “no tax on overtime” pledge, the Senate proposal is limited to a $12,500 maximum deduction and also phases out at the $150,000 income level.

Under the Senate plan, the endowment tax for colleges and universities with endowments worth $750,000 to $2 million per student would only rise to 4%, where the House bill lifted it to 21%.

The Senate bill also includes a new remittance tax on international money transfers, but limits it to cash transactions, giving a break for money sent from bank accounts and debit or credit cards.

The provisions proposed by the Senate would increase the debt limit by $5 trillion; the bill passed by the House called for lifting it by $4 trillion.

Both moves are seen as enabling the nation to continue borrowing money through the 2026 midterm elections.

Dan can be reached at [email protected] and on X @DanMcCue