President Trump’s ambitious tax-cut bill encountered a setback as hardline Republicans opposed it due to concerns about spending cuts, particularly to Medicaid. The bill, which seeks to extend the 2017 tax cuts, gained approval from a key congressional committee on May 18 but faced opposition from conservative members who are demanding deeper cuts to offset costs.
The committee’s 17-16 vote allowed the bill to advance, despite all Democrats opposing it. The hardliners had initially blocked it from passing due to disagreements over Medicaid cuts and the elimination of green energy tax credits. House Budget Chairman Jodey Arrington emphasized that negotiations among House Republicans and White House officials are ongoing.
Nonpartisan analysts project that the bill could contribute an additional $3 trillion to $5 trillion to the nation’s debt over the next decade. Concerns were heightened following Moody’s recent downgrade of the U.S. credit rating, indicating a looming economic threat and rising debt levels that may reach 134% of GDP by 2035.
Treasury Secretary Scott Bessent downplayed the downgrade’s significance, asserting that the tax cuts would promote economic growth. However, experts warn that increasing debt levels could necessitate a need for revenue generation or spending reductions.
The bill also proposes notable changes, including eliminating taxes on tips and overtime income, while Republicans remain divided over the deductibility of state and local taxes (SALT). House Speaker Mike Johnson expressed optimism about the bill’s passage before the Memorial Day holiday, but cautioned that lawmakers face a more pressing challenge regarding the U.S. debt ceiling later this summer. This situation raises concerns about potential economic repercussions, including higher interest rates, as highlighted by Democratic Senator Chris Murphy.
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