While President Donald Trump traveled to Canada this week for a meeting with top international leaders — and abruptly left when the conflict between Israel and Iran escalated — lawmakers on Capitol Hill have continued to work on the centerpiece of the president’s domestic legislative agenda.
In fact, Republican senators finally released the long-awaited draft of the tax portion of their version of the One Big, Beautiful Bill Act, also known as the fiscal year 2026 budget reconciliation package. What’s in the Senate bill, how does it differ from the House-passed version, and what has the reaction to it been so far?
Let’s take a look.
What’s In The Senate Finance Committee’s Tax Language?
According to a Kaiser Family Foundation poll released this week, the House-approved OBBBA is deeply unpopular. Nearly two-thirds of adults hold unfavorable views of it, about twice the number of those who view the bill favorably. Opinions are, predictably, split along party lines: 85 percent of Democrats and 71 percent of independents have an unfavorable view, while 61 percent of Republicans view it favorably.
In other words, the American people would not mind seeing some changes made to House lawmakers’ work.
Republican Senate Finance Committee members did just that, releasing a draft package of amendments on Monday that differs quite a bit from what House lawmakers approved last month. (Whether voters like the changes senators made to the OBBBA is still an open question that pollsters are gathering information on now.)
One big difference from the House-approved bill is that the Senate version of the OBBBA would raise the debt ceiling by $5 trillion instead of $4 trillion. Senators also scaled back House-approved tax breaks for income on tips, overtime, and pass-through businesses, and they significantly cut back the House effort to raise taxes on university endowments while also eliminating a provision that would provide for higher taxes on foundations.
On the business tax side, the Senate legislation also calls for:
- Making permanent the 21 percent corporate tax rate that was enacted as part of the 2017 Tax Cuts and Jobs Act (TCJA);
- Full expensing for domestic research and development;
- Full expensing for new capital investments, like machinery and equipment;
- Restoring interest deductibility for businesses; and
- Strengthening employer-provided childcare credit and boosting federal childcare assistance.
Republican Finance Committee members also included several provisions to lower individual Americans’ tax burdens. Those provisions call for:
- Making permanent the existing TCJA personal income tax brackets, the increase in the standard deduction, and the termination of personal exemptions;
- Creating new deductions for taxes on tips, overtime pay, and car loan interest without making these sources of income fully deductible;
- Creating school choice tax credits;
- Providing a $6,000 bonus exemption to millions of low- and middle-income seniors in order to lower their tax burdens;
- Enhancing 529 savings accounts to make education more affordable for families; and
- Establishing savings accounts for newborns.
Additionally, the Senate bill calls for more slowly phasing out renewable energy tax cuts enacted under former President Joe Biden than the House-passed bill would. As The Hill said, “This flexibility is likely to please moderates in both chambers who felt that the House version was too stringent. However, it could be teeing up a collision with the conservative House Freedom Caucus, whose board said it will ‘not accept’ Senate changes that ‘water down’ its major cutbacks to the climate-friendly credits.”
On the spending side, senators made deeper cuts to Medicaid. For example, over the next six years, the draft legislation would lower, from six percent to 3.5 percent, the health care provider taxes that allowed for states to expand their Medicaid programs. The Hill said, “the explosive change [is] expected to spark pushback in red states.” (More on that likelihood below.) The Senate bill also goes beyond House-passed language when it comes to tightening Medicaid eligibility requirements.
The Coming Fight Over SALT Could Get Spicy
Notably, the Senate Finance Committee’s draft preserves the 2017 Tax Cuts and Jobs Act’s $10,000 cap on how much of their state and local tax burden Americans can deduct from their federal tax bill.
The U.S. House-approved OBBBA, readers will remember, raised the cap to $40,000 for taxpayers making less than $500,000 annually. That number was arrived at after prolonged negotiations between House Speaker Mike Johnson (R-La.) and Republicans from high-tax states like California and New York.
Disagreement over this one provision could slow the bill’s progress, if not doom it altogether. As AXIOS noted, “Neither the House nor the Senate wants to go to a formal conference, but” the SALT skirmish could throw GOP lawmakers into a formal negotiating process between the two chambers of Congress.
Senate Majority Leader John Thune (R-S.Dak.) said lowering the SALT cap “would be a big mistake … that would drag this thing out.” House lawmakers also weighed in. “Everyone knows this 10K number will have to go up. And it will,” Rep. Elise Stefanik (R-N.Y.) said on social media. Rep. Stefanik’s Republican colleague from New York, Nicole Malliotakis, was even more pointed. She described the SALT rollback as “a slap in the face to the Republican districts that delivered our majority and trifecta.”
Republican leaders are trying to work out this issue now, but it’s not the only point of disagreement they must tackle.
Republican Opposition And The Byrd Rule
The full Senate can only pass the OBBBA if a minimum of 50 out of 53 Republican senators vote for the measure and Vice President J.D. Vance breaks the tie. As AXIOS explained, “[J]ust a few hours after the text came out, [the Finance Committee’s draft bill] was already on shaky ground in the Senate.”
Already, more than three Republican senators have said they have problems with the bill.
In fact, Sen. Ron Johnson (R-Wis.) even went so far as to say he would not vote for the bill as written. Sen. Johnson wants steeper spending cuts and he opposes the Senate’s scaling back a proposed 23 percent tax deduction for pass-through business income to 20 percent. “I’m confident enough that we have a group of senators that will delay this until at least the August recess so we can look at this,” Sen. Johnson said Tuesday on CNBC.
Sen. Johnson said Sens. Rick Scott (R-Fla.), Mike Lee (R-Utah), and Rand Paul (R-Ky.) also want larger spending cuts. Additionally, on Tuesday, Sen. Paul said he would vote against the bill if it included a debt ceiling increase. “I can’t vote to raise the debt ceiling $5 trillion because really what that means is we’re going to get more of the same,” Paul said Tuesday on Fox Business.
“We’re further away than we were before,” one GOP senator told AXIOS.
Meanwhile, Bloomberg Government reported that Sens. Susan Collins (R-Maine), Lisa Murkowski (R-Alaska), and Jim Justice (R-W.Va.) had already objected to the less stringent Medicaid cuts that were outlined in the House bill, and thus are highly likely to oppose the harsher Senate version. “They are likely to prove a challenge to passing the Senate bill,” Bloomberg Government said. Sen. Josh Hawley (R-Mo.) also opposes the deeper Medicaid cuts in the Senate bill.
Additionally, “A group of [Republican] moderates who advocate for clean energy tax breaks, including North Carolina’s Thom Tillis and Utah’s John Curtis, said they are still studying the bill and suggested they may need more tweaks to lengthen the phaseout of tax credits for renewable energy.”
On the other side of the aisle, Democrats will try to eliminate several provisions in the text by arguing they violate the “Byrd rule,” which stipulates that anything written into a budget reconciliation bill must connect to one of these three topics: federal spending, federal taxation, or the federal deficit and debt.
According to Punchbowl, Democrats intend to challenge:
- Provisions that ease gun licensing and registration requirements;
- Social Security number requirements for tax benefits that aim to keep undocumented immigrants from earning federal benefits;
- A child tax credit provision that would require at least one parent to have a work-eligible Social Security in addition to their child;
- A provision to ban states from regulating artificial intelligence if they want federal broadband funds; and
- Senate Judiciary Committee language that would limit judges’ power to issue preliminary injunctions against the executive branch.
All of these disagreements, and the Byrd rule, could, of course, put in jeopardy Republicans’ self-imposed July Fourth deadline for getting the tax bill through the Senate. According to Punchbowl, the White House very much wants to stick to that timeline. It reported this morning that Vice President Vance “pleaded with Senate Republicans on Tuesday to finish their work on President Donald Trump’s tax agenda before July 4” so President Trump could sign it before the August recess.
Only time will tell if GOP holdouts heed the vice president’s call.