House Republicans are struggling to resolve key issues with President Donald Trump’s multitrillion-dollar tax package after weekend talks, including a change in the deduction cap for state and local taxes and a potential hike in the rate for high earners.
Key GOP-led committees dribbled out parts of their plan over the weekend, such as an increase in the maximum child tax credit to $2,500 and raising the estate tax exemption to $15 million. Those were items in an incomplete menu of proposals required to be released before Monday.
On the government savings side, the Energy and Commerce Committee proposed on Sunday a controversial work requirement system for Medicaid beneficiaries and potential cost-shifts to the states also tied to the insurance program for millions of poor and disabled Americans.
But that left some of the most politically tricky components unaddressed, until lawmakers return to the issues Monday. Trump wants to eliminate the carried-interest tax break used by venture capital and private equity fund managers and boost levies on executive compensation. He’s also endorsed upping the top income tax rate to 39.6% for individuals making $2.5 million or more and couples earning at least $5 million, though he’s retreated somewhat on pushing that proposal.
Perhaps the most politically fraught question is how much to raise the deduction for state and local taxes, which Trump capped at $10,000 in 2017 and members who represent high-tax states like New York, New Jersey and California have been longing to increase. It’s particularly challenging for Republicans in those states — some of whom want the limit lifted to $30,000 or even higher to answer demands of frustrated constituents.
But the revenue that the lower cap currently generates is badly needed to pay for the tax cuts Trump wants to aim at his middle-class and working-class base, such as eliminating taxes on tips and overtime.
“We will work together on any and all outstanding issues, but there shouldn’t be many — The Bill is GREAT,” Trump posted on social media on Monday, calling on Republicans to unify around the bill. “We have no alternative, WE MUST WIN!”
Such details have hit a House GOP self-imposed deadline, however.
Speaker Mike Johnson and his lieutenants continue to eye Memorial Day, later this month, for final House passage of the overall bill. And this week has been set for key remaining committees to finalize their parts, so that an overall bill can be cobbled together and advanced.
If they miss that deadline, as analysts consider likely, another more difficult deadline looms.
Republicans are planning to use the tax bill to advance a $5 trillion debt-limit increase, and Treasury Secretary Scott Bessent told lawmakers Friday that his department’s ability to use special accounting maneuvers to stay within that ceiling limit could be exhausted in August. He urged them to act by mid-July. Still, he said in a Bloomberg Television interview Monday that “the tax bill is moving along very well — better than I could have imagined.”
If the GOP cannot get the tax package done in time, they could pass a standalone bill on their own, though that might be politically challenging if done without spending cuts. Otherwise they could work with Democrats, but they would likely use their leverage to try negotiating for spending increases, as they have in the past.
Starting Tuesday, key hearings kick off at House committees including the tax-writing Ways and Means panel. Also up: the Energy and Commerce Committee, which oversees health-care spending. A draft plan for Medicaid changes fails to make the largest-scale measures that the Freedom Caucus has pushed — risking blowback for GOP leaders soon from conservatives.
Under the current draft, at least 13.7 million people would lose health insurance by 2034, also curtails some Affordable Care Act coverage, according to analysis from the non-partisan Congressional Budget Office.
The GOP’s razor-thin 220-213 majority has made party unity vital. But that’s a tall order when, for example, fiscally conservative Republicans from low-tax states oppose a boost to the so-called SALT cap, seeing it as a boon to the rich in largely Democratic states.
A decision on SALT and other issues could be announced after a meeting between party leaders and some of these lawmakers Monday morning. Also awaiting decisions are Trump’s hopes to end taxes on tips, overtime and Social Security benefits, as well as tax credits for auto loans and for building domestic factories. The last two were designed to blunt the sticker shock of Trump’s tariffs regime.
