GOP Races to Settle on a Tax Bill

BY RICHARD RUBIN AND SIOBHAN HUGHES

WASHINGTON—President Trump is urging Republicans to get their spending and tax bill to his desk by July 4, but lawmakers face a series of hurdles and headaches on issues ranging from artificial intelligence to deficit spending to rural hospitals.

Senate GOP leaders are revising their version in advance of potential votes this week, searching for a mix that can garner a majority in the chamber, which is divided 53- 47. Anything that gets through the Senate must pass the House, which is divided 220-212 in Republicans’ favor; any subsequent House changes would require another Senate vote. Lawmakers are scheduled to leave Washington for a recess next week but signaled they were prepared to stay to finish the bill.

“No one goes on vacation until it’s done,” said Trump in an all-caps post on Truth Social on Tuesday.

The House and Senate bills both would extend tax cuts set to expire at year-end. They would also create versions of Trump’s promises to remove income taxes on tips, overtime and Social Security benefits while lowering projected spending on Medicaid and nutrition assistance. The legislation would provide more money for border security and national defense.

On Tuesday, members of several House factions—moderates concerned about Medicaid, conservatives seeking more spending cuts and New Yorkers insisting on a $40,000 state and local tax deduction cap—expressed opposition to the emerging Senate plan.

In each round of the process so far, most GOP holdouts ended up voting “yes” to keep things moving forward.

“When push comes to shove, you’re looking at whether you’re going to allow the perfect to become the enemy of the good,” Senate Majority Leader John Thune (R., S.D.) said Tuesday.

Here’s a look at some key outstanding issues:

Deficits

The House bill clocked in a $2.4 trillion increase in budget deficits through 2034, compared with letting tax cuts expire Dec. 31. Dozens of House members said that is as high as they want to go.

What is unknown is just how the Senate version compares and how large a deficit can attract a majority of senators. The tax piece of the bill includes about $400 billion more in tax cuts than the House version, the Joint Committee on Taxation said.

Some key spending cuts have fallen out of the Senate bill after the parliamentarian determined they don’t qualify for the fast-track budget reconciliation process. Sen. Markwayne Mullin (R., Okla.) said the items tossed by the parliamentarian had put as much as a $300 billion hole in the bill.

Medicaid

Senators such as Josh Hawley (R., Mo.) and Susan Collins (R., Maine) have been warning about the effects of Medicaid spending cuts.

A main focus is the Senate Republicans’ proposed changes to levies known as Medicaid provider taxes, a mechanism that lets states increase their federal subsidies. A tighter limit on those taxes would reduce money to hospitals.

Spending hawks such as Sen. Rick Scott (R., Fla.) have sought more-expansive cuts that would reduce federal spending on the childless, able-bodied adults who gained Medicaid coverage under the Affordable Care Act.

Energy

Compared with the House, the Senate proposed a much slower phaseout of the cleanenergy tax breaks that Democrats created in the Inflation Reduction Act in 2022.

Producers of wind, solar and geothermal energy would have more time to start projects and still qualify for tax credits.

SALT

A core bloc of House Republicans from New York, New Jersey and California say they can’t support any bill unless it sets the cap on state and local tax deductions, or SALT, at $40,000, up from the current $10,000. They have enough votes to sink the bill.

The House approved the $40,000 number, but high-tax states don’t have a Senate Republican making their case, and the change could reduce revenue by hundreds of billions of dollars.

Mullin said late Monday that he saw acceptance, though not agreement, on keeping a $40,000 cap but changing the income thresholds. But Rep. Nick LaLota (R., N.Y.) warned it was a tough sell.

Senate Republicans aim to protect artificial-intelligence projects from state-level regulation by withholding broadband funds from any states that impose AI rules.

The provision is another way to achieve a goal similar to one pursued by the House, which included a moratorium on all AI regulations at the state level. Some Senate Republicans are balking at the AI measure. Hawley said that he wasn’t a big fan of the revised proposal.