“Big Beautiful Bill” Receives Final Passage in Congress

Congress has passed the “One Big Beautiful Bill,” a wide-ranging package that includes changes to federal taxes, health care programs, government spending, and more.

The legislation passed the House on July 3 by a narrow vote of 218-214 after passing the Senate earlier in the week, with a tie breaker from Vice President JD Vance.

Three members of Kentucky’s federal delegation voted against the legislation: Senator Rand Paul (R), Representative Thomas Massie (R), and Representative Morgan McGarvey (D).

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: The lower individual and business tax rates from the 2017 Tax Cuts and Jobs Act would become permanent. The tax rates were set to expire in December of this year.
• Small Business Income Tax Deduction: Small businesses, including partnerships and S corporations, can permanently deduct 20 percent of qualified business income.
• Business Investments: Immediate expensing for domestic research and development (R&D) expenses was made permanent. One hundred percent bonus depreciation for investments in short-lived assets was also permanently restored.
• Expanded Child Tax Credit: The child tax credit would increase to $2,200 per child through 2028.
• Higher SALT Deduction Cap: Households earning $500,000 or less could deduct up to $40,000 in state and local taxes through 2029, then it reverts to $10,000 in 2030
• New Tax Exemptions: Income from tips, overtime, and car loan interest (on vehicles assembled in the U.S.) would be exempt from federal taxes.
• 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.

The Kentucky Chamber supported making permanent key elements of the 2017 tax reform bill, including lower tax rates for businesses, the small business income tax deduction, and the improved treatment of business investments. Analysis by the nonpartisan Tax Foundation found that the tax provisions of the final bill would increase GDP by 1.2 percent and create the equivalent 938,000 full-time jobs.

The Chamber also voiced support for improvements made by the bill to the Child and Dependent Care Tax Credit and the Employer-provided Child Care Tax Credit (also known as 45F).

Medicaid

The package includes drastic changes to Medicaid, impacting Kentucky healthcare systems. As part of its advocacy efforts, the Kentucky Chamber sent a letter to Kentucky’s congressional delegation urging them to support health care providers, communities, and families by reducing or eliminating the Medicaid provider tax and the directed payment framework included in the bill. The letter reads:

“Hospitals throughout the country remain under extraordinary financial strain. Directed payments help bridge the gap by using legally authorized tax structures to support safety-net hospitals that provide life-saving care, train the next generation of physicians, and are often their communities’ largest employer. Hospitals will be forced to make devastating decisions without these supplemental payments: eliminating key services, reducing staff, or even closing their doors altogether. These outcomes would disproportionately impact low-income families, rural residents, and communities already facing barriers to care.”

Click here to read the full letter.

The legislation is expected to be signed by President Trump on July 4.