Senate GOP Negotiates Tax Bill Amid Medicaid Cuts, SALT Cap Disputes

Senate Republicans are working to pass President Donald Trump’s comprehensive tax and economic legislation by the July 4 deadline, but face challenges securing enough votes due to internal party disagreements. The Senate bill proposes deeper Medicaid cuts with expanded work requirements, retains the $10,000 cap on state and local tax (SALT) deductions—contrasting with the House’s higher $40,000 cap—and includes increased tax breaks for seniors alongside over $1 trillion in program cuts. The legislation also boosts funding for ICE and Homeland Security and phases down provider taxes used by states for Medicaid payments. A key sticking point remains the SALT deduction cap, which Senate leaders have left as a placeholder amid ongoing negotiations, reflecting significant differences between the House and Senate versions. Despite these hurdles, the Senate Finance Committee has preserved the municipal bond tax exemption, a relief to market participants. The bill’s passage is seen as critical to President Trump’s domestic agenda, with tight margins in both chambers and concerns over the projected $5 trillion deficit impact complicating the legislative path forward.