The U.S. House of Representatives has passed the “One Big Beautiful Bill,” a wide-ranging package that includes changes to federal taxes, health care programs, and government spending.
The legislation passed on May 22 by a narrow vote of 215–214, and all but two of Kentucky’s congressmen, Representative Thomas Massie (R) and Representative Morgan McGarvey (D), voted in favor.
Tax Changes
The bill builds on the 2017 tax reform law by making several provisions permanent and expanding them. Key components include:
- Permanent Tax Cuts: Under this bill, the lower individual and business tax rates from the 2017 Tax Cuts and Jobs Act would become permanent.
- Small Business Income Tax Deduction: Small businesses, including partnerships and S corporations, will be able to deduct 23 percent of qualified business income, an increase from 20 percent.
- Expanded Child Tax Credit: The child tax credit would increase to $2,500 per child through 2028 before reverting to $2,000.
- Higher SALT Deduction Cap: Households earning $500,000 or less could deduct up to $40,000 in state and local taxes, with the deduction gradually reduced for higher incomes.
- Phase Out of Green Energy Tax Credits: Tax credits for certain energy projects would be eliminated starting in 2029. To qualify before then, companies must begin construction within 60 days of the bill becoming law.
- New Tax Exemptions: Income from tips, overtime, and car loan interest (on vehicles assembled in the U.S.) would be exempt from federal taxes.
Medicaid Reforms
The legislation would also make major updates to Medicaid, which currently covers approximately one in three Kentuckians. Proposed changes include:
- Work Requirements: Starting in late 2026, most adults without children would need to work or participate in approved activities for at least 80 hours per month to stay enrolled.
- Stricter Eligibility Checks: States would need to verify eligibility more often.
- New Funding for Non-Expansion States: States that did not expand Medicaid under the Affordable Care Act would receive more federal support for certain hospital services, potentially helping rural health providers.
What’s Next
The bill moves to the Senate, where changes could be made before a final vote.
Last week, the Kentucky Chamber visited members of the Commonwealth’s congressional delegation in Washington, D.C. to discuss key issues including taxes, tariffs, and workforce.
The Chamber will continue monitoring this legislation closely. With significant implications for taxes, health care costs, and workforce access, the final version could directly affect Kentucky’s employers and economy.
Stay tuned to The Bottom Line for updates on federal legislation and policy changes.