Senate approves Trump's tax and fiscal plan amidst GOP disparities
Senate GOP's Monumental Tax and Spending Bill: A Tumultuous Voyage Ahead
In a nail-biting late-night vote on Saturday, Senate Republicans managed to inch forward with President Trump's ambitious tax and spending package, the "One Big Beautiful Bill Act," though the slim margin revealed the political challenges looming for Republican leaders, as announced by the Associated Press.
With a 51-49 vote, the majority of Republican senators backed the bill's progression, while all Democrats opposed it. Surprisingly, Senators Rand Paul and Thom Tillis, both Republicans, voted against their party lines.
This whopping 1,000-page bill, teeming with revisions, is expected to be passed by Monday, aligning with Trump's target date of July 4.
The bill marks the initial significant show of support and resistance for the Republican party, with party leaders spending over three hours haggling to secure the necessary votes. The delicate dance aimed to reconcile Trump's ambitions with the disparate demands of Republicans across the ideological spectrum.
Senator Lisa Murkowski, who has been vocal about safeguarding clean-energy tax breaks, was spotted negotiating with Senate Finance Chair Mike Crapo before casting her vote in favor. Notable holdouts included Sens. Rick Scott, Mike Lee, Ron Johnson, and Cynthia Lummis, who sought more significant spending cuts.
Johnson, initially against the measure's advancement, bowed under party pressure to vote in favor late in the evening after GOP leaders agreed to back a proposal to end new enrollments in the Medicaid expansion introduced under the Affordable Care Act-an idea still controversial among moderate Republicans.
The Controversial Financial Overhaul
The bill undertakes permanent tax cuts, new tax relief, considerable boosts to border and defense spending, and reductions in Medicaid and nutrition programs-pillars of Trump's second-term agenda. Democrats have harshly criticized the bill, viewing it as an assault on the social safety net, accompanied by tax breaks to high-income earners.
According to the Congressional Budget Office (CBO) analysis, the Senate version would cut the deficit by $508 billion, but only under the assumption that expiring tax cuts are extended indefinitely without additional costs. Comparatively, the Senate bill would increase deficits by around $3.3 trillion when placed side-by-side with the House proposal, surpassing the $2.4 trillion expected for the House version. This spiraling deficit number has raised concerns among fiscal conservatives in the House regarding the bill's final passage.
The CBO projects that the latest Senate bill would result in nearly 12 million more Americans without health coverage by 2034.
Revised Provisions
The revised Senate bill encompasses expanded state and local tax (SALT) deductions through 2029, providing temporary relief for residents of high-tax states, and slows the phase-out of so-called provider taxes.
On the energy front, the bill sees the rollback of tax credits for electric vehicles, solar, and wind projects, a move applauded by conservatives, though it meets opposition from some industry groups. A new excise tax on certain foreign-made components used in renewable projects has also been added.
Senator Josh Hawley voted in favor despite his objections to changes in Medicaid funding formulas, citing a $25 billion rural hospital fund in the bill that would positively impact his state in the short term. He has vowed to fight future efforts implementing delayed Medicaid cuts.
Senator Susan Collins supports moving the bill forward but remains undecided on the final legislation. Collins has called for restricting tax cuts for high earners and voiced concerns about the Medicaid reductions.
Revisions to the SALT cap would set the deduction limit at $40,000 in 2025, with income phase-outs beginning at $500,000. These amounts would gradually increase through 2029 before the cap returns to $10,000. The bill also eliminates restrictions that formerly prevented closely held businesses from circumventing the cap through state-level workarounds-a move welcomed by groups like dentists, manufacturers, and accountants.
Small colleges successfully lobbied for an exemption from the endowment tax, which now applies only to institutions with over 3,000 students.
The energy-related changes respond to complaints from conservatives and Trump that the GOP was not moving swiftly enough to undo clean-energy subsidies enacted by Democrats in the 2022 Inflation Reduction Act. Under the bill, tax credits for electric vehicles would expire by September 30, while wind and solar projects must be operational by the end of 2027 to qualify for incentives. Hydrogen projects, however, receive extended deadlines after lobbying from Senator Shelley Moore Capito (Republican, West Virginia). Tax credits for certain coal types used in steelmaking were also included.
Elon Musk, Tesla chief executive and former Trump adviser, took to social media critiquing the bill, stating it favors "industries of the past" at the expense of future-focused sectors like electric vehicles. Senator Mike Lee agreed to shelve a controversial provision to sell off public lands after facing internal party opposition.
The updated bill would gradually reduce the provider tax rate for states expanding Medicaid under the Affordable Care Act, dropping from 6% to 3.5% starting in 2028, a year later than initially proposed. States that did not expand Medicaid would see provider tax rates frozen. Nursing homes and intermediate care facilities are unaffected by the changes.
Alaska secured targeted benefits after advocacy from Murkowski and Senator Dan Sullivan (Republican, Alaska). The bill increases tax deductions for Alaska Native whaling captains, adjusts federal Medicaid matching rates to account for Alaska and Hawaii's higher living costs, and offers flexibility to protect food assistance programs in Alaska.
Despite Goldman Sachs, Trump, and Republican leadership's determination to push the bill through both chambers before the July 4 deadline, significant hurdles remain in uniting the party behind this sprawling legislation.
- The controversial tax and spending bill, expected to pass by Monday, has sparked a political divide, with Democrats viewing it as an assault on the social safety net, while fiscal conservatives in the House express concerns about the spiraling deficit.
- In the realm of health, the revised Senate bill may lead to nearly 12 million more Americans without health coverage by 2034, as per the Congressional Budget Office analysis.
- Beyond politics and policy-and-legislation, the bill makes notable changes in the field of crime-and-justice, gradually reducing the provider tax rate for states expanding Medicaid under the Affordable Care Act, and offering flexibility to protect food assistance programs in states like Alaska.
- The bill's provisions, such as the rollback of tax credits for electric vehicles and solar projects, have drawn attention from general-news and car-accidents perspectives, with Elon Musk, Tesla's CEO, criticizing the bill for favoring "industries of the past" at the expense of future-focused sectors like electric vehicles.
