President Donald Trump’s massive tax legislation would have major impacts on Michigan taxpayers and businesses and could blow a billion-dollar-plus-sized hole in the state budget.

House Republicans intended to work through the weekend to nail down the votes needed to pass the legislation next week after five conservatives joined all Democrats on the budget committee Friday in voting against it, causing a setback for Trump and Speaker Mike Johnson, R-Louisiana.

The bill would make sweeping changes with new tax cuts, huge spending on border security, borrowing limits in the student loan program and work requirements for the federal food assistance program and Medicaid, the federal-state program that covers medical costs for lower-income Americans.

The bill text would also reverse many of President Joe Biden’s auto policies and spending initiatives to fight climate change, and a new program would bring school vouchers to Michigan for the first time.

Eleven House panels spent recent weeks finalizing sections of the bill to compile at least $1.5 trillion in savings to cover the cost of extending the 2017 tax breaks passed during Trump’s first term that expire at year’s end. Democrats warned that the proposed spending cuts would lead to millions of Americans losing health care coverage or critical nutrition benefits.

“It’s simply devastating,” said Rep. Hillary Scholten, D-Grand Rapids. “They’re adding $4 trillion to the debt and continuing massive tax breaks to corporations and the ultra wealthy.”

Rep. Lisa McClain, R-Bruce Township, dismissed concerns about shortfalls in state budgets that could lead to cutting individuals from food assistance programs or reduced Medicaid coverage.

“For far too long, they’ve been gaming the system. That’s got to stop, right? The waste, the fraud, the abuse. Everyone’s got to tighten their belt,” said McClain, chairwoman of the House Republican Caucus.

“I am hard pressed to believe that any branch of government runs so efficiently that they can’t find any savings.”

If the GOP-led House can push it through the narrowly divided chamber, Republicans will need only 51 GOP votes to pass it in the Senate, rather than 60, by using a specialized budget procedure.

But the Senate also could make significant changes to what House lawmakers send them. McClain blasted that idea.

“The president has been very clear that he wants this bill done by July 4,” McClain said. “I would not want to be the one that stood in the president’s way of doing that.”

Medicaid reforms

Republicans said their Medicaid reforms are intended to refocus the program on the pregnant women, children, people with disabilities and elderly Americans who rely on it.

“Not for the illegal immigrants, not for people registered in multiple states, not people who are ineligible, not for people who are able-bodied without dependents who are choosing not to work,” said Rep. John James, Shelby Township Republican who voted in committee in support of the Medicaid changes.

In Michigan, Medicaid provides health care coverage to more than 1 in 4 people, totaling 2.6 million beneficiaries, including 1 million children, according to state figures.

A state report issued this month warned that the new Medicaid work requirements would cause as many as 39% or 290,000 of the 749,375 adults enrolled in the Health Michigan Plan to lose their coverage. The change would also cost the state an estimated $75 million in administrative expenses. The work rules are targeted at the Healthy Michigan or Medicaid expansion enrollees.

The requirements call for at least 80 hours per month of work, education or service for able-bodied adults without dependents. People would also have to verify their eligibility to be in the program twice a year, instead of once. The bill imposes mandatory co-pays as high as $35 for expansion enrollees above the poverty line.

The coverage losses anticipated by the Michigan Department of Health and Human Services are not primarily due to people failing to meet the work criteria but from “administrative barriers such as lack of knowledge about the requirements, as well as the complexity and burden of compliance,” the state report said.

“Work requirements seem to be very popular, and it seems to make sense to a lot of people. But one of the challenges is, how do you make sure that you are implementing your policy and not making that a barrier to coverage?” said Laura Appel, executive vice president of government relations and public policy for the Michigan Health & Hospital Association.”There’s an anticipation that many people would not maintain their coverage under that particular policy, so we’re very concerned about that.”

The bill also would freeze the health care provider taxes that Michigan uses to pay for 20% or $3 billion of the state’s share of Medicaid programs, meaning states couldn’t increase or add new provider taxes. The extra tax leads to higher payments from the U.S. government, which critics said is a loophole that lets states abuse the system.

The GOP bill would prohibit certain types of provider taxes, targeting those on managed care plans used to finance Medicaid in seven states, including Michigan, because of how those states structure the tax using variable rates.

Michigan’s Insurance Provider Assessment (IPA) tax generates about $450 million a year toward the state’s base Medicaid costs, according to MDHHS. If it’s prohibited under the new rules, that would leave the state with a budget hole, said Edwin Park, a research professor and health policy expert at Georgetown University’s McCourt School of Public Policy.

“That means federal funding is no longer available related to those revenues, and so the state’s going to be in a bind,” Park said.

Under the bill, the state is barred from creating a new provider tax to replace the revenues that are lost, and it makes no provision for states to revise the tax to eliminate the variable rates that are no longer allowed, the Georgetown University expert said.

“The state, if it can’t replace these revenues with other provider taxes, then it’s going to have to look at other tax increases or cutting other parts of the budget ? which is principally education in every state ? or they’re going to have to cut their Medicaid programs,” Park said.

State Rep. Greg VanWoerkom, a Norton Shores Republican who leads the appropriations subcommittee overseeing Medicaid spending, said the panel has been watching developments in D.C. and is awaiting more clarity. He described some of the ideas surfacing as “test balloons” to gauge public reaction.

“We have to know that conversation is happening and have some potential options on the table,” VanWoerkom said. “But I’m not going to go run around scaring people right now. Let’s wait to see what’s actually in the bill.”

Food stamp changes

The House GOP bill would require states, for the first time, to pay for 5% to 25% of the funding for the Supplemental Nutrition Assistance Program or SNAP, starting in 2028.

If the legislation is passed, states would also begin paying 75% of program administrative costs. Currently, states pay half of the program’s overhead costs and do not contribute to the food assistance benefits.

Under the bill, the amount each state would have to contribute toward food assistance benefits is based on its payment error rate. States like Michigan, with high rates of SNAP payment errors, would be responsible for more of the cost.

Using Michigan’s payment error rate for fiscal 2023 (the latest available) of 10.7%, the state would be responsible for a quarter of SNAP payments. That would put the state on the hook for $778 million worth of SNAP payments, which is 25% of the $3.1 billion that the federal government spent on SNAP benefits in Michigan in fiscal 2024, according to figures from the Michigan Department of Health and Human Services.

If Michigan can lower its payment error rate in 2026 — the benchmark year for the new policy — the state could reduce its share of SNAP payments to as low as $155 million, or 5% of total benefit expenditures.

Critics of the proposal, such as Ty Jones Cox, vice president for food assistance at the Center for Budget and Policy Priorities, said the change would likely force states to slash their budgets and potentially limit who is eligible for SNAP to pay for the benefits.

“You’re blaming states, but it’s households that are going to be hurt at the end of the day,” Jones Cox said.

State Rep. John Roth, an Interlochen Republican who leads the legislative panel overseeing human services spending, said the state would have to reconsider how it manages SNAP benefits if it were required to provide a 25% match.

“We’re watching it carefully, and we will have to adjust. But could we take a 25% hit? No,” Roth said.

“There’d have to be really tough decisions where our money goes,” Roth added. “I think we would do it …, but there would be hard cuts somewhere else.”

The GOP federal legislation also would expand a 20-hour-per-week SNAP work requirement for the first time to parents with children over the age of 6 and adults aged 55 to 64.

“These are able-bodied Americans that we need to work, especially when there are more than 7 million open jobs across the country,” reads a fact sheet from House Agriculture Committee Chairman GT Thompson, a Pennsylvania Republican.

Rep. Kristen McDonald Rivet, D-Bay City, serves on the committee and voted this week against the proposal.

“DOGE has already cut back operating grants for food banks, cut a billion dollars out of the school food program, and now we’re looking at $300 billion in cuts to SNAP,” McDonald Rivet said. “The ecosystem of food for children is diminishing in a very big way.”

Tax cuts galore

The extension of the 2017 tax cut provisions in the GOP bill would ensure that more than 62% of tax filers don’t see tax increases in 2026, according to an analysis by the nonpartisan Tax Foundation.

The proposed bill would additionally provide taxpayers with an average $1,300 tax reduction, according to the House Ways and Means Committee. It incorporates some tax cuts that Trump heralded on the campaign trail, such as eliminating taxes on overtime pay and tips, although those would be temporary and expire after 2028.

Senior citizens age 65 and older would get an extra tax deduction of $4,500 per filer for those with a modified adjusted gross income of $75,000 or less. Parents would get a boon with an extension of the $2,000 child tax credit ? a change that would be permanent, according to the Ways and Means Committee.

“If we don’t pass this bill, every Michigander will see a $2,400-a-year tax increase,” McClain said. “I don’t know about you, but I don’t want Michiganders’ taxes to go up by 2,400 bucks. Period. End of conversation.”

The legislation also permanently extends the higher estate tax exemption that was doubled under the 2017 Tax Cuts & Jobs Act. Gifts and inheritances of up to $15 million for single filers and $30 million for married couples would be exempted from federal gift or estate taxes starting in 2026.

The pass-through deduction for small businesses would also go up to 23% under the legislation.

“Those small businesses that were prosperous, especially through COVID and all the things that they had to go through, they’re the ones at most risk if the Tax Cuts & Jobs Act is not extended,” said U.S. Rep. Jack Bergman, a Watersmeet Republican.

“On a lot of cases, depending on the industry, they work on very limited margins or small margins, so they’re the most vulnerable.”

Education reforms

The bill package sets aside $5 billion for federal vouchers for private school tuition, home schooling materials and for-profit virtual learning.

This provision, based on the Educational Choice for Children Act, would effectively allow for vouchers in Michigan for the first time using federal dollars. The state’s Blaine Amendment constitutionally prohibits using state dollars to support any non-public school.

“The status quo has given us falling test scores, students who can’t read or write, and policies that keep parents in the dark,” said Rep. Tim Walberg, the Tipton Republican who chairs the House Energy & Workforce Committee and supports the measure. “We should expand options for students so every child can succeed.”

Former Education Secretary Betsy DeVos of Michigan, a school choice advocate, has endorsed the policy.

The tax credit is designed to permit individuals to receive a dollar-for-dollar federal tax credit for donations to nonprofit organizations that grant scholarships. Up to $500 million would be allocated to each state for scholarship tax credits in the first three years under the bill’s $5 billion cap.

Josh Cowen, a professor of education policy at Michigan State University, described the bill as a federal version of the voucher legislation that Gov. Gretchen Whitmer vetoed in 2021.

“So much for ‘leaving education to the states,’ right? That’s their rhetoric,” said Cowen, author of “The Privateers: How Billionaires Created a Culture War and Sold School Vouchers.”

“I take the view that the whole point of this is to push vouchers into Michigan, and I would start with Michigan simply because this is Betsy DeVos’ backyard.”

Other education-related provisions in the package include new caps on college borrowing for the student loan program, including $50,000 for undergraduates and for the Parent PLUS loans. The bill would also rescind Biden-era loan forgiveness programs.

“I’m proud of the committee’s work to finally stand up and end the status quo of endless borrowing,” Walberg said.

Auto policy overhaul

The GOP package, as currently written, would shock Michigan’s auto industry by gutting key Biden-era policies that pushed a transition to electric vehicles.

The Republican package would cancel new emissions standards, thereby preserving U.S. automakers’ ability to lean on internal combustion vehicles that drive both profits and greenhouse gas emissions. The bill would also end the $7,500 EV tax credit and reduce other federal supports for the nascent domestic supply chain for batteries and critical minerals.

Proposed clawbacks of Inflation Reduction Act dollars put over $1 billion at risk for General Motors Co. and Stellantis NV projects geared toward retooling shuttered or at-risk plants for EV production in Michigan, Indiana and Illinois.

Both automakers declined to comment on the bill and its potential effects on those projects. Ford Motor Co. and the Alliance for Automotive Innovation, the industry’s top lobbying group in Washington, also declined to comment.

McClain, the No. 4 Republican in the House, cheered the automotive provisions of the bill, attacking the Biden policies as unwanted electric vehicle mandates.

“We are rolling back the Democrats’ Green New Scam that has wasted taxpayer dollars, cost Michiganders jobs, and taken away their freedom to choose what kind of car they drive,” she said in a statement.

Some critics in the Democratic Party and within the industry denounced the proposals. U.S. Rep. Debbie Dingell of Ann Arbor said the bill creates “total chaos” for the industry.

“Here’s a fact: The global marketplace wants EVs, and I’ll be damned if I’m gonna let China beat us in that market,” Dingell said during a marathon markup session in the House Energy and Commerce Committee.

Albert Gore, executive director of the Zero Emission Transportation Association and son of the former vice president, warned that the new GOP proposal would stunt the auto industry’s growth at a crucial moment.

“Anybody who claims to be concerned about Chinese dominance in battery minerals and supportive of U.S. competitiveness in that sector needs to know: This bill is absolutely devastating to that goal,” Gore said in an interview.