GOP hesitates on deep spending cuts, leading to a reduction in Trump's tax cuts
On the chopping block might be a range of Trump demands, including a permanent extension of the tax cuts enacted during his first term.
TroibNews 
President Donald Trump sought a “big, beautiful bill,” but now Republicans are having to temper their expectations.
On Thursday, GOP leaders in Congress indicated that they are reducing their aspirations for tax cuts due to challenges in implementing significant spending cuts and receiving strong pushback from Republican deficit hawks contemplating a no vote on Trump’s expansive megabill.
Potentially on the cutting room floor are several of Trump's demands, including a permanent extension of the tax cuts enacted during his first term, as well as campaign promises from his second term aimed at providing tax relief for seniors and exempting taxes on tips and overtime earnings. According to four Republican lawmakers, speaking anonymously, some of these provisions may ultimately be enacted only for a limited time.
As key committees struggle to achieve a $2 trillion reduction in spending, Speaker Mike Johnson informed a group of House Republicans on Thursday that he is now aiming for $4 trillion in tax cuts. This figure is $500 billion less than what many in the GOP had anticipated, and it may fall short of the threshold required to make the 2017 tax cuts permanent—one of Trump’s primary demands for the megabill.
“Republicans talk a big game … about reining in reckless spending,” House Budget Chair Jodey Arrington remarked to reporters. “You won’t get the full permanency in the tax policy on all the provisions if we don’t get to the $2 trillion in savings, and that’s unfortunate.”
The situation is still evolving: Republican leaders are considering Trump’s request to raise income taxes on high earners from 37 percent to 39.6 percent—the rate in effect before the 2017 tax reform—to accommodate additional tax cuts elsewhere.
The chief tax architect in the House, Ways and Means Chair Jason Smith, is scheduled to visit the White House on Friday as GOP leaders contemplate a more modest tax plan. Trump claimed on Truth Social Wednesday that the bill would deliver “the biggest Tax Cut for Middle and Working Class Americans by far.”
“We are going to do NO TAX ON TIPS, NO TAX ON SENIORS’ SOCIAL SECURITY, NO TAX ON OVERTIME, and much more,” he declared.
Under Johnson’s revised $4 trillion tax proposal, however, Smith may struggle to fulfill all of Trump’s requests. Many sought-after tax cuts may only be temporary, leaving future Congresses to determine their fate.
Time is of the essence for Republicans to finalize the legislative package. Johnson is pushing for three critical committees to vote on their sections of the bill next week. With the Ways and Means, Energy and Commerce, and Agriculture committees scheduled to meet on Tuesday, the opportunity to amend the overall package is shrinking rapidly.
Committee rules stipulate that the Energy and Commerce Committee, which is examining significant changes to Medicaid, must release final legislative language by 24 hours before its Tuesday meeting at 2 p.m. Ways and Means aims to convene at that same time.
Even if House GOP leaders manage to assemble the megabill, the Senate is likely to amend many of its provisions. Several GOP senators are hesitant about significant cuts to Medicaid and shifting food aid expenses to states, which could further lessen the proposed cuts. Senate tax writers are also resisting increases on the top earners’ tax rate.
“I’m not excited about the proposal, but I have to say, there are a number of people in both the House and the Senate who are, and if the president weighs in favor of it, then that’s going to be a big factor that we have to take into consideration as well,” Senate Finance Committee Chair Mike Crapo said during an interview on Thursday with talk show host Hugh Hewitt.
Crapo has strongly advocated for excluding the cost of permanently extending the 2017 tax cuts while only accounting for the expense of new tax designs. However, the political landscape in the House differs, where a group of fiscal hawks is insisting that GOP leaders balance spending cuts with tax cuts.
Smith had already indicated making the 2017 bill permanent would be challenging under the House’s fiscal framework, which projected $4.5 trillion in tax cuts alongside $2 trillion in spending reductions.
Now that Johnson is aiming for $500 billion less in tax cuts, tax writers on the committee face difficult decisions regarding priorities. Representative Ron Estes, one of the tax writers, mentioned Wednesday that many tax provisions would likely be temporary, with some potentially extended for four, six, or eight years.
Among those are aspects of Trump’s 2017 tax law, such as business tax deductions, individual tax rates, and estate taxes. House Republicans have also pushed to reinstate three essential business provisions, which would cost over $600 billion to make permanent. Additionally, Smith must accommodate Trump’s campaign priorities concerning tips, overtime, and Social Security.
Despite revenue-enhancing ideas—like increasing taxes on university endowments and abolishing Biden-era clean energy credits—the arithmetic isn’t balancing out for Republicans hoping to fit everything into the package.
Complicating matters are blue-state Republicans advocating for an increased deduction for state and local taxes (SALT). SALT Republicans presented proposals to Ways and Means members on Wednesday but left without a solution that satisfied both factions.
On Thursday evening, New York Republicans Andrew Garbarino, Nick LaLota, Mike Lawler, and Elise Stefanik dismissed a proposed increase in the SALT deduction from $10,000 to $30,000 as “insulting.”
“We were on the 25-yard line with about 75 yards to go,” LaLota told reporters. “We got sacked at that meeting. We probably lost five to ten yards.”
Meanwhile, House Republicans' attempts to enhance spending cuts have largely stalled. In Medicaid—previously targeted for as much as $600 billion in savings—agreements have only emerged around more modest proposals, like adding work requirements, strengthening eligibility verifications, and removing noncitizens from the rolls.
Johnson has ruled out one of the most contentious cuts GOP leaders were considering, which involved reducing the federal cost share for the joint federal-state Medicaid program after discussions with moderates on Tuesday evening. House Energy and Commerce Chair Brett Guthrie noted that a policy aimed at lowering drug prices in the program, as proposed by the White House, is likely off the table as well.
However, one ambitious cost-saving measure—capping federal payments for certain Medicaid enrollees—still remains a politically charged option. Ultraconservatives are pushing for such “structural” changes, but moderates are cautious. A report commissioned by Democrats indicated that a similar proposal could result in 3.3 million people losing Medicaid coverage and 1.5 million becoming uninsured, although it would generate $225 billion in savings.
“It’s a sensitive thing,” Johnson acknowledged on Thursday.
House Republicans also need to sway centrist holdouts to support a controversial plan to shift some costs of food aid under the Supplemental Nutrition Assistance Program to states for the first time, ahead of the scheduled Agriculture Committee meeting.
Although the diminished tax cuts may pose a setback for Trump’s agenda, some individuals in the White House have expressed relief that Congress has moved away from the most sweeping safety-net cut proposals, according to two sources who spoke on the condition of anonymity. They are privately hoping that moderates from swing districts will prevail over the hard-liners.
Trump has vowed to deliver the “largest tax cuts in history,” but he has also consistently pledged not to reduce Americans' government benefits and has recently expressed discomfort with proposals for extensive cuts to Medicaid.
Frederick R Cook for TROIB News
On Thursday, GOP leaders in Congress indicated that they are reducing their aspirations for tax cuts due to challenges in implementing significant spending cuts and receiving strong pushback from Republican deficit hawks contemplating a no vote on Trump’s expansive megabill.
Potentially on the cutting room floor are several of Trump's demands, including a permanent extension of the tax cuts enacted during his first term, as well as campaign promises from his second term aimed at providing tax relief for seniors and exempting taxes on tips and overtime earnings. According to four Republican lawmakers, speaking anonymously, some of these provisions may ultimately be enacted only for a limited time.
As key committees struggle to achieve a $2 trillion reduction in spending, Speaker Mike Johnson informed a group of House Republicans on Thursday that he is now aiming for $4 trillion in tax cuts. This figure is $500 billion less than what many in the GOP had anticipated, and it may fall short of the threshold required to make the 2017 tax cuts permanent—one of Trump’s primary demands for the megabill.
“Republicans talk a big game … about reining in reckless spending,” House Budget Chair Jodey Arrington remarked to reporters. “You won’t get the full permanency in the tax policy on all the provisions if we don’t get to the $2 trillion in savings, and that’s unfortunate.”
The situation is still evolving: Republican leaders are considering Trump’s request to raise income taxes on high earners from 37 percent to 39.6 percent—the rate in effect before the 2017 tax reform—to accommodate additional tax cuts elsewhere.
The chief tax architect in the House, Ways and Means Chair Jason Smith, is scheduled to visit the White House on Friday as GOP leaders contemplate a more modest tax plan. Trump claimed on Truth Social Wednesday that the bill would deliver “the biggest Tax Cut for Middle and Working Class Americans by far.”
“We are going to do NO TAX ON TIPS, NO TAX ON SENIORS’ SOCIAL SECURITY, NO TAX ON OVERTIME, and much more,” he declared.
Under Johnson’s revised $4 trillion tax proposal, however, Smith may struggle to fulfill all of Trump’s requests. Many sought-after tax cuts may only be temporary, leaving future Congresses to determine their fate.
Time is of the essence for Republicans to finalize the legislative package. Johnson is pushing for three critical committees to vote on their sections of the bill next week. With the Ways and Means, Energy and Commerce, and Agriculture committees scheduled to meet on Tuesday, the opportunity to amend the overall package is shrinking rapidly.
Committee rules stipulate that the Energy and Commerce Committee, which is examining significant changes to Medicaid, must release final legislative language by 24 hours before its Tuesday meeting at 2 p.m. Ways and Means aims to convene at that same time.
Even if House GOP leaders manage to assemble the megabill, the Senate is likely to amend many of its provisions. Several GOP senators are hesitant about significant cuts to Medicaid and shifting food aid expenses to states, which could further lessen the proposed cuts. Senate tax writers are also resisting increases on the top earners’ tax rate.
“I’m not excited about the proposal, but I have to say, there are a number of people in both the House and the Senate who are, and if the president weighs in favor of it, then that’s going to be a big factor that we have to take into consideration as well,” Senate Finance Committee Chair Mike Crapo said during an interview on Thursday with talk show host Hugh Hewitt.
Crapo has strongly advocated for excluding the cost of permanently extending the 2017 tax cuts while only accounting for the expense of new tax designs. However, the political landscape in the House differs, where a group of fiscal hawks is insisting that GOP leaders balance spending cuts with tax cuts.
Smith had already indicated making the 2017 bill permanent would be challenging under the House’s fiscal framework, which projected $4.5 trillion in tax cuts alongside $2 trillion in spending reductions.
Now that Johnson is aiming for $500 billion less in tax cuts, tax writers on the committee face difficult decisions regarding priorities. Representative Ron Estes, one of the tax writers, mentioned Wednesday that many tax provisions would likely be temporary, with some potentially extended for four, six, or eight years.
Among those are aspects of Trump’s 2017 tax law, such as business tax deductions, individual tax rates, and estate taxes. House Republicans have also pushed to reinstate three essential business provisions, which would cost over $600 billion to make permanent. Additionally, Smith must accommodate Trump’s campaign priorities concerning tips, overtime, and Social Security.
Despite revenue-enhancing ideas—like increasing taxes on university endowments and abolishing Biden-era clean energy credits—the arithmetic isn’t balancing out for Republicans hoping to fit everything into the package.
Complicating matters are blue-state Republicans advocating for an increased deduction for state and local taxes (SALT). SALT Republicans presented proposals to Ways and Means members on Wednesday but left without a solution that satisfied both factions.
On Thursday evening, New York Republicans Andrew Garbarino, Nick LaLota, Mike Lawler, and Elise Stefanik dismissed a proposed increase in the SALT deduction from $10,000 to $30,000 as “insulting.”
“We were on the 25-yard line with about 75 yards to go,” LaLota told reporters. “We got sacked at that meeting. We probably lost five to ten yards.”
Meanwhile, House Republicans' attempts to enhance spending cuts have largely stalled. In Medicaid—previously targeted for as much as $600 billion in savings—agreements have only emerged around more modest proposals, like adding work requirements, strengthening eligibility verifications, and removing noncitizens from the rolls.
Johnson has ruled out one of the most contentious cuts GOP leaders were considering, which involved reducing the federal cost share for the joint federal-state Medicaid program after discussions with moderates on Tuesday evening. House Energy and Commerce Chair Brett Guthrie noted that a policy aimed at lowering drug prices in the program, as proposed by the White House, is likely off the table as well.
However, one ambitious cost-saving measure—capping federal payments for certain Medicaid enrollees—still remains a politically charged option. Ultraconservatives are pushing for such “structural” changes, but moderates are cautious. A report commissioned by Democrats indicated that a similar proposal could result in 3.3 million people losing Medicaid coverage and 1.5 million becoming uninsured, although it would generate $225 billion in savings.
“It’s a sensitive thing,” Johnson acknowledged on Thursday.
House Republicans also need to sway centrist holdouts to support a controversial plan to shift some costs of food aid under the Supplemental Nutrition Assistance Program to states for the first time, ahead of the scheduled Agriculture Committee meeting.
Although the diminished tax cuts may pose a setback for Trump’s agenda, some individuals in the White House have expressed relief that Congress has moved away from the most sweeping safety-net cut proposals, according to two sources who spoke on the condition of anonymity. They are privately hoping that moderates from swing districts will prevail over the hard-liners.
Trump has vowed to deliver the “largest tax cuts in history,” but he has also consistently pledged not to reduce Americans' government benefits and has recently expressed discomfort with proposals for extensive cuts to Medicaid.
Frederick R Cook for TROIB News
