Two weeks after the House adopted a sprawling package of tax cuts, Senate Republicans on Monday unveiled their legislative vision proposing a series of tweaks that would primarily enhance the benefits provided to businesses.
The legislative text released by the Senate Finance Committee mirrors in broad strokes the effort the House adopted. Both aim to extend a set of tax cuts on individuals and corporations that will soon expire, which President Trump signed into law during his first term and has pushed to expand in his second.
But the Senate tax proposal — just one piece of a much larger domestic policy bill — is not identical to the approach that House Republicans clinched late last month. In short, the Senate measure offers bigger tax benefits for corporations as well as older Americans. It would also change the way that party lawmakers aim to deliver on Mr. Trump’s promises to end taxes on tips and overtime.
The tweaks could carry vast implications for millions of families and business owners, as Republicans continue to calibrate a costly bill that could alter the trajectory of the economy and shape the nation’s financial health for generations.
Here are some of the changes to individuals’ and businesses’ taxes under consideration in the Senate.
More generous corporate tax breaks
In a major win for businesses, Senate Republicans proposed to make permanent a set of generous deductions for research and development and other expenses, including machinery purchases. The House proposed to extend these measures, which were set to expire at the end of the year, but only on a temporary basis, as Republicans in the chamber looked for ways to shave costs from their already expensive legislation.
Erica York, the vice president of federal tax policy at the Tax Foundation, said it was too early to tell how permanence could affect the cost of the overall bill. The legislation includes substantial changes to Medicaid and cuts to other safety-net programs, along with reductions of some federal spending, all of which could lower the total cost of the bill. Nonpartisan budget watchdogs found the full measure passed by the House could add $3 trillion to the debt over the next decade.
But, Ms. York said, the move to make some of those deductions permanent would align the bill “closer to the talking points of prioritizing growth” in the economy, one of Mr. Trump’s stated goals in pursuing tax cuts.
The Senate also proposed to make permanent a 20 percent deduction for pass-through income, which is business income taxed at the individual rates of an owner. That extends the current policy, which is set to expire at the end of the year, though it is less generous than the 23 percent deduction proposed in the House.
Changes to taxes for families
Every year, taxpayers can opt for what is called the standard deduction, a flat amount they can claim on their taxes so that they do not have to itemize every expense. Republicans increased this deduction as part of their initial 2017 tranche of tax cuts, but the expansion is set to expire at the end of this year.
In response, Republicans in the House and Senate have proposed preserving these deductions at their current levels on a permanent basis. Where the two chambers differ is the amount they would add. Senate Republicans proposed a permanent, one-time $1,000 increase for individuals and $2,000 for married filers taking effect in the 2026 tax year, while their House counterparts would offer the extra amounts but only through 2028.
Otherwise, Republicans in both chambers would preserve the lower tax brackets that they set up under Mr. Trump in 2017, as they look to stave off what would otherwise be a tax increase beginning next year.
For many families, another key source of savings is the child tax credit. Senate Republicans proposed permanently increasing the credit available to parents, which would be set at $2,200 per child, beginning in the 2025 tax year. House Republicans had proposed to bump up the credit to $2,500, but only through 2028.
Key tweaks to Trump campaign promises
On the campaign trail, Mr. Trump promised to end taxes on tipped wages, Social Security payments and overtime pay. Republicans in Congress have worked to deliver on those goals, but Senate Republicans would do so on slightly different terms than House lawmakers.
The new Senate legislation proposes granting a $6,000 tax deduction for older Americans, up from the $4,000 deduction included in the House bill.
Much like the one in the House, the Senate Republican measure allows Americans to deduct tips and overtime from their taxes. But it introduces some important changes. First, it would cap the amounts that individual or married filers can claim on their taxes under each of these provisions. The Senate measure would also have each deduction phased out gradually based on annual income, beginning at $150,000 for individuals and $300,000 for joint filers.
Andrew Lautz, the associate director of the economic policy program at the Bipartisan Policy Center, said the changes to taxes on tips and overtime would still be enacted only on a temporary basis in the two chambers’ bills. But the new Senate approach would address a “cliff” in the House measure, which “cuts off the deductions completely for anyone making a dollar over” its income limit, he said.
Lastly, the Senate joined the House in trying to allow many car buyers to deduct $10,000 a year in loan interest for vehicles made in the United States, an idea backed by Mr. Trump. But Senate Republicans appeared to limit this to only new cars, as sought by Senator Bernie Moreno of Ohio.
A grain of salt on SALT
One of the most significant flash points in the debate over the Republican tax bill is the so-called SALT deduction: the amount in state and local taxes that homeowners can write off on federal tax returns. Some Republicans in high-tax states like New York want to lift the current $10,000 cap to make it more generous for their constituents.
House Republicans proposed raising the cap to $40,000 in a move that assuaged some party lawmakers yet angered conservatives, who voted for the bill anyway. In the Senate, though, Republican leaders proposed keeping the $10,000 cap in place, at least for now, as they tried to negotiate a compromise on an issue that increasingly divided their ranks.
Those divisions emerged before the Senate could even release the text of its tax package. Representative Mike Lawler, Republican of New York, posted on social media that any Senate measure that renewed the $10,000 SALT cap would be “DEAD ON ARRIVAL” in the House.
A few omissions
The Senate dropped a House-passed provision that would have imposed a higher tax on private foundations. Senate Republicans also sharply reduced a new tax on college endowments, which would be set at 8 percent for the largest institutions, not 21 percent as proposed in the House.
Senate Republicans also ditched an attempt by their counterparts in the House to limit deductions for sports franchises. And they relaxed what has become known as the revenge tax, which the House would apply on companies in countries that try to collect new taxes on American firms. The Senate would begin collecting that tax later, starting in 2027, and cap it at 15 percent.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
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