President Donald Trump’s $4.5 trillion tax cut bill prevailed in a crucial Senate test vote, a sign that Republican leaders are resolving the infighting over portions of the legislation and moving toward meeting a July 4 deadline the president has set for passage.
Senate Majority Leader John Thune and his lieutenants may still need to tweak portions of Trump’s signature economic legislation in order to win the 50 votes it needs to pass the Senate.
But the Senate voted Saturday to begin debate on the legislation just hours after party leaders unveiled the latest version of the massive tax and spending package. The measure advanced by a 51 to 49 vote, with just two Republicans voting to stall consideration.
Democrats are now planning to demand a full reading of the bill text, which could push a final vote into Monday.
The bill includes nearly $4.5 trillion worth of tax cuts, according to the non-partisan Joint Committee on Taxation. But Republicans are aiming for only $693 billion of those tax reductions to count in the official bill cost — assuming they are able to successfully use a budget gimmick that wouldn’t count the extension of Trump’s first-term cuts in the price tag.
Despite broad Republican support for the tax cuts and spending increases for immigration enforcement and defense at the core of the package, party leaders have struggled to balance competing demands from the GOP’s discordant ideological factions.
Conservatives are demanding larger spending cuts to offset the tax cuts. Moderates are worried about the scale of proposed cuts to safety-net programs such as Medicaid and food stamps. And some senators from states with significant renewable energy industries are trying to soften the rapid phase-out of green energy tax credits.
Thune and other party leaders also have been trying to resolve lesser skirmishes such as one on a provision to block states from regulating artificial intelligence.
A new draft of the bill unveiled early Saturday morning attempted to win over moderates on the Medicaid issue and conservatives on renewable energy.
The latest version accelerated a phaseout of wind, solar and electric vehicle tax credits to win over conservatives.
Senate Republicans moved up a cut-off of tax credits used for wind and solar projects even earlier then they initially proposed, amid pushback from Trump on the credits. The measure would require those projects to be “placed in service” by the end of 2027 to receive the incentives, as opposed to simply being under construction by that time.
The new Senate legislation also would end a popular $7,500 consumer tax credit for electric vehicles earlier than in the prior drafts. While the initial proposal would have ended the incentive at the end of 2025 for most EV sales, the new version would terminate the credit after Sept. 30, 2025. Tax credits for the purchase of used and commercial electric vehicles would end at the same time.
To win over moderate Republicans, the bill would create a new $25 billion rural hospital fund aimed at helping mitigate the impact of Medicaid cuts, which otherwise could force some rural providers to shut down.
Republican Senator Susan Collins of Maine had demanded a $100 billion fund.
Moderate Republicans also won a delay from 2031 to 2032 on the full impact of a new 3.5% cap on state Medicaid provider taxes. States often use these taxes, within some already existing rules, to draw down federal funding and increase payments to facilities like hospitals. Limits on the Medicaid funding mechanism would begin phasing in in 2028.
A tentative deal with House Republicans to increase the state and local tax deduction is included in the new version. The bill would raise the SALT deduction cap from $10,000 to $40,000 for five years before snapping back to the $10,000 level. The new cap applies to 2025 and rises 1% in subsequent years.
The ability to claim the full SALT amount would phase out for those making more than $500,000 per year. A House attempt to curb the ability of pass-though businesses to circumvent the SALT cap was removed from the text.
The Senate measure would make permanent individual and business tax breaks enacted in 2017, while adding temporary new breaks for tipped and overtime workers, seniors and car buyers. It also would avert a possible August payment default by raising the US debt ceiling by $5 trillion.
Senate Republican leaders are seeking to pass the bill as soon as Sunday, giving the House time to vote on it by July 3.
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