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Frank Kelly Special: Senate's tax draft sets up a fight | June 16, 2025

6/16/2025

The Senate Finance Committee released their tax draft and it challenges the House on Section 899, SALT, and Medicaid.

Francis (Frank) J. Kelly

Founder & Managing Partner, Fulcrum Macro Advisors LLC and Senior Political Strategist for DWS

This afternoon (June 15, 2025), the U.S. Senate Finance Committee released the tax portion of the Senate version of the One Big Beautiful Bill Act – OBBA – otherwise known as the Reconciliation bill.

We are still reviewing the draft (it is more than 500 pages long), but our initial read of the draft shows it diverges significantly from the House version on several important and contentious points, including:

Delaying until 2027 implementation of Section 899, softening the House’s version of the provision by raising the rate by 5 percent a year until it hits a 15% cap (the House version goes immediately to 20%).
Lowering the state and local tax (SALT) deduction cap to $10,000, down from the House version which set the deduction at $40,000.
Cutting Medicaid more aggressively than the House does (something President Trump had warned against doing).
Softening and slowing the House phase-out of Inflation Reduction Act (IRA) solar energy tax credits.

We expect the Senate to begin some debate on the legislation this week but with Thursday being a federal holiday (Juneteenth), real debate will begin next week.

The Senate is going to race to try and pass their version as soon as possible to meet President Trump’s request to have a final bill – agreed to with the House of Representatives – on his desk for signature by July 4th. But seeing the significant differences between the Senate and House on the SALT provisions, Section 899, and Medicaid cuts - all highly contentious issues which House Republicans spent the last several weeks loudly warning Senate Republicans not to change – we see it as unlikely Congress will meet the July 4th deadline. Instead, we do not see easy compromises on these points suggesting to us efforts to reach a deal could go for the better part of the summer.

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Francis (Frank) J. Kelly

Frank is the Founder and Managing Partner of Fulcrum Macro Advisors LLC, a political risk advisory firm based in Washington, DC. He is the senior political strategist for DWS.

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Frank Kelly Special: Senate's tax draft sets up a fight | June 16, 2025

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