Trump wants a 'big beautiful bill' to cut taxes. Will his GOP allies complicate that?
WASHINGTON – In early April, House Speaker Mike Johnson huddled with a handful of conservative hardliners as the fate of President Donald Trump's most important second-term bill hung in the balance.
Tensions were running high, and the Republican lawmakers were worried the mega-package to overhaul government spending and cut taxes would balloon the federal deficit. Johnson needed their votes in order to kick off negotiations and, eventually, deliver for the new president.
So, Johnson made the deficit hawks a promise: The Louisiana Republican would ensure there would be at least $1.5 trillion in spending cuts over 10 years in the package, or they could kick him out of the speakership.
"I operate on the principle that our word is our bond," Johnson said in an interview with Paste BN, recalling the emotional meeting in a room near the House floor. "When I tell you something, I'm going to follow through."
Who will blink first?
Fulfilling that promise will be no simple feat. As lawmakers draw hard lines over what they will support in the massive bill, it is becoming increasingly clear that not every player's ultimatums will all be met. The question is: Who will be forced to compromise?
Those Republican fiscal conservatives still insist they will not support the package unless it achieves dramatic spending cuts. Several of them upped the ante on May 7, reiterating a desire for $500 billion more in reductions or a commensurate narrowing of the tax cuts.
Meanwhile, a bloc of moderate Republicans is demanding no reductions in Medicaid benefits – a requirement experts say would be impossible to meet while achieving Republicans' spending-cut goals and other GOP priorities.
Then there’s the blue-state Republicans who will go to the mat for lifting tax deduction limits that would benefit their constituents, but would increase the bill’s price tag, further complicating the fiscal math.
Each group has outsized influence because of Republicans' narrow majorities in both chambers. As few as four lawmakers rebelling in the House or Senate could derail the final package, as no Democrats are expected to support the legislation.
Their demands may be irreconcilable. But Republican leaders say failure is not an option: If they don't pass something by the end of the year, Trump's 2017 tax cuts will expire, and renewing them is a major priority for the president. There's an additional incentive to get it done, as the bill would raise the debt ceiling and avoid default without requiring negotiations with Democrats – another top goal for the party.
"This bill would never pass, except it must," said GOP strategist Alex Conant of Firehouse Strategies. "The prospects for getting every Republican on the same page seems impossible, but it’s going to happen."
Price tag problems
Tax cuts will be the heart of Republicans' package. Trump wants to make his 2017 tax cuts permanent, which would cost an estimated $4.5 trillion over the next 10 years.
The president has also said it's a priority to eliminate tax on tips, on overtime, and on Social Security benefits, all of which he touted on the campaign trail. Following through on these would cost at least another $900 billion, according to the Committee for a Responsible Federal Budget.
GOP leaders say that extending the 2017 tax cuts will generate $2.5 trillion in growth (the non-partisan Tax Foundation expects that will be closer to $710 billion), and more than 30 Republicans have said they won't support the full suite of tax priorities unless they can cut at least $2 trillion to make it deficit-neutral by Republicans' own estimates.
That's a big task. For context, the federal government is estimated to spend around $7 trillion total in fiscal year 2025. Nearly every significant piece of that pie, such as Medicare, Social Security and defense, would be politically sensitive to cut.
"If you want to have long-term tax cuts put in place and if you want to ensure that there aren't tax increases, then you need to do your part on the fiscal discipline side," said Rep. Chip Roy, R-Texas. "Republicans have been campaigning on balanced budgets for as long as I've been alive and they've utterly failed."
At the moment, it seems leadership intends to keep the promise of cutting as much as they spend: Johnson told House Republicans on May 8 that they should build a smaller, $4 trillion tax package in order to meet the goal of $1.5 trillion in spending cuts.
Trump has also endorsed raising taxes on the wealthiest Americans as a way to pay for his other priorities – a proposal that is deeply unpopular among most congressional Republicans.
Medicaid in the crosshairs
If there's a third rail in Republicans' negotiations, it's cuts to Medicaid, the program that provides health insurance to more than 70 million low-income Americans.
House Republicans have designated the lion's share of spending cuts to the Energy and Commerce Committee, the panel that oversees Medicaid and CHIP, which has been instructed to cut $880 billion. Because Trump has repeatedly said Medicare, which provides health insurance for the elderly, is off the table for cuts, it is expected that most of that would have to come from Medicaid.
Lawmakers are seeking ways to meet that colossal figure without reducing benefits for eligible recipients. Johnson told Paste BN that Energy and Commerce Committee Chair Brett Guthrie, R-Kentucky, is "very confident that we can get this done, and that we can do it in a manner that fulfills our commitments not to gut Medicaid" and instead makes the program "work more efficiently and effectively."
Some tweaks are easy for most Republicans to get on board with: Implementing work requirements, cracking down on non-citizens enrolled, and regular eligibility reviews.
But the savings from those changes would be modest. Most of the solutions that would be needed to close the gap are no-gos for a group of moderate Republicans, including a change to the federal match rate to states or per capita caps on Medicaid funding, because they would likely trigger reductions in Medicaid spending by states. Johnson said this week that the change to the federal match rate (known as "FMAP") is off the table.
A dozen House Republicans have said they cannot accept cuts to "vulnerable populations," and one member, Nebraska Rep. Don Bacon, has said he won't stomach more than $500 billion in cuts to the program. At least five Republican senators have also raised concerns, which is enough to block the bill in the Senate if they stand firm.
"I don't understand the argument that says: Yes, congratulations working folks, you voted for Donald Trump and now we're going to take away your access to health insurance. It seems insane to me," said Sen. Josh Hawley, R-Missouri, who has repeatedly said he won't support the bill if it includes Medicaid cuts.
Asked by Paste BN whether he thinks Republicans will be able to pass the package, given all the conflicting priorities, Hawley said with a smile: "We'll pass a reconciliation bill, absolutely. It just better not contain Medicaid benefit cuts."
SALT showdown
When Republicans approved the Tax Cuts and Jobs Act in 2017 during Trump's first term, they set a cap on state and local tax (SALT) deductions that largely benefit people who live in higher-tax states. Making some residents of those mostly Democratic states pay more in taxes helped reduce the cost of Trump's tax signature tax law.
Now, a small group of Republicans who represent districts in those states – primarily New York, California and New Jersey – want those caps lifted, and there are enough of them to kill the reconciliation bill if they don't get what they want.
However, it's unclear how much they want the cap to be raised.
Rep. Young Kim, R-California, has proposed a $62,000 cap (as opposed to the current, $10,000 one.) Rep. Mike Lawler, R-New York, introduced a bill earlier this year to raise the cap to $100,000 for single filers and $200,000 for married couples. Some, such as Rep. Nicole Malliotakis, R-New York, have proposed income-based caps so the deduction doesn't help "millionaires and billionaires," though others in the group oppose income caps.
House Republican leaders proposed a $30,000 cap, which a group of the lawmakers rejected on May 8 as "insulting."
Rep. Nick LaLota, R-New York, said the core group of five members who have made it clear raising SALT caps is a requirement have discussed privately what they're willing to accept, but won't release it publicly yet. That group includes Lawler, Kim, Rep. Andrew Garbarino, R-New York, and Rep. Tom Kean, R-New Jersey.
"We recognize that our strength is in numbers," LaLota said. "The more we're able to stick together, the more we'll be able to answer the call for all of us."
Pressure ahead
All three of these factions will be under immense pressure from their leadership and from Trump to compromise and approve the package, even if they don't get what they want.
Congressional leaders and the White House both want to have the bill to the president's desk by July 4 – a rapid timeline that includes just six working weeks, as lawmakers will have one week back in their home districts.
Senior White House officials have been working closely with GOP leaders and committee chairs on the package as it advances. And in nearly every major legislative hurdle, including clinching the vote that made Johnson speaker, Trump has personally gotten involved to twist arms in the final moments.
In that tense meeting off the House chamber in April, Johnson said Trump offered to make calls to get the hold outs on board, but he told the president: "I'm going to do the job here."
"It is a great credit to him, and obviously a great benefit to all of us, that he is as engaged as he is, and always willing to lend a hand to get the agenda done," Johnson said.
Zac Anderson contributed.