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Senate Republicans released a long-awaited version of Donald Trump’s flagship tax bill on Monday, setting up a possible clash with House Republicans over the so-called “big, beautiful bill”.
The Senate finance committee published a draft bill that made several significant changes to a version that passed the House of Representatives last month — including keeping the annual cap on the amount of state and local taxes taxpayers can deduct from their federal tax bills, commonly known as “Salt”, at the current level of $10,000.
That stands in stark contrast the House bill, which raised the Salt cap to $40,000 a year. The House proposal would amount to a significant tax break for homeowners in states with the highest property tax rates including New York, New Jersey and California.
While people briefed on the plans insisted the figure in the Senate bill should be seen as a “place holder” as negotiations continue, the move prompted outrage from a group of House Republicans who see Salt as a make-or-break issue. It also raises serious questions about whether the legislation can get through both chambers of Congress and signed into law by the president’s self-imposed deadline of July 4.
“I have been clear since day one: sufficiently lifting the Salt cap to deliver tax fairness to New Yorkers has been my top priority in Congress,” said Mike Lawler, a Republican congressman whose district includes many of the affluent suburbs north of New York City.
“After engaging in good-faith negotiations, we were able to increase the cap on Salt from $10,000 to $40,000,” Lawler added. “That is the deal, and I will not accept a penny less. If the Senate reduces the Salt number, I will vote no, and the bill will fail in the House.”
Any revisions to the “big, beautiful bill” will need to pass the Senate and be rubber-stamped by the House before Trump can sign the legislation into law.
Lobbyists and special interest groups have worked furiously in recent weeks to try to persuade lawmakers in the Senate to revise the sweeping tax bill, which extends Trump’s 2017 tax cuts while also raising the debt ceiling by $5tn. It would also impose steep cuts to social programmes and roll back clean energy tax credits ushered in under Joe Biden’s presidency.
Some of those lobbying efforts appeared to bear fruit on Monday, as the Senate committee’s draft pared back some of the deep cuts the House made to Biden-era clean energy tax credits, delayed the implementation of a tax on foreign tax credits and reduced the possible tax bills for US university endowments.
Under the latest Senate proposals, clean energy investment tax credits that support energy sources the Trump administration favours — such as nuclear, hydropower and geothermal power — will be extended until 2036. The text proposed a total phaseout of incentives for wind and solar by 2028, although projects which begin construction as late as 2027 will be able to access some credits.
Adjustments were also made to Section 899, which allows the government to impose additional taxes on foreign individuals and companies from countries deemed to have punitive tax policies. The rule was scaled back and delayed after big banks and small businesses criticised initial proposals, arguing the rule would chill US investment and hurt American companies and workers.
In the Senate bill, section 899 will not be implemented until December 31 2026 to give affected countries time to adjust their policies.
The new language also caps additional tax put on US investments at 15 per cent, versus 20 per cent in the House version of the bill.
The Senate draft also reduced the potential tax exposure for US universities, which faced a jump in taxes on income from endowment investments from 1.4 per cent to up to 21 per cent, depending on the size of their endowments and student bodies. Under the Senate proposals, the tax rate on university endowments would not exceed 8 per cent.
