Senate GOP’s tax bill proposals spark House backlash

Washington — US Senate Republicans have unveiled proposed changes to President Donald Trump’s sweeping tax-cut and spending bill, including making business-related tax breaks permanent while also limiting the deductibility of state and local income taxes, angering some House Republicans.

The different versions of the bill in the two Republican-controlled chambers of Congress could complicate party leaders’ goal of passing the bill that is the centrepiece of Trump’s domestic agenda before a self-imposed July 4 deadline.

One big change would impose a $10,000 cap on federal deductions for state and local income taxes, below the $40,000 limit set in the version approved by the House of Representatives last month.

That change on Monday drew immediate criticism from House Republicans  whose constituents would benefit from the higher deduction. But a committee document shows the amount of the cap is subject to continuing negotiations.

The Senate Finance Committee proposal would also cap tax breaks on tipped income and overtime pay that Trump promised during the 2024 campaign. The House version would allow deductions on income of up to $160,000 a year.

The Senate version provides a deduction of up to $25,000, which would begin to phase out for incomes above $150,000 for an individual and $300,000 for a married couple. For overtime pay, Senate Republicans propose a $25,000 deduction for joint filers.

It slightly eases the House’s restrictions on an accounting manoeuvre used by some states to boost federal Medicaid contributions. The “provider tax” was criticised as a gimmick or loophole by budget watchdogs, but rural hospitals and other healthcare providers have argued it is necessary to stay solvent.

The proposal also addresses a key priority of Senate Republican leadership, making certain business tax breaks permanent, including full expensing for domestic research & development and new capital investment for machinery and equipment, according to a summary released by the panel.

The measure raises the federal government’s self-imposed debt ceiling by $5-trillion, a step Congress must take by this summer or risk a devastating default on the nation’s $36.2-trillion in debt.

The Senate will now debate the modified text of Trump’s One Big Beautiful Bill Act, which that chamber would need to pass and send back to the House for another vote before Trump could sign it into law.

Reuters