On Tuesday, Senate Republicans faced challenges with a large package aimed at advancing President Trump’s tax priorities, which would be funded largely by cuts to social safety nets like Medicaid and food assistance. The bill also makes significant reductions to green energy initiatives and proposes changes to the student loan system.
The nearly 1,000-page legislation, which was unveiled on Friday, has undergone considerable revisions since its initial proposal a few weeks ago. There have been ongoing adjustments by Republicans leading up to this point.
This extensive bill is now waiting for discussion in the House of Representatives, where leaders are eager to push it through before the July 4th deadline.
Tax Reduction
A central element of the legislation is the effort to make certain expiration clauses in Trump’s Tax Act permanent. Nonpartisan analysts estimate this could cost trillions over the next decade.
One of the major proposals within the bill is the expansion of individual tax rate cuts established in the 2017 Act. Additionally, the bill aims to solidify current federal tax brackets, increase standard deductions, and eliminate individual exemptions.
It also seeks to honor some campaign promises made by the president, such as enhancing tips, overtime pay, and tax deductions on car loan interest, even though these measures won’t be fully deductible.
Medicaid
The final bill imposes restrictions on Medicaid, a joint federal and state program that offers healthcare to over 70 million low-income and disabled Americans.
Similar to the House version, beneficiaries will need to prove they’re working at least 80 hours monthly or enrolled in school to keep their health coverage starting December 31, 2026. There will also be more frequent eligibility checks.
Interestingly, the bill includes funding for medical care for undocumented immigrants and stipulates cuts to federal funding for states that do not comply with rules against Medicaid covering gender transition services.
The proposed cuts affecting tax collections for hospitals in states that expanded Medicaid remain controversial, but their implementation has been delayed to 2028.
Under this bill, individuals above the poverty line must pay out-of-pocket for a variety of Medicaid services, although some Democratic-led states may opt to charge less, with a cap of up to 5% of annual income.
Reducing Green Energy Subsidies
Senators have removed the climate-friendly energy tax credits established under the 2022 Inflation Reduction Act.
The new law stipulates that projects must begin electricity production by 2028 to qualify for tax credits, tightening previous requirements where projects could qualify even if construction began later.
SNAP
This legislation will require certain states to begin covering a portion of SNAP benefits, which were formerly fully funded by the federal government, if their payment error rates exceed 6%.
If a state’s error rate is above this threshold, it could be penalized, with the potential allocation covering increased costs ranging from 5% to 15%. This approach is intended to motivate states to reduce errors, though critics fear it could ultimately cut benefits.
Concerns raised by Republican senators from Alaska, which had the highest error rates in 2024, resulted in final modifications allowing for delays in enforcement for those states.
Student Loans
The bill proposes a number of reforms to student loans, introducing borrowing limits and reducing repayment plans to just two options.
Graduate-level federal loans would be capped at $20,500 annually, with $50,000 limits for legal or medical school loans and $20,000 for undergraduate loans taken out by parents. If approved, borrowers will have just two repayment plans to choose from—a new standard plan and an income-driven option, starting in 2028.
This legislation also simplifies the rehabilitation of loans, allowing the process to occur twice instead of once.
Pell Grants
Pell Grants are set to receive additional funding in 2026, specifically excluding students who have received full-ride scholarships. The bill introduces workforce Pell Grants aimed at supporting students engaged in short-term vocational programs that don’t culminate in a degree.
Debt Limitations
The proposed legislation sets a debt limit of $5 trillion on how much money the Treasury can allocate to settle state bills.
Following a debt ceiling deal in 2023, the cap had been suspended until 2024. Since the start of this year, the Treasury has employed “extraordinary measures” to assist lawmakers in navigating debt limitations and preventing a potential default.
Currently, the national debt stands over $36 trillion.
School Selection Tax Credit
Republicans have also endorsed a tax credit refund for individuals or businesses that contribute to organizations that provide scholarships for K-12 school choices.
This represents a significant win for proponents of school choice, as it launches a national program that could bypass state-level restrictions on such initiatives.
What Was Left Behind?
Public Land Sales
Sen. Mike Lee (R-Utah) initially sought provisions for selling substantial amounts of public land but opted to withdraw the effort over the weekend.
He noted on social media that the budget settlement process presented barriers, making it difficult to ensure that these lands were sold strictly to American families.
Lee had proposed the sale of millions of acres of land but eventually revised it to a more manageable figure. He continues to advocate for measures that would promote affordable housing but faced pushback not only from Democrats but also from within his party.
Wind and Solar Goods Tax
The bill scrapped proposed changes regarding excise taxes on new solar and wind projects, particularly concerning components from China, amid concerns from moderate lawmakers about adding taxes to those industries.
State AI Regulations
The Senate has removed a provision that would have limited states from implementing their own AI regulations for five years in exchange for access to significant federal funds for AI infrastructure.
This provision had aimed to shorten the original timeline and impose a longer ban on state-level AI regulations.
