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Trump Bill Tangled Up in the Senate

Clean energy, state taxes, Medicaid, and much more are being debated.

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Francis Chung/POLITICO via AP Images

By David
Dayen

Welcome to "Trump's Beautiful Disaster," a pop-up newsletter about the Republican tax and spending bill, one of the most consequential pieces of legislation in a generation. Sign up for the newsletter [link removed] to get it in your in-box.

In the Senate's first week of handling the mega-bill sent over from the House, not a heck of a lot appeared to get done. As of Thursday evening, three committees-Environment and Public Works [link removed], Armed Services [link removed], and Commerce [link removed] released the text of their
contributions, neither of which address the core of the bill and neither of which differ much [link removed] from the respective House versions. (For example, EPW included the "pay-to-play [link removed]" permitting reform for public works proposals that ties higher fees to expedited timelines for approval.)

Most of the knots have yet to be untangled, and those knots are proliferating. It's red line season, when senators announce their must-haves in the bill to kick off negotiations. Some of these came up in a big meeting with President Trump on Wednesday. Let's look at a few:

Clean-energy tax credits: This has been a big fight for some senators, like North Carolina Republican Thom Tillis, who have large manufacturing companies in their states. The repeal
language inserted at the last minute in the House would give companies an absurdly unrealistic 60 days from enactment to start work on factories, or else lose access to the credit. Virtually everyone working in the clean-energy industry considers that completely unworkable. Several have endorsed slower phaseouts and different timelines for various forms of energy, including Sen. John Curtis (R-UT) in this Deseret News op-ed [link removed].

But the quicker phaseout was the main get for the House Freedom Caucus-the provision that got them to advance the bill. Having now heard from Elon Musk, however, they're already having second thoughts about their yes votes. Losing their main victory to the Senate could push them over the edge when the bill returns to the House.

The Freedom Caucus also inserted "Foreign Entity of Concern
[link removed]" (FEOC) provisions that ban any facility receiving "material assistance" from countries like China from getting production tax credits. This would include components, assembly parts, critical minerals, and virtually every other contributor to production. Under current supply chains, such a restriction would be impossible for anyone to meet. "It's full IRA repeal under the guise of being tough on China," says former Biden industrial-policy official Alex Jacquez [link removed]. And it could come up as a red line as well.

SALT: I wrote on Monday that the state and local tax deduction changes were going to be a big target in the Senate, because while several House Republicans represent the high-tax blue states and well-off districts that covet that
tax break, there are no Republican senators from New York, New Jersey, or California. Sure enough, Senate Majority Leader John Thune (R-SD) has said the SALT cap, which moved from $10,000 to $40,000 for tax filers making under $500,000 a year in the House bill, would have to change [link removed]. Trump was apparently OK with this in the meeting with senators, but the House SALT Caucus is apoplectic [link removed], saying they would vote down the bill if that changes. "The path to 218-and delivering for the American people-runs through the SALT Caucus," caucus chairs Young Kim (R-CA) and Andrew Garbarino (R-NY) said in a statement.

The House change costs $786 billion over the next decade, according to the Congressional Budget Office, and the Senate is having
trouble with their deficit hawks; managing this divide will be supremely difficult here.

Medicaid cuts: Sen. Josh Hawley (R-MO) has listed [link removed] what he sees as the objectionable Medicaid cuts that affect real people: additional cost-sharing on beneficiaries, and the limitations on "provider taxes" that virtually all states impose. The former was what I thought would be a flashpoint when I scooped that it was in the bill [link removed]; literally charging poor people more for health care to pay for tax cuts for rich people wasn't going to fly. The latter is, let's face it, deceptive: States "charge" taxes to health care providers but then give them higher reimbursements under Medicaid, which nets the states more money from the federal government. It's
a sneaky way to get more federal dollars. But if you limit it, as the House bill does, you force states to come up with more money for Medicaid that they do not have.

It's amusing that Hawley is fine with work requirements, the biggest Medicaid change in the bill, when they are not at all designed to actually put anyone to work but just a pretext to kick people off their coverage [link removed], particularly those who simply don't get enough hours [link removed] at their erratically scheduled job. But his objections are enough of a red line to open yet another divide.

[link removed]

Trump tax promises: Tillis has taken aim
[link removed] at the "no tax on tips" provision, which he correctly calls unfair to workers with similar incomes who don't get tips. The Senate has already passed a stand-alone no tax on tips bill and could ditch the $40 billion measure from the mega-bill altogether. The four-year elimination of tax on overtime is pricier, at $124 billion; senators proposed tightening eligibility for the tax break. Others don't like the "Trump accounts," the $1,000 tax-free accounts for newborns in the House bill.

Business taxes:

****The individual provisions from the Trump tax cuts of 2017 are all made permanent in the House version, but a few business tax breaks (like 100 percent deductions for research and development, interest expensing, and so-called "bonus depreciation") only run to 2029. Sen. Steve Daines (R-MT) wants them to be made permanent too, and said he'd vote against
the bill if they're not. That would add hundreds of billions of dollars to the final cost.

AI regulation ban: Rep. Marjorie Taylor Greene (R-GA), having just gotten around to reading the bill she voted for, came out strongly [link removed] against the ten-year ban on state AI regulations, echoing several other Republicans. This one looks pretty dead: The Senate appears to be hoping that the parliamentarian kills it for violating the budget reconciliation process "Byrd Rule" so they can tell the industry backers their hands were tied. The Senate Commerce Committee tweaked their version slightly [link removed], by tying it to broadband deployment funds, which at least are given to states. But even committee chair Sen. Ted Cruz (R-TX) wouldn't defend the provision
to Punchbowl, saying "it will surely be challenged under the Byrd Rule and it's not clear if it would survive."

Another policy with shaky support, which would limit judges' ability to enforce contempt orders, could also get tossed under the Byrd Rule, which several Republicans would be fine with.

One red line appears to have been crossed out. Sen. Mike Rounds (R-SD) was adamant that he would not allow the sale of 600 MHz of spectrum as a revenue-producing measure, arguing that it would infringe on certain national-security frequencies. But a deal has been struck [link removed] that Rounds says would protect those frequencies while still allowing some spectrum to be auctioned. I have written about this spectrum deal [link removed] and how it could enrich Elon
Musk's companies, though he's a high-profile opponent of the bill for other reasons.

Ultimately, red lines are all well and good in red line season, but whether they actually hold things up is less clear. The bill is the GOP's top priority, and its goals to cut taxes and kick the poor are broadly shared by Republicans. So the pressure to make a deal will be immense.

The one caveat to that involves the biggest red-liners: the Senate's deficit hawks, egged on by Musk and the Freedom Caucus. Sen. Ron Johnson (R-WI) has now called the bill [link removed] "immoral" and "grotesque" and said he can't support it. Sen. Rand Paul (R-KY) is right there with him, despite being attacked directly [link removed] by Trump. It's possible they would be placated by $2 trillion
in spending cuts, which would be a significant increase from the net $1.3 trillion in the House bill. But Johnson's actual ask would be more like

**$5 to $15** trillion in cuts in the ten-year budget window, which approaches Musk-ian levels of insanity.

The looming problem for this deficit hawk debate also involves the parliamentarian. The current CBO estimate, just updated on Thursday, says that the bill adds $3 trillion in debt [link removed] when you include interest costs. But under the "current policy baseline" magic math favored by Senate Republicans, which wipes away the $3.7 trillion cost of extending the 2017 tax cuts, the bill actually

**saves** money. However, this is contingent on the parliamentarian's approval as well. Democrats are going to challenge
[link removed] the current policy baseline magic math, and though some Republicans [link removed] want the parliamentarian to be ignored, Thune-for now [link removed] said he wouldn't do that.

If their "current policy baseline" goes away, Republicans will no longer have that fig leaf to say that the bill saves money, and would have a weaker argument to counter the deficit hawks. Suddenly, trillions would have to be found, either by scaling back the tax cuts or adding more spending trims, to reach something closer to deficit neutrality. That's probably why some Republicans are poking around Medicare
[link removed], a Trump red line, for cuts. The recipe is for more fights, and more red lines.

Again, the expectation is still that something gets done. But stay tuned.

[link removed]

Other Big Beautiful Thoughts

* A brutal poll [link removed] for Joni Ernst commissioned by Senate Majority PAC, showing that 69 percent of respondents had heard her "we all are going to die [link removed]" comments, and that she's effectively tied against a generic opponent. (Public Policy Polling)

* I guess Trump and Musk are on the outs
[link removed], so sad. This went completely off the rails on Thursday and could impact the whole bill. More on that in future editions. (

**The Wall Street Journal**)

* You're going to hear a lot about the Trump "revenge tax," which targets foreign investment and would, simply put, make the country poorer [link removed]. (Bloomberg)

* How the bill is going to spike energy prices [link removed]. (

**The New York Times**)

* Republicans are already talking about [link removed] the

**next**Big Beautiful Bill. They do have two additional budget
years (FY2026 and 2027) where a reconciliation bill would be available. (

**Washington Examiner**)

We want to hear from you. If you're a Hill staffer, policymaker, or subject-matter expert with something to say about the Big Beautiful Bill, or if there's something in the legislation you want us to report about, write us at info(at)prospect.org.

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