The US Senate has passed President Trump’s massive tax and spending package, also coined by Trump as the “Big Beautiful Bill”. The bill was passed on July 2nd with a narrow vote of 51-50, with Vice President JD Vance casting the tie breaking vote.
Senate Passing and Details of the Bill
After days of negotiations and a 24-hour vote-a-session, the Senate finally approved the bill. However, Republican Senators such as Thom Tillis, Rand Paul and Susan Collins voted against it. The Big Beautiful Bill aims to support Trump’s domestic policy agenda, which includes tax cuts, changes in Medicaid, clean energy, immigration policies and other things. ⁽¹⁾
The CBO (Congressional Budget Office) expects the bill to add $3 trillion to the national debt over the next decade. Despite the additional debt, Republican senators celebrated the victory after a long amendment session where dozens of other amendments were considered, but none came through. ⁽²⁾
Breaking Down the Bill
The Senate’s version of the bill indicates several major changes that could impact certain areas of the stock market differently: ⁽³⁾
- Defense and Security
Increased defense military spending and border security measures.
Industries Affected: Aerospace and Defense
Analyst Outlook: Positive
- No Tax on Tips and Overtime
Workers would be exempt from taxes on tip income up to $25,000 per individual, as well as overtime up to $12,500 per individual and $25,000 per couple. The tax breaks run through 2028. Those deductions start to phase out at $150,000 in income per person.
Industries Affected: Consumer Staples and Services
Analyst Outlook: Positive
- Medicaid
Medicaid spending will be reduced by almost $1 trillion over 10 years, which could cause almost 12 million Americans to lose health insurance. It also caps state provider taxes to limit federal Medicaid funding.
Industries Affected: Healthcare
Analyst Outlook: Negative
- Clean Energy
Ends tax credits for wind and solar projects not in service by 2027 and removes a planned excise tax on projects with Chinese components.
Industries Affected: Utility
Analyst Outlook: Negative
- Electric Vehicles
Removing the $7,500 tax credit for consumer purchases of new and used electric vehicles would end on Sept. 30, 2025, earlier than previous versions of the bill that would have eliminated the credit at the end of the year.
Industries Affected: EV Producers
Analyst Outlook: Negative
- Semiconductors
An investment credit for semiconductor manufacturers would be increased to 35% from 25%, giving chipmakers more incentive to break ground on new facilities by the existing 2026 deadline.
Industries Affected: Semiconductor
Analyst Outlook: Positive
- Business Tax Breaks
Three business tax deductions would be made permanent. That includes the ability to use depreciation and amortization as the basis for interest expensing, the research and development write-off and a 100% bonus depreciation of certain property, including most machinery and factories. It’s a potential win for banks, who could see a surge in lending as companies have more cash freed up to invest in projects.
Industries Affected: Industrial, Technology, and Banking
Analyst Outlook: Positive
Semiconductor Industry Focus
Under the bill passed by the Senate on Tuesday, tax credits for semiconductor firms would rise from 25% to 35%. That’s more than the 30% increase that made it into a draft version of the bill. ⁽⁴⁾
Companies eligible for the credits could include chipmakers such as Intel, Taiwan Semiconductor Manufacturing Company and Micron Technology, provided that they expand their advanced manufacturing in the US ahead of a 2026 deadline. ⁽⁵⁾
The new provisions expand on tax incentives under the 2022 CHIPS and Science Act, which provided grants of $39 billion and loans of $75 billion for US-based semiconductor manufacturing projects. ⁽⁶⁾
House of Representative Vote
The US House of Representative began a final debate on the Big Beautiful Bill after a dramatic session of voting that was nearly defeated due to Republican defections. The House voted 219-213 to move forward with the bill. ⁽⁷⁾
The vote marks a win for Republican leadership seeking to deliver on Trump’s second term policy agenda. After hours of stalemates and maneuvering, they finally managed to come to a solution and crush opposition from within their own ranks to move forward. ⁽⁸⁾
The Senate implemented substantial changes to its version of the megabill, including deeper cuts to Medicaid and a $5 trillion debt limit hike, much higher than the $4 trillion increase the House proposed in its version of the bill. ⁽⁹⁾
