President Donald Trump’s tax-cut bill faced challenges within the Republican party, primarily due to disagreements over proposed spending cuts, specifically targeting Medicaid. On May 18, after days of internal conflict, the bill passed a congressional committee in a narrow 17-16 vote. Hardline conservatives had previously blocked the legislation over demands for more substantial cuts to Medicaid and the repeal of green energy tax credits. Despite this, they allowed the bill to advance by voting “present,” indicating ongoing negotiations between committee members and House Republican leaders.
The tax bill aims to extend tax cuts from 2017, projected to add significantly to the nation’s debt—potentially $3 trillion to $5 trillion over ten years. Moody’s recently downgraded the U.S. credit rating, citing the excessive debt, which is anticipated to reach 134% of GDP by 2035. Treasury Secretary Scott Bessent downplayed the downgrade’s significance, suggesting the tax cuts would stimulate enough growth to alleviate concerns about the debt.
The bill proposes a range of changes, including eliminating taxes on tips and overtime income, increasing defense spending, and providing more funds for immigration enforcement. However, divisions remain among Republicans regarding cuts to the state and local tax deductions, which are crucial for lawmakers from high-tax states.
House Speaker Mike Johnson expressed confidence that the bill would pass before the House’s upcoming deadline, while Democratic Senator Chris Murphy warned that the credit downgrade suggests potential economic instability, predicting higher interest rates that could adversely affect businesses and homeowners.
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