5 takeaways from the Senate bill with Trump's tax cuts

Senate Republicans released their tax portion of President Trump’s megabill on Tuesday afternoon, kicking off what’s expected to be an intense period of negotiations to send the final version of the measure through the House and onto the White House.

The 549-page bill would extend the bulk of the GOP’s 2017 signature tax cuts, financed with steep cuts to safety net programs like Medicaid and clean energy tax credits.

“It powers the economy by permanently extending critical pro-growth provisions and introduces new incentives for domestic investment, providing certainty for American job creators to spur domestic economic activity and invest in their workers,” Senate Finance Chair Mike Crapo said in a statement accompanying the legislation.

Republican senators are racing to pass their megabill using a party-line reconciliation process to overcome united Democratic opposition. Here are 5 takeaways.

Trump’s campaign promises to get rid of taxes on tips and overtime pay are still in

The Senate GOP legislation includes Trump’s campaign promises to eliminate taxes on tips and overtime pay. It also would establish a tax deduction on auto loan interest and a larger standard deduction for seniors aged 65 and above. The latter is meant to replace a Trump promise to eliminate taxes on Social Security benefits. All would expire at the end of Trump’s term in 2028.

The House-passed tax-and-spending bill had identical measures, but GOP senators put more limits, presumably to cut the final price tag. On getting rid of tax on tips, the GOP bill would set up a maximum $25,000 deduction that starts phasing out at $150,000 for singles and $300,000 for couples. It applies for occupations that usually receive cash tips, such as bartenders or waitresses. A list of specified jobs that apply for the tax break will be released by the Treasury Department within three months of the bill being signed into law.

When it comes to no tax on overtime pay, the GOP legislation establishes a deduction that peaks at $12,500 for singles, and $25,000 for those filing joint tax returns. It has a larger phase out that begins at $150,000 for singles and $300,000 for couples filing jointly.

Republican senators opted for permanence over short ladders 

GOP senators are keen to restore a set of business tax breaks that expired three years ago and make them permanent. Past efforts to revive them in bipartisan negotiations failed, despite the support the provisions also attracted from Democrats and influential business groups.

The three business tax provisions include extending rules allowing companies to deduct the capital expense costs immediately, instead of spreading them over years; establishing a bigger interest deduction; and restoring the ability for businesses to immediately write off research and development expenses.

“Holding the ultimate cost of the bill constant, making these three provisions permanent is critical to achieving the growth needed to bring in more revenue,” George Callas, once a senior tax aide to former House Speaker Paul Ryan and currently with advocacy group Arnold Ventures, wrote on X.

Other provisions such as scholarship tax credits are also made permanent, in contrast to the House GOP’s short-ladder approach. “It's not just the business extenders: there's a lot more permanency in the Senate tax bill across the board,” said Andrew Lautz, a tax expert at the Bipartisan Policy Center.

Biden’s climate-era programs get a longer shelf life (for now)

Some GOP senators are hesitant to immediately scrap clean energy tax credits that Democrats approved under former President Joe Biden. That skepticism was channeled into the Senate GOP tax bill.

Senate Republicans would give wind and solar projects more time to qualify for the credits and not shut them off abruptly. The bill is also friendlier to geothermal, nuclear, and hydropower projects, while imposing new limits to prevent Chinese products from entering U.S. supply chains.

Still, other clean energy measures are eliminated outright. The $7,500 clean vehicle credit expires six months after the bill is enacted.

'Trump accounts' for newborns are left unchanged and modestly increase child tax credit

One big GOP priority hasn’t been changed from the House bill. The Senate GOP bill would establish a tax-preferred savings account with a $1,000 contribution from the federal government for children born during Trump’s term, known as "Trump accounts." They’re able to access the cash for certain purposes after turning 18, and have full control of the money at the age of 30.

Senate Republicans would increase the child tax credit to $2,200 and make it permanent. It’s a modest increase from the current level of $2,000, which is set to revert back to $1,000 at the end of this year if Congress doesn’t step in.

GOP senators low-balled House Republicans on SALT

Republican senators drastically scaled back a $40,000 limit on the state and local tax deduction, a provision allowing individuals or married couples to subtract the amount paid in state tax from their federal tax bill. Republicans put the limit in place to help finance the 2017 tax cuts, and most of the SALT deduction flows to high-earners in predominantly Democratic states.

SALT had been the center of tense negotiations in the lower chamber and the policy changes triggered anger among Republicans hailing from states like New York. GOP Rep. Mike Lawler of New York called the SALT changes “dead on arrival” in an X post.