President Donald Trump's $4.5 trillion tax cut bill prevailed in a crucial Senate test vote after hours of negotiations, setting up a fresh round of deal-making as Republicans seek to convince holdouts to support the bill for final passage.
The vote wrangling will continue Sunday as the official debate process plays out on the Senate floor. But the real negotiations will be behind closed doors in Senate offices as Majority Leader John Thune seeks to convince enough of his members to back the bill.
He can only afford to lose three of the 53 Republicans in the chamber.
A final vote on passage looks to spill into Monday. Before that, senators will have the ability to offer an unlimited number of amendments to revise the bill. The vast majority of these amendments fail, but a few carefully crafted measures may be adopted in order to win the support of enough Senate Republicans.
Trump has demanded that Congress send him the bill by July 4. The House also has to vote on the latest version of the legislation before it can go to White House for Trump's signature.
The president has repeatedly assailed what he has called "grandstanders" — legislators who have withheld their support in order to gain leverage to have their priorities included.
Trump, who had been monitoring the Senate action this weekend from the Oval Office,
Republicans scored a win when the Senate rules-keeper decided that a revised version of the Medicaid cut proposal complied with the chamber's rules. Senate Parliamentarian Elizabeth MacDonough had previously struck down the health-benefit reduction plan with $250 billion in spending cuts fiscal conservatives had sought.
But that victory is double-sided. That decision could make it harder for key senators seeking for fewer Medicaid cuts — Susan Collins of Maine, Lisa Murkowski of Alaska and Tillis — to support the bill.
The Congressional Budget Office on Sunday estimated that the legislation would add $3.3 trillion to U.S. deficits over a decade, a figure that could give some fiscal hawks pause.
Saturday night's vote to open to debate at times looked like it could fail. Senate leaders held open the vote for nearly four hours, while Vice President JD Vance exerted pressure on Republicans to support the bill.
Collins said she voted to begin debate, but that she couldn't support the bill as-is without additional measures to mitigate the effects of the Medicaid cuts in the bill. Murkowski agreed to advance the legislation on Saturday after lengthy reassurances from Thune.
Ron Johnson of Wisconsin initially voted "no," but switched his vote after meeting with Vance and Thune.
Johnson told reporters that Trump and Senate leaders agreed to support an amendment to phase out the 90% Medicaid match for the expansion population under the Affordable Care Act. He said that Rick Scott of Florida, Mike Lee of Utah and Cynthia Lummis of Wyoming are also pushing for that change.
Johnson said it would hopefully lead to hundreds of billions in additional savings. But that plan could result in a revolt from moderates in both the House and the Senate, given many states now rely on the funding.
That amendment would likely fail given opposition and it remains unclear what Johnson and the others would do if the proposal weren't included in the final bill.
Utah's Lee late Saturday announced he would
Tax and spending cuts
The bill includes nearly $4.5 trillion worth of tax cuts, according to the nonpartisan 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.
Green 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 than 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.
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 phase in starting in 2028.
SALT cap
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 U.S. debt ceiling by $5 trillion.
