On Sunday evening, after several days of internal struggles, the tax reform and spending reduction bill led by President Trump passed the House Budget Committee with a vote of 17 to 16. Initially facing opposition from conservative Republican lawmakers, the bill was able to move forward with four members changing their votes to support, paving the way for a full vote in the House of Representatives.
The purpose of this bill is to continue the tax cuts passed during Trump’s tenure in 2017, as well as to introduce new tax-exempt items such as tips, overtime pay, and tax deductions on car loan interest. Additionally, the bill proposes lowering the corporate tax rate from 21% to 17%, expanding tax credits for families and childcare, and significantly increasing defense and border security spending.
The White House and Republican leadership have stated that this is an important legislative tool for Trump to fulfill his campaign promises and reshape the American economy.
Despite being a reconciliation bill that benefits from procedural advantages and can be passed in the Senate with a simple majority vote, last week, the bill faced opposition in the House Budget Committee, with five Republican lawmakers joining Democrats in voting against it, causing the bill to fail.
Following weekend closed-door negotiations, in a rare Sunday evening meeting, four conservative Republican lawmakers changed their votes to support the bill, leading to its passage with a narrow margin.
Committee Chairman Jodey Arrington noted that while the legislative process is moving forward, negotiations are ongoing, and it is expected to continue until the full House vote.
Despite the bill’s passage in the budget committee, internal divisions within the Republican Party remain significant. Conservative lawmakers have criticized the bill for frontloading spending and tax cuts while delaying measures to offset costs, raising concerns about the deficit risk.
One point of contention is the provision to cut Medicaid for low-income earners, set to take effect in 2029 and affecting around 8.6 million people. Additionally, the bill cuts green energy subsidies, raises the SALT tax deduction limit, sparking differing opinions within the Republican Party. Democrats have described the bill as a “betrayal” of the working class, warning that it will exacerbate economic inequality.
Last week, Moody’s downgraded the US sovereign rating, citing concerns that the national debt could reach 134% of GDP by 2035. According to the nonpartisan Committee for a Responsible Federal Budget, the bill is estimated to increase US debt by about $3.3 trillion over the next decade.
In response, US Treasury Secretary Scott Bessent dismissed Moody’s downgrade as inconsequential, emphasizing that the bill will stimulate economic growth and ultimately improve the US fiscal situation.
Speaker Johnson hopes to bring the bill to a full House vote before the end of this week. If the bill passes in the House this week, it will move to the Senate for consideration. However, Senate Republicans are also seeking to amend the bill, potentially complicating its passage when sent back to the House.
Johnson stated, “The version we send over will be the result of very careful negotiations and delicate balancing. We hope they won’t make too many changes so that we can ensure swift passage.”