Trump Tax Bill Narrowly Passes House, Overcoming Infighting

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(Bloomberg) — President Donald Trump’s signature tax bill narrowly passed the House Thursday morning, advancing a sprawling multi-trillion dollar package that would avert a year-end tax increase at the expense of adding to the US debt burden.

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The bill now heads to the Senate, where groups of Republicans are pressing for extensive change. Lawmakers plan to vote on approval by August. It includes a $4 trillion increase in the US debt ceiling, which the Treasury Department forecasts could otherwise force a default as soon as August or September, adding urgency to the timeline.

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The 215-214 House vote, with one abstention, was met with cheers from Republicans in the chamber. It followed a furious offensive by Trump, who visited the Capitol to rally Republicans, worked lawmakers by phone late into the night and summoned holdouts to the Oval Office. His budget office released a statement branding any GOP lawmaker who failed to support the package guilty of the “ultimate betrayal.”

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House Speaker Mike Johnson and his lieutenants went through rounds of negotiations steps from the House floor to balance the demands of lawmakers from high-tax states pressing for an increase in the state and local tax deduction. Hardline conservatives insisted on deeper spending cuts and vulnerable swing-district Republicans wary of slashing Medicaid.

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The measure would avoid a blow to US growth just as the economy struggles with the impact of the steepest tariff increases in almost as century, though it’s expected to add hundreds of billions a year to the deficit.

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It would extend Trump’s first-term tax cuts due to expire Dec. 31, along with new tax relief including raising the limit on the deduction for state and local taxes to $40,000 and temporarily exempting tips and overtime pay from taxes.

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Cuts to safety-net programs such as food stamps and Medicaid health coverage for the poor and disabled could worsen economic inequality even as wealthy Americans gain the largest share of tax cuts. 

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Deficits driven by the tax cuts also risk exacerbating bond investors’ concerns about the ballooning US debt, highlighted by Moody’s decision to downgrade the US government’s credit rating.

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Democrats vowed to make House Republicans pay a price in next year’s midterm elections, casting the measure as a Robin Hood-in-reverse effort to take from the poor and give to the rich.

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“The GOP tax scam will hurt working families the most while delivering massive tax breaks for billionaires like Elon Musk,” said House Minority Leader Hakeem Jeffries of New York.

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Republicans counter that their voters will be energized by enactment of Trump’s top legislative priority for the year and reward them politically. 

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Spending Cuts

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Ultraconservative Freedom Caucus members were able to insert new language in the bill that would dramatically speed up the end of clean energy tax credits passed under the Biden administration, which would generally have to be put in to service before 2029 and would have to be well under way within 60 days of the bill’s enactment. The hardliners also were able to move up the start date for new Medicaid work requirements to December 2026 from a 2029 start in the initial version of the package.