President Donald Trump’s flagship tax legislation scraped through the House of Representatives on Thursday in a narrow 215-214 vote, setting up a contentious debate in the Senate where key Republican lawmakers are already pushing for significant revisions.
The multi-trillion-dollar package includes a $4 trillion hike to the US debt ceiling and a sweeping array of tax changes, many of which extend or expand provisions from Trump’s first term.
The legislation, dubbed by Trump as the “one, big, beautiful bill,” now enters the Senate spotlight with Republican leaders hoping for final passage by August.
The Treasury Department has warned that without a debt ceiling increase, the United States could face a default as early as September.
Bill seeks to raise SALT cap; introduce steep cuts to Medicaid, food stamps
The bill seeks to extend the Trump-era tax cuts set to expire on December 31 and introduces new provisions, such as temporarily exempting tips and overtime pay from taxation and raising the cap on state and local tax (SALT) deductions to $40,000.
The cap will gradually increase by 1% annually over a decade, but phase out for individuals earning more than $500,000.
Spending-wise, the legislation includes $150 billion in additional military funding and $175 billion for immigration enforcement—both areas Trump has prioritized.
There are also $12 billion in reimbursements for state-level border security efforts, benefiting states like Texas.
However, the plan also introduces steep cuts to Medicaid and food stamps.
New Medicaid work requirements would take effect in December 2026—earlier than originally proposed—after pressure from the ultraconservative House Freedom Caucus.
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.
These changes are likely to be hotly contested in the Senate, with some Republicans already expressing unease over slashing programs that affect low-income Americans.
Taxes on institutions to be raised, EV tax credits to be mostly done with
To help offset the costs of the tax cuts, the bill raises taxes on institutions and individuals long criticized by Trump.
Prestigious universities with large per-student endowments—such as Harvard—would see their tax on investment income rise from 1.4% to 21%. Immigrants would also face a new tax on overseas remittances.
Electric vehicle tax credits, a pillar of the Biden administration’s clean energy agenda, would be mostly eliminated by the end of 2025.
Instead, the bill introduces a tax deduction for interest on loans used to purchase US-built gas or electric vehicles—part of a broader pivot back toward fossil fuel incentives.
The package also renames federally seeded savings accounts for newborns—previously branded “MAGA accounts”—to “Trump accounts,” a symbolic flourish added in the final hours of negotiation.
Senate Republicans prepare to reshape the bill
As the bill heads to the upper chamber, Senate Republicans are indicating that changes will be necessary.
Some are pushing to make business tax breaks permanent, while others are calling for additional deficit reduction and resisting any Medicaid reductions.
House Speaker Mike Johnson has acknowledged the difficulty of uniting disparate GOP factions, but framed the bill as a necessary step to avoid economic stagnation.
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“This legislation delivers on our promises—lower taxes, less regulation, and stronger borders,” Johnson said after the vote.
Democrats, however, are preparing to leverage the bill’s unpopular provisions in next year’s elections.
“This is a reverse-Robin Hood scheme that steals from the poor to give to billionaires like Elon Musk,” said House Minority Leader Hakeem Jeffries.
Debt concerns loom over future prospects
With the bill adding hundreds of billions annually to the federal deficit, financial markets have begun to show unease.
Moody’s recent decision to downgrade the US government’s credit rating underscored investor concern over Washington’s growing debt burden.
On Monday, yields on 30-year Treasury bonds briefly spiked above 5%, reaching levels not seen since late 2023.
Trump and his allies argue that the economic boost from tax cuts will outweigh the risks, pointing to lagging GDP growth amid ongoing tariff tensions and inflation concerns.
But skeptics warn that ballooning deficits and cuts to safety-net programs could deepen inequality and hurt long-term fiscal stability.
With the Senate now in control of the bill’s fate, the coming weeks promise a bitter legislative battle that will shape the nation’s tax and spending policy for years to come.
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