House Republicans Scramble for Tax Deal Following Trump Meeting

House Republican leaders worked frantically Wednesday night to resolve divisions over Medicaid and green energy provisions in Donald Trump’s signature tax bill that threaten plans to vote on it this week.

Opposition from some hardliners began to soften after an afternoon White House meeting with Trump, with Representative Andy Biggs throwing his support behind the bill. Representative Ralph Norman, once a firm opponent who did not attend the White House meeting, appeared more open-minded after speaking with colleagues who met with the president.

“We’re gonna get back together once we see it in writing,” the South Carolina Republican said of the anticipated changes to the bill.

House Speaker Mike Johnson speaks to reporters at the Capitol on Wednesday.

Photographer: Alex Wroblewski/Bloomberg

House Speaker Mike Johnson can only lose a few votes and still pass the bill, which is the centerpiece of Trump’s legislative agenda.

Johnson suggested there could be various ways to placate the ultraconservatives — who demand steeper cuts to Medicaid and faster elimination of clean energy tax credits — including by executive order. And Trump said he was “giving very serious consideration” to a public offering for the mortgage giants Freddie Mac and Fannie Mae, which could raise hundreds of billions of dollars for the government, a move that would appeal to fiscal hawks.

But just as the tide appeared to be turning in Trump’s favor, problems popped up elsewhere.

New York Republican Andrew Garbarino, who was among the lawmakers who negotiated a favorable deal on the state and local tax deduction earlier Wednesday, signaled concern about proposed changes to accelerate an end to the IRA’s green energy credits.

Doing so “could end up killing projects all over the country that have been announced,” Garbarino told reporters. He said the credits would help the country meet the massive growth expected in electricity demand in the coming decade.

Meanwhile, Representative John Rose of Tennessee added himself to the “no” column late Wednesday, citing concerns about the cost of the deal to raise the SALT cap to $40,000.

Still party leaders said they plan to press forward with a vote as soon as Wednesday.

“We’re going to vote tonight,” House Majority Leader Steve Scalise told reporters.

The White House amped up the pressure on Republicans earlier Wednesday urging lawmakers to quickly approve tax bill, adding in a statement that failure to do so would be the “ultimate betrayal.”

As negotiations continued, there were signs investors are growing more wary of the US debt load, which would be worsened by the tax package.

Treasuries on Wednesday extended their recent selloff, with longer-term securities getting hit the hardest and an auction of 20-year debt receiving a relatively tepid reception. The bond-market selloff at one point pushed the yield on the 30-year bond up by as much as 13 basis points to almost 5.10%, its highest level since 2023.

Read More: Bond Market Warns Congress on Risk of Failure to Rein in Deficit

Republicans made some headway in advancing Trump’s bill on Wednesday. Johnson announced that he had an agreement with lawmakers from high-tax states to increase the limit on the state and local tax deduction to $40,000, winning over a key faction of members who had threatened to block the legislation.

“The members of the SALT caucus negotiated yesterday in good faith,” Representative Mike Lawler, a New York Republican, told Bloomberg Television Wednesday. “We settled on something that we believe in, we support.”

Read more: Johnson Says Deal Reached on Raising SALT Cap to $40,000

Freedom Caucus members said they aren’t moving the goal posts by asking for more spending cuts than the budget outline they already voted for. They said they want to rearrange the spending cuts to focus on ending “abuse” in Medicaid and immediately ending green energy tax breaks.

House Republicans leaders are also planning to accelerate new Medicaid work requirements to December 2026 from 2029 in a bid to satisfy ultraconservatives, according to a lawmaker familiar with the discussions.

How deeply to cut safety-net programs such as food assistance and Medicaid health coverage for the poor and disabled has been a sticking point in reaching agreement on Trump’s tax bill, as Johnson attempts to navigate a narrow and fractious majority.

Read More: Tax Bill Set to Bring Forward Medicaid Work Requirements to 2026

Several ultraconservatives also said they see a slog ahead. “There’s a long way to go,” said Representative Chip Roy of Texas, another Republican hardliner, said earlier Wednesday.

Donald Trump and Mike Johnson arrive for a House Republican caucus meeting at the US Capitol in Washington, DC, on May 20.

Photographer: Ting Shen/Bloomberg

The $40,000 SALT limit would phase out for annual incomes greater than $500,000 for the 10-year length of the bill, Lawler said. The income phaseout threshold would grow 1% a year over a decade, a person familiar with the matter said.

The cap is the same for both individual taxpayers and married couples filing jointly, the person added.

Another person described the income phase-out as gradual, so that taxpayers earning more than $500,000 would not be punished.

Several lawmakers — New York’s Garbarino, Lawler, Nick LaLota, and Elise Stefanik; New Jersey’s Tom Kean, and Young Kim of California — have threatened to reject any tax package that does not raise the SALT cap sufficiently.

The current write-off is capped at $10,000, a limit imposed in Trump’s first-term tax cut bill. Previously, there was no limit on the SALT deduction and the deduction would again be uncapped if Trump’s first-term tax law is allowed to expire at the end of this year.

--With assistance from Sana Pashankar, Ryan Chua, Ari Natter, Akayla Gardner, Jarrell Dillard, Emily Birnbaum, Skylar Woodhouse, Jack Fitzpatrick, Nacha Cattan and Nancy Cook.

To contact the reporters on this story:
Erik Wasson in Washington at ewasson@bloomberg.net;
Emily Birnbaum in Washington at ebirnbaum3@bloomberg.net;
Steven T. Dennis in Washington at sdennis17@bloomberg.net

To contact the editors responsible for this story:
Megan Scully at mscully32@bloomberg.net

Mike Dorning, Derek Wallbank

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