Senate Finance Committee Chairman Mike Crapo unveiled the Senate’s version of large portions of the reconciliation bill to extend the 2017 Tax Cuts and deliver significant budget savings. The bill contains numerous changes compared to the House-passed One Big Beautiful Bill Act (OBBBA), and represents an important step toward avoiding a major $4.5 trillion tax hike at the end of this calendar year.
Broadly speaking, the Senate proposal builds on many of the tax provisions passed by the House.
This is particularly true for many pro-growth provisions like the research and development tax deduction and full expensing, which are now made permanent compared to being temporary. Permanency will ensure businesses have the certainty they need to invest in America over the long-term and could double the bill’s economic growth estimates. The Senate bill also wisely places guardrails on “No Tax on Tips,” “No Tax on Overtime,” and “No Tax on Social Security” to reduce the potential for them to be gamed by bad faith actors while preserving the advantage for those who genuinely deserve to benefit. It also retains a $10,000 cap on the State and Local Tax (SALT) deduction rather than the expensive and misguided $40,000 SALT cap proposed by the House.
However, the Senate bill retreats on the House’s phaseout of green energy tax credits. The House included an aggressive phaseout of the Inflation Reduction Act tax credits for clean energy projects, which is now altered in a way that allows developers to take advantage of the IRA credits for years to come.
Below, NTU outlines some of the differences between the Senate version compared to what has already passed out of the House.
Provisions for Workers and Families
Section: Child Tax Credit
House provision: The House version makes the current $2,000 child tax credit permanent and indexes it for inflation. It also temporarily increases the credit to $2,500 from 2025 to 2028.
Senate provision: The Senate boosts the credit to $2,200, makes it permanent and indexes the credit for inflation.
Taxpayers’ position: The Child Tax Credit is important for families dealing with the high cost of living. While both the House and Senate approaches have merit, Congress should reach an agreement that establishes a permanent size for the credit and indexes that amount for inflation. That will prevent taxpayers from experiencing significant changes in their tax liability from year to year.
Section: Passthrough Deduction
House provision: Many passthrough businesses can utilize the 20% deduction that was created in Section 199A of the Tax Cuts and Jobs Act of 2017. The House version increases the 20% passthrough to 23% and makes this provision permanent.
Senate provision: The Senate version preserves the current 20% passthrough deduction and makes it permanent.
Taxpayers’ position: The House provision is scored at $820 billion, making it one of the largest tax provisions in the bill. The Senate bill will have a smaller revenue impact.
Section: No Tax on Overtime
House provision: The House version allows a full deduction for overtime pay for workers making less than $160,000.
Senate provision: The Senate version provides a similar tax-free overtime structure that also caps the deduction at $12,500 for individual filers and at $25,500 for married filing jointly.
Taxpayers’ position: The Senate version is far better as it will reduce the deficit impact associated with this provision and strengthen guardrails to protect against its abuse. Even so, broadbased tax relief is far preferable to targeted tax provisions, such as this one. Congress should avoid unnecessarily complicating the tax code and instead seek to provide across-the-board relief to all taxpayers.
Section: No Tax on Tips
House provision: Tipped income would be tax deductible under the House version for employees in professions that customarily receive tips, as determined by the Treasury Secretary. This deduction is uncapped and begins to phase out at $150,000 of income.
Senate provision: The Senate version preserves much of the House language including a phaseout threshold of $150,000 but also includes a $25,000 cap on the deduction.
Taxpayers’ position: The Senate version is preferable. It will help reduce the deficit impact associated with this provision and strengthen guardrails to protect against its abuse. Even so, broadbased tax relief is far preferable to targeted tax provisions, such as this one. Congress should avoid unnecessarily complicating the tax code and instead seek to provide across-the-board relief to all taxpayers.
Section: Senior Deduction
House provision: With a goal of exempting Social Security income from taxation, the House version creates a $4,000 deduction for seniors (65 and older) with income of less than $75,000 (individual) or $150,000 (married filing jointly).
Senate provision: The Senate creates a similar deduction with a higher amount of $6,000 per individual.
Taxpayers’ position: In the case of the senior deduction, the House version is preferable. Broadbased tax relief is far preferable to targeted tax provisions, such as this one. Congress should avoid unnecessarily complicating the tax code and instead seek to provide across-the-board relief to all taxpayers.
Section: State and Local Tax Deduction
House provision: The House OBBBA increases the current $10,000 SALT cap to $40,000, with a phase out for income above $500,000.
Senate provision: The Senate draft retains TCJA’s $10,000 cap on SALT.
Taxpayers’ position: The Senate language, while likely a placeholder for ongoing negotiations, is far superior to the House language. An ideal tax code would eliminate all individual deductions, including those for SALT. The savings from capping or eliminating SALT should be used to further reduce tax rates across the board or to reduce the deficit.
Provisions for American Businesses
Section: Full Expensing
House provision: The House provides a temporary extension of full expensing—a critical pro-growth provision that incentivizes the purchase of machinery and capital goods—through the end of 2029.
Senate provision: The Senate version makes full expensing permanent.
Taxpayers’ position: Congress must follow the Senate text and make full expensing permanent to give businesses the certainty they need to invest in America over the long-term. This improvement over the House proposal will bolster the pro-growth elements of this tax bill.
Section: Full Expensing of Domestic Research and Experimental Expenditures
House provision: The House allows full expensing of R&D expenditures, but only for four years.
Senate provision: The Senate enacts permanent full expensing of R&D.
Taxpayers’ position: Congress must follow the Senate on this provision and lock in permanent full expensing for R&D. Making this provision permanent will give businesses the certainty they need to invest in America over the long-term. This improvement over the House proposal will bolster the pro-growth elements of this tax bill.
Section: Intangible Drilling Costs (IDC)
House provision: The House does not include IDC provisions.
Senate provision: The Senate version fixes the IDC carveout created by the Inflation Reduction Act’s corporate alternative minimum tax (CAMT). The CAMT allows most accelerated depreciation deductions with the notable exception of IDC. The Senate version allows IDC to be fully expensed along with other expenditures.
Taxpayers’ position: Congress should include the Senate’s IDC fix in the final bill. The architects of the CAMT created the IDC carveout as a punitive measure directed at the oil and gas industry. As a matter of sound tax policy, IDC should be treated the same as other expenditures. Additionally, fixing this provision will help produce more American energy. Congress could also resolve this problem by fully repealing the CAMT.
Section: Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Restoration
House provision: The House expands interest deductibility of EBITDA on a four-year basis.
Senate provision: The Senate permanently restores EBITDA.
Taxpayers’ position: Congress should adopt the Senate language. Permanently restoring EBITDA would incentivize companies to make large expenditures—such as constructing factories, warehouses, and electricity generation facilities—which are often financed by debt.
Section: Sec. 899, aka the “Revenge Tax”
House provision: The House version would authorize the imposition of U.S. taxes to penalize foreign countries that maintain “unfair” discriminatory or extraterritorial taxes. This provision would take effect immediately, with a starting rate of 5% and increasing over four years to 20%.
Senate provision: The Senate provision is similar, but the start would be delayed until 2027, and the rate would be capped at 15%.
Taxpayers’ position: Reducing unfair taxes is a worthy goal, but it should be done in a way that does not threaten foreign investment in the United States and that results in lower foreign taxes, not higher U.S. “revenge” taxes. The Senate version is preferable and would allow for a year to consider alternative approaches. For instance, NTU encourages the inclusion of digital services tax bans in future trade agreements, based on the U.S.-Japan Digital Trade Agreement negotiated during President Trump’s first term.
Section: Changes to the Inflation Reduction Act (IRA) tax provisions
House provision: The House bill would repeal market-distorting green energy tax credits from the IRA. It ends tax credits for both used and new EV car purchases, EV fueling properties, and residential clean energy credits on December 31, 2025. It phases out clean energy production and investment credits, as well as advanced manufacturing production credits, with a long phase out period (starts in 2029, with full phase out in 2032).
Senate provision: The Senate bill repeals most of the same credits from its bill, but in certain places it extends the phase out portion of the credit by several years, increasing the likelihood that a future Congress will end the phaseout and keep the credits. The Senate version also ends credits for EV purchases, fueling properties, and residential clean energy credits, with a roughly equivalent phaseout period. It also phases out the clean energy production and investment credits, but with a faster phaseout for wind and solar (ends in 2028), and a much longer phaseout for other clean energy production like hydropower, nuclear, and geothermal. Production from these sources doesn’t lose its credits till 2036. The Senate bill, however, keeps most advanced manufacturing production credits, except for wind, until 2034.
Taxpayers’ position: Congress should adopt the House approach of phasing out IRA tax provisions as quickly as possible. The IRA is one of the most expensive bills ever enacted into law. While the Senate version of the bill keeps most of the IRA phase out provisions from the House bill, several key production credits are extended and are effectively made permanent. These changes are expensive, are not needed to increase the use of green energy production technologies, and should be removed for the benefit of taxpayers.
Section: Modifications to de minimis entry privilege for commercial shipments
House provision: Repeals de minimis exemption for low-value imports.
Senate provision: No change to de minimis exemption.
Taxpayers’ position: Congress should adopt the Senate’s approach and preserve the de minimis exemption. Congress enacted an exemption for low-value imports in 1938. In 2016, Congress increased the exemption to $800. This made imports subject to the same rules as the $800 personal exemption for goods Americans bring back when traveling internationally. Terminating the de minimis exemption would impose a regressive tax increase on Americans.
Health Care Provisions
Section: Expanding and Improving Health Savings Accounts (HSAs).
House provision: Changes to HSAs in the House bill include allowing individuals eligible for Medicare Part A to continue to contribute to an HSA, designation of bronze and catastrophic plans offered through the Affordable Care Act marketplace as qualified high deductible health plans, and increasing the annual contribution limit for taxpayers earning less than $75,000, or $150,000 for joint filers. These changes would allow more Americans to utilize HSAs to save money for medical expenses.
Senate provision: The Senate bill includes no changes to HSAs.
Taxpayers’ position: Expanding HSAs would help Americans save money to pay for their medical expenses. NTU strongly supports the inclusion of the HSA reforms from the House bill.
Section: Medicaid Provider Tax Cap
House provision: Institutes a moratorium on states’ ability to raise provider tax above 6%.
Senate provision: Caps most states’ ability to levy provider taxes on certain health care providers at 3.5% by 2031. This would only apply to states that expanded Medicaid under the Affordable Care Act.
Taxpayers’ position: Congress should adopt the Senate’s provider tax cap. Medicaid expansion states often take advantage of the current system through provider taxes, allowing them to extract more funding from the federal government. Efforts to reduce the provider tax level will yield a significant amount of budget savings that can offset the cost of the bill in a way that reduces the size of government in the healthcare system.
Section: Medicaid Work Requirements
House provision: The House institutes an 80 hour-per-month work requirement for able-bodied adults, with exceptions for eligible populations
Senate provision: The Senate expands the House-passed Medicaid Work requirements to also include parents with dependents over the age of 15.
Taxpayers’ position: Under current law, Medicaid enrollees are not subject to work requirements even for able-bodied adults choosing not to work. It is reasonable to expect that work-capable individuals receiving government-sponsored health care should have to work or actively look for employment, especially as the cost of Medicaid has ballooned in recent years and is approaching $1 trillion.
Other Sections
Section: Debt Limit
House provision: Increases the debt ceiling by $4 trillion.
Senate provision: Increases the debt ceiling by $5 trillion.
Taxpayers’ position: Congress should minimize the size of the debt limit increase. Breaching the debt ceiling would have disastrous economic consequences and it is crucial that such a possibility never occurs. However, our high debt is an existential threat and our fiscal house must be put in order. The debt ceiling serves as a powerful periodic reminder of our nation’s fiscal mess and has been the impetus behind several bipartisan efforts to reduce the debt, such as the Budget Control Act of 2011.
Section: Foundation Tax
House provision: The House version expands the current flat 1.39% tax on net investment income to a progressive tax with rates as high as 10%.
Senate provision: The Senate version does not include a foundation tax.
Taxpayers’ position: Congress should follow the Senate version and eliminate the foundation tax. While the House provision is well-intentioned—it seeks to rein in foundations that have abused their nonprofit tax status and engaged in political activities—it would create unintended consequences by also hurting foundations that are providing important philanthropic services to Americans. Furthermore, it could help pave the way for a wealth tax.