Global Daily Tax News, US Senate Agrees One Big Beautiful Bill Act, (Jul 3, 2025)

In a marathon session, the US Senate approved its version of the One Big Beautiful Bill Act by 51 votes to 50 on July 1, 2025, returning its rendition of the legislation to the House of Representatives for its approval.

The Senate-approved version of the bill would make permanent tax cuts for businesses that were introduced in the Tax Cuts and Jobs Act, including immediate expensing for spending on capital equipment and research and development.

Among numerous other measures, the draft bill would permanently raise the child tax credit to USD2,200 (rather than temporarily to USD2,500 as proposed by the House) and grant seniors a greater USD6,000 deduction (rather than USD4,000).

The Senate version would come at a cost of USD3.3 trillion over 10 years, significantly higher than the House-drafted version, which would have raised the deficit significantly still but only by USD2.8 trillion over the next decade.

With concerns raised about the scale of the deficit when the Bill passed the House also by a single vote, it is expected that belt-tightening measures may be added back to the bill before the House gives its approval once again under the reconciliation process.

Another area that may rear its head to prevent the bill's passage by the President's July 4 deadline is the addition of provisions to provide that the increase to the cap for state and local tax deductions would be temporary. While the Senate agreed with the House proposal to raise the cap from USD10,000 to USD40,000, its version of the bill would do so only temporarily, until the end of the current presidential term in 2028, after which the USD10,000 cap would be restored.

Another potential contentious matter is the Senate's proposals to significantly reduce tax on healthcare providers to 3.5 percent (rather than six percent in the House bill) from the fiscal year 2032. This is projected to further reduce coverage for American households and place a greater burden on state authorities to supplement taxpayers' coverage.

House Republicans have warned that the Medicaid proposals could be the bill's undoing, with some lawmakers previously threatening to block the bill when it is returned from the Senate.

Passage of the Bill was welcomed by US businesses, including the US Chamber of Commerce, which said: "With today's vote, the Senate has taken decisive action to deliver the kind of permanent tax relief the American business community has been calling for. The tax provisions included in this bill will not only drive economic growth and sharpen America's competitive edge but also put more money in workers' pockets, increasing prosperity in communities across the country."