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The Senate Finance Committee, led by Republicans, released its version of President Donald Trump’s legislative priority on Monday. The proposal includes sweeping Medicaid cuts and permanent tax reforms. Lawmakers aim to finalize the bill by July 4.

Many provisions mirror the House’s version passed last month. These include extending tax breaks from the 2017 Tax Cuts and Jobs Act and introducing work requirements for Medicaid. However, the Senate proposal also features some key changes.

Tax Revisions Draw Internal Disputes

A major point of contention is the cap on state and local tax (SALT) deductions. The Senate plan maintains a $10,000 cap, while the House bill raises it to $40,000 for joint filers making under $500,000. This move may endanger a compromise carefully negotiated in the House.

“This is the deal, and I will not accept a penny less,” warned Rep. Mike Lawler (R-NY). “If the Senate reduces the SALT number, I will vote NO, and the bill will fail in the House.”

Business tax breaks are also a focal point. The Senate proposes permanent deductions for equipment and R&D expenses to boost economic growth. These changes, while beneficial to businesses, would raise the bill’s total cost.

The Senate also wants to make a $2,200 child tax credit permanent—less than the House’s temporary $2,500 increase from 2025 to 2028. Tax breaks for tips and overtime would be capped at $25,000 and $12,500 respectively and would run from 2025 to 2028.

Seniors would benefit from a more generous tax deduction: $6,000 under the Senate plan, compared to $4,000 in the House version.

Medicaid Faces Deeper Cuts

The Senate proposal goes further than the House in reshaping Medicaid. It would limit provider taxes—fees hospitals and other providers pay states—from 6% to 3.5% by 2031. This would affect 40 states and D.C., mostly Democratic-led states that expanded Medicaid.

Conservatives say states use these taxes to increase federal matching funds. But moderates argue the cap could harm rural hospitals. “These cuts risk underfunding essential care in rural communities,” one Senate aide said.

Also, the Senate bill expands work requirements for Medicaid. Parents with children aged 15 and up would need to work, attend school, volunteer, or receive job training for 80 hours per month to retain benefits. The House had exempted all parents of dependent children.

According to the Congressional Budget Office, the House version would result in 7.8 million more uninsured Americans by 2034. The Senate’s tougher requirements could increase that number further.

Clean Energy Incentives Rolled Back

The Senate bill would end consumer tax credits for electric vehicles and most home energy upgrades by next year. Business tax credits for wind and solar projects would also phase out by 2028.

However, firms generating power from zero-emission sources—like nuclear or hydropower—would continue to receive credits beyond that point. The Senate’s version also preserves credits for clean energy manufacturing longer than the House version but ends support for wind turbine makers by 2027.

Notably, the Senate would eliminate credits for clean hydrogen, a blow to oil and gas-backed innovation in the sector.

Debt Ceiling Extended

To allow time for Trump’s agenda, the Senate version raises the national debt ceiling by $5 trillion—$1 trillion more than the House bill. This gives the administration more flexibility before needing to negotiate with Democrats.

Treasury Secretary Scott Bessent has called on Congress to act before the August recess. The U.S. hit its $36 trillion borrowing cap in January, and failure to raise it could trigger a catastrophic default.

Next Steps

Republican senators are racing to pass the bill next week. But internal divisions over SALT caps, Medicaid cuts, and energy credits could delay final approval. If passed, the legislation would mark one of the most aggressive overhauls of federal taxes and entitlements in years.

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