Will the “One Big, Beautiful Bill” get better? The Senate has proposed reforms to do so by controlling the bill’s costs while boosting its economic impact.
After the House passed President Trump’s signature bill, the legislation was sent to the Senate for a vote. The Senate has made its package of reforms public. Once approved by the Senate, the changes go back to the House, where they must be approved.
The House version passed by the slimmest of margins.
As a reminder, this bill extends and enhances expiring tax cuts for households and small businesses, repeals green subsidies, and provides border security funds.
How the House and Senate Versions Compare and Contrast
The Senate adopted many of the provisions included in the House version of the “One Big, Beautiful Bill,” including:
- Lowered rates made permanent
- Higher exemption for estate taxes made permanent
- No tax on car loan interest: a deduction of up to $10,000 for interest paid for vehicles made in the United States.
There are key differences in provisions affecting families and individuals:
- The doubled Child Tax Credit:
(House) Made permanent and boosted $500 per child from 2025-2028,
(Senate) Made permanent and a one-time boost of $200 per child in 2025 - The doubled standard deduction:
(House) Made permanent and boosted by $1,000 – $2,000 for several years
(Senate) Made permanent and a one-time boost of $1,000 (single) / $2,000 (married) in 2026 - No Tax on tips:
(House) Deduction for tips earned
(Senate) Deduction for tips earned is limited to $25,000 per taxpayer - No tax on overtime:
(House) Deduction equal to the amount of OT a worker has earned
(Senate) Deduction for overtime earned is limited to $12,500 per taxpayer - Tax relief for seniors:
(House) $4,000 deduction for Americans age 65 and older
(Senate) $6,000 deduction for Americans age 65 and older
Data Wrapper has a nifty graph here.
The differences in tax provisions affecting businesses:
- Small business 20% deduction:
(House) 20% made permanent and boosted to 23%
(Senate) 20% made permanent with a minimum deduction of $400 established - Full expensing (that incentivizes the purchase of machinery and capital goods):
(House) Temporary extension of full expensing through the end of 2029.
(Senate) Permanent - Full expensing of research & development (R&D):
(House) Temporary through 2029
(Senate) Permanent
The Senate’s changes sharpen the House’s bill. By placing guardrails on new tax benefits for workers and families, the Senate is controlling costs and ensuring that critical tax benefits are weighted towards lower- and working-class individuals.
Making full expensing of capital goods permanent will trigger massive economic growth. This was a kickstart for businesses to purchase new equipment, such as tractors and 3-D printing machines, or expand their warehouses and facilities. As our Earn More, Pay Less series of small business owners demonstrates.
The 3 big friction points in negotiations:
While most of the Senate’s revisions will likely be adopted by the House, there are several sticking points that could hamper the passage of the bill.
- SALT (state and local tax deduction):
(House) Caps on state and local tax deductions at $40,000
(Senate) Keeps cap at $10,000 - Medicaid reforms
(House) Institutes 80-hour-per-week work requirements for able-bodied adults
(Senate) Institutes the House’s work requirements and expands them to parents with dependents over the age of 15
(House) Caps states’ ability to raise provider tax above 6%
(Senate) Caps most states’ ability to raise provider taxes at 3.5% by 2031, only for states that expanded Medicaid under the Affordable Care Act. - Green subsidies – Both the House and Senate phase out tax credits for clean energy and home energy efficiency, but the Senate aims to slow down the phaseout.
In a bid to win over Republicans from New York, California, and New Jersey, the House proposed lifting the current cap of $10,000 to $40,000 per household with incomes of less than $500,000. House Republicans who negotiated the higher cap are balking at the Senate’s changes.
The challenge for those House Republicans is that most Republican senators are not from states dependent on SALT. They are more bullish on keeping the SALT cap where it is.
On the green subsidies, some conservative senators have embraced the green subsidies that created projects and jobs in their states. They do not want to be seen as killing jobs.
Similarly, some conservative senators are fearful that Medicaid reforms will result in millions of people no longer qualifying for healthcare coverage. Yet, most of these individuals are not poor, disabled, pregnant moms, or poor children, but able-bodied adults without children who can work but are choosing not to work. Conservatives with large rural populations also worry that funding gimmicks used by states to pad their healthcare funding will be called down.
Congress needs to tighten Medicaid and preserve it for those who truly need it.
We’ll watch how leaders in the Senate work through these sticking points in advance of a vote expected this week.
Bottom Line
Passing this bill prevents the largest tax hike in history! Anyone claiming that poor and working-class families will not benefit from the “One Big, Beautiful Bill” is being disingenuous.
If the tax cuts expire, the average taxpayer faces a 22% tax increase. The Child Tax Credit will be cut in half for 40 million families. Taxes will rise to 43% for 26 million small businesses.
The Senate has contoured the “One Big, Beautiful Bill” to sharpen its features and enhance its impact. This version will control costs while expanding more tax relief to individuals and households, and trigger economic growth that will deliver new jobs for Americans.