By David Morgan, Richard Cowan and Andy Sullivan
WASHINGTON (Reuters) -U.S. Senate Republicans on Monday unveiled proposed changes to President Donald Trump’s sweeping tax-cut and spending bill that would make some business-related tax breaks permanent and also limit a tax break for state and local income taxes, angering some of their colleagues in the House of Representatives.
The different versions of the bill in the two narrowly Republican-controlled chambers of Congress could complicate party leaders’ goal of passing the bill that is the centerpiece 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, well below the $40,000 limit set in the version approved by the House of Representatives last month. That drew immediate criticism from House Republicans whose constituents would benefit from the higher deduction.
But a committee document shows the amount 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 bill would extend the 2017 tax cuts that were Trump’s main legislative achievement during his first term in office, and also boost spending for the military and border security.
The measure raises the federal government’s self-imposed debt ceiling by $5 trillion, a step Congress must take by sometime this summer or risk a devastating default on the nation’s $36.2 trillion in debt.
“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,” said Republican Senate Finance Committee Chairman Mike Crapo of Idaho in a statement unveiling the revised bill.
With a 53-47 Senate majority and a 220-212 edge in the House, Republicans can afford to lose few votes to pass a bill that faces united Democratic opposition.
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 maneuver used by some states to boost federal Medicaid contributions. The “provider tax” was criticized as a gimmick or loophole by budget watchdogs, but rural hospitals and other healthcare providers have argued it is necessary to stay solvent.
However, the Senate bill largely mirrors the House’s work requirement for adult Medicaid recipients, which the nonpartisan Congressional Budget Office says would leave about 4.8 million people without health insurance.
Top Senate Democrat Chuck Schumer said the measure’s “cuts to Medicaid are deeper and more devastating than even the Republican House’s disaster of a bill.”
The Senate version also would more aggressively phase out subsidies for electric vehicles and green energy that were passed under Trump’s predecessor, Democratic President Joe Biden. Shares of U.S. solar energy companies tumbled in extended trade on Monday.
The proposal also includes a key priority of Senate Republican leadership by making certain business tax breaks permanent, including full expensing for domestic research and development and new capital investment for machinery and equipment, according to documents released by the panel. Those tax breaks are temporary in the House version.
A retaliatory tax targeting foreign investors that has raised alarms among some business groups is largely the same as the House version, though it would be delayed by a year to 2027.
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.
(Reporting by David Morgan, Richard Cowan and Andy Sullivan; Editing by Scott Malone and Chris Reese)
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