The federalism take in Trump’s ‘Big Beautiful Bill’
Below is an excerpt from Jennifer Butler’s Dispatch from DC mailing list, where she shares valuable inside information on Trump’s proposed “One Big Beautiful Bill Act” and its potential impact on state policy. The bill recently passed the U.S. House by a single vote and now heads to the Senate.
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What Trump’s “One Big Beautiful Bill” Could Mean for the States
House Republicans worked through the night to push the “One Big Beautiful Bill Act” across the finish line, narrowly passing it 215–214. Trump made a personal appearance on the Hill and later met with Freedom Caucus members, demanding unity and warning holdouts not to derail the effort. After intense negotiations, a few key concessions were made to strengthen Medicaid and ACA provisions, along with raising the SALT deduction cap.
The 1,100+ page bill delivers on several of Trump’s 2024 campaign promises. It locks in the lower individual tax rates and higher standard deduction from the 2017 Trump tax law and permanently raises the exemption for the alternative minimum tax. It also increases small business expensing limits and sets a $15 million estate tax exemption starting in 2026. It restores more generous write-offs for R&D and equipment through 2029 and temporarily adds new deductions for overtime pay, American car loan interest, tip income and a larger senior deduction.
But buried in the fine print are numerous provisions that will directly affect state budgets and program operations. We’ve reviewed the bill and highlighted several key items state leaders should track. It’s also important to note this is not the final version: the Senate returns the first week of June, after the Memorial Day recess, and will begin work on the bill.
What’s in the Bill That Affects States
The One Big Beautiful Bill Act, including adopted updates in the manager’s amendment, is organized by congressional committee, with each House committee assigned a budget target and jurisdiction over specific federal programs. What follows is a breakdown of the sections most relevant to states, grouped by committee title. Note that not every title includes major provisions affecting state budgets or administrative responsibilities.
Title I – Committee on Agriculture
Supplemental Nutrition Assistance Program (SNAP)
- Expands mandatory SNAP work requirements from age 49 to 64 and limits states’ ability to waive the requirements to only areas with unemployment above 10%.
- Requires states to contribute 5% of SNAP benefit costs and increases states’ share of SNAP administrative costs from 50% to 75%.
Title IV – Committee on Energy and Commerce
Artificial Intelligence
- Prohibits states and political subdivisions from enacting or enforcing any law, regulation, or policy that limits the development, deployment, or use of artificial intelligence models for 10 years.
Medicaid & ACA
- Improved Eligibility Verifcation: Requires states to check federal databases for deceased enrollees and mandates redeterminations every 6 months for expansion adults, and states must submit all enrollee Social Security Numbers to a new federal system that will detect dual Medicaid enrollment across states.
- Provider Tax and State-Directed Payments: Freezes existing provider tax rates, bans new ones, and limits states’ ability to supplement provider payments beyond Medicare levels – except that non-expansion states may make state-directed payments capped at 110% of Medicare rates.
- Expansion FMAP and Cost Share: Reduces FMAP by 10% for expansion states that use Medicaid to cover illegal immigrants, ends the COVID-era 5% FMAP incentive for states newly expanding Medicaid, and requires states to impose cost-sharing on Medicaid expansion adults with incomes above 100% of the federal poverty level, capped at $35 per service and no more than 5% of income overall.
- Work Requirements: Mandates work requirements (80 hours/month) for able-bodied adults in the expansion population without dependents be put in place by December 31, 2026, with states having the option for earlier adoption.
- ACA Exchanges: Ends automatic reenrollment in zero-dollar premium plans and tightens up income and eligibility verification requirements, while reinstating federal cost-sharing reduction payments to lower out-of-pocket costs for low-income enrollees.
Title VI — Committee on Homeland Security
- Border Security Reimbursement: The adopted manager’s amendment allocated approximately $12 billion to reimburse states for border security expenses incurred during the Biden Administration.
Title X – Committee on Transportation and Infrastructure
- Electric and Hybrid Vehicle Fees: To address the fact that owners of EVs don’t pay the federal gasoline tax, the bill requires states to collect and deposit into the Highway Trust Fund an annual registration fee of $250 for electric vehicles and $100 for hybrid vehicles.
Title XI – Committee on Ways and Means
- State and Local Tax (SALT) Deduction: Raises the SALT deduction cap to $20,000 for single filers, $40,000 for joint filers starting in 2025; with a phase-out beginning at $250,000 adjusted gross income (AGI) for single filers and $500,000 AGI for joint filers.
- Clean Energy and EV Tax Credits: States with clean energy goals may be impacted by changes in federal clean energy tax incentives. Tax credits for commercial and used electric vehicles will end after this year, while credits for most new EVs expire. The bill also accelerates the phaseout of tax credits for solar, wind, geothermal, or battery projects, requiring projects to start within 60 days of enactment and placed in service by the end of 2028. New nuclear energy products remain eligible for tax breaks as long as construction begins by the end of 2028.
- Tax Credit for Scholarships: Creates a nonrefundable federal tax credit for donations to qualified scholarship-granting organizations, potentially expanding private school access even in states that have resisted enacting school choice programs.
- Expands 529 Plans: Expands the definition of “qualified education expenses” for 529 savings accounts to include K–12 private school tuition, homeschooling expenses, tutoring and testing fees, and educational therapies for students with disabilities.
— The Federalism Beat