The Senate’s Version of the ‘Big, Beautiful Bill’ Has Gotten Worse

Ten days ago, after the Senate released its version of Republicans’ signature reconciliation package, the One Big Beautiful Bill Act, National Review editorialized that the upper chamber had improved upon what the House had previously put together. Indeed it had, by prioritizing the best parts of the legislation while curtailing the worst. It offered permanency for the tax code simplification and rate reductions of the 2017 Tax Cuts and Jobs Act, kept the state and local tax deduction capped at $10,000 instead of raising it to $40,000, as the House would, and aimed for structural Medicaid reform by curbing exploitative state practices.

A lot has changed in the last ten days, however. In that time, much of the Senate’s bill has been picked apart by the body’s parliamentarian to ensure compliance with the rules of reconciliation. Political pressures from various members of the Republican Conference have forced leadership to adopt further changes, mostly in the wrong direction. The majority of these changes were included in the megabill’s revised text, released on Friday night, whereas others are planned as part of a final amendment once voting on other amendments wraps up either later today or tomorrow:

• The limit on health care provider taxes, which states use to get billions in extra federal funding for their Medicaid programs, has been delayed until 2028. Even then, there would be a gradual drawdown of provider taxes rather than an immediate crackdown, so the policy would not fully enter effect until 2032. This delay was sought by Medicaid defenders within the conference, such as Collins (R., Maine), who also secured the creation of a $25 billion fund for rural hospitals to supposedly offset the damage of Medicaid reform. Of course, $25 billion is more than twice what rural hospitals receive every year in total Medicaid inpatient spending.
• To appease blue-state Republicans in the House, the exorbitantly expensive state and local tax deduction is back up to $40,000, as they had demanded. Worse still, the Senate removed many limits on the deduction that were included by the House, raising the cost of the change by two-thirds, or $125 billion. As a consolation for conservatives, the deduction cap is scheduled to revert back to $10,000 in 2030. Surely, it won’t then be expanded again (wink-wink).
• After various civil service reforms were struck by the parliamentarian, the bill now makes no effort to reform the federal government’s bloated pension system by raising employee contributions. Federal retirement benefits are currently far more generous than those in the private sector, and meager employee contributions leave taxpayers on the hook for hundreds of billions of dollars.
• An exceedingly reasonable proposal by Senator Mike Lee (R., Utah) to sell off a tiny fraction of federal land holdings in metro areas is set to be removed following backlash from fellow Western-state Republicans. The federal government will continue to own no less than 46 percent of those states’ territory, most of which has no designated purpose.
• Senator Lisa Murkowski (R., Alaska) won a number of special favors for her home state in exchange for her support. Alaska would have access to waivers to bypass the bill’s requirements for states to share the cost of their food-stamp programs and impose stricter work requirements for them. Hawaii is also made eligible for these exclusions, presumably to provide them an air of a legitimate reason besides the purchase of a single lawmaker’s vote. Oh, and whaling-boat captains in Alaska will now be able to deduct up to $50,000 in “whale-hunting-related expenses” from their tax bills.

One positive change is that the phaseout of the Inflation Reduction Act’s green energy subsidies — which was more aggressive in the House’s version of the bill — has been accelerated in the Senate’s revised text. Renewable energy projects would now need to enter service by the end of 2027 to be eligible for tax credits. Unfortunately, this shift is accompanied by some additional, smaller subsidies for nuclear facilities and loans for “energy dominance.” The revised bill also contains a novel tax on new solar and wind projects unless they follow onerous requirements to cleanse themselves of Chinese components. Given that this tax does not apply to oil and gas projects, it seems intended to actively disadvantage renewable energy sources rather than merely repeal an artificial advantage of those industries.

Altogether, the changes to the Senate bill add up to a staggering cost. Based on Congressional Budget Office estimates, the nonpartisan Committee for a Responsible Budget projects that the revised legislation would add $3.94 trillion to the national debt over ten years — nearly $1 trillion more than the House’s version. If expiring provisions of the bill are extended past their stated end dates, which usually happens, its total cost could exceed $5 trillion. Such is the natural result when special handouts and carve-outs grow, offsets shrink under political scrutiny, and tax cuts take precedence over spending restraint.