📰 PULSE POINTS:

❓WHAT HAPPENED: President Trump’s flagship budget bill—meant to lock in his 2017 tax cuts and deliver more relief for workers—is moving through Congress via the reconciliation process. However, internal Republican divisions threaten to derail the plan.

👤WHO WAS INVOLVED: House Speaker Mike Johnson is pushing to pass the bill by May’s end, but Republicans like Mike Lawler and Elise Stefanik want changes to the SALT deduction, while hardliners demand Medicaid cuts. Trump, meanwhile, opposes both cutting Medicaid and hiking taxes.

⚠️FALLOUT: Disagreements over SALT deductions, Medicaid cuts, and public land sales have splintered GOP unity. With Democrats unanimously opposed, the bill’s survival hinges on near-total Republican support, currently far from guaranteed.

📌SIGNIFICANCE: Without a resolution, Americans face a $4.5 trillion tax hike as Trump’s 2017 cuts expire. Failure could force Trump to oppose his own bill, risking a political embarrassment and undermining GOP midterm messaging.

IN FULL:

President Donald J. Trump’s much-touted “Big, Beautiful Budget Bill” is taking shape in Congress as the House of Representatives and Senate delve deep into the budget reconciliation process. The legislation, a budget reconciliation bill, circumvents the Senate’s filibuster rules, meaning that only a simple majority of the upper chamber is needed to pass it into law. Notably, the core content of the bill includes a permanent extension of President Trump’s 2017 tax cuts, additional tax relief for American workers, and funding for border security and the White House’s mass deportation program.

Currently, designated Republican lawmakers in the House are hammering out the final legislation. However, policy differences between the two chambers threaten to halt the process. While House Speaker Mike Johnson (R-LA) continues to state he intends to pass the House version by the end of May, internal House Republican disagreements over key tax provisions suggest the May deadline is overly optimistic. Meanwhile, cuts to Medicaid and a federal land sales provision are also causing consternation in the Senate.

WHAT IS A RECONCILIATION BILL?

While a reconciliation bill is more straightforward to pass through Congress than typical legislation, the process is constrained by several rules governing what can be included in the budget measure and its ultimate impact. Reconciliation bills must deal with mandatory spending, the federal government’s debt limit, or revenue measures.

According to Congressional rules, the Senate can, in theory, take up three reconciliation bills each year, dealing with each of the three subjects independently. Additionally, the legislation is subject to a provision known as the “Byrd Rule”—enacted by the late Senator Robert C. Byrd (D-WV)—which stipulates that a reconciliation bill cannot increase the federal deficit after a 10-year budget window and cannot alter the Social Security program.

Notably, the current reconciliation bill contains critical provisions making several of President Trump’s 2017 tax cuts permanent. If the bill fails, Americans would face a massive tax increase totaling $4.5 trillion over the next ten years.

THE ‘SALT’ PROBLEM. 

Negotiations over the bill have stalled because of changes made to the State and Local Tax (SALT) deduction under the 2017 Trump tax cuts. Right now, the SALT deduction is limited to $10,000. This cap means that taxpayers in high-tax states—most of which have Democratic governors—can only deduct up to $10,000 of their state and local tax payments from their federal income taxes.

The SALT deduction has become a significant issue for House lawmakers. Some moderate Republicans from swing districts in Democrat-controlled states want to lift the cap on this deduction to levels in place before the 2017 tax cut. Representatives Mike Lawler (R-NY), Elise Stefanik (R-NY), Andrew Garbarino (R-NY), and Nick LaLota (R-NY) from New York are strong supporters of restoring the deduction. These Republican lawmakers work with House Democrats, who tried to lift the SALT cap during former President Joe Biden’s time in office but were unsuccessful.

Some conservative House Republicans want to eliminate the SALT deduction completely. They believe this deduction unfairly transfers money from low-tax Republican states to high-tax Democrat states. These lawmakers also argue that eliminating the SALT deduction could help fund new tax relief measures in the bill.

THE MEDICAID DILEMMA. 

While the debate over the future of the SALT deduction has thrown up one roadblock to the passage of President Trump’s “Big, Beautiful Budget Bill,” a brewing fight over Medicaid threatens to derail the legislation entirely.

House Republicans are deeply divided over proposed cuts to the government healthcare program. Moderates and some Trump allies uphold President Trump’s promise not to slash Medicaid funding. However, conservative House lawmakers are pushing for deep cuts to Medicaid, arguing that the spending reduction is the only way to keep the reconciliation bill budget neutral, as required by the Byrd Rule.

House lawmakers must identify either $1.5 trillion in spending cuts or new revenue to cover the federal revenue loss created by making the 2017 Trump tax cuts permanent. To enact new tax relief, such as Trump’s “No Tax on Tips,” “No Tax on Overtime,” and “No Tax on Social Security” proposals, the House will need to find even more spending reductions or generate new tax revenue from other sources.

President Trump has repeatedly emphasized he will not sign a budget bill that cuts Medicaid or Social Security. This pledge, and resistance among some Republican members, has left reconciliation negotiators scrambling to identify other methods to keep the legislation at least revenue-neutral. A similar divide over cuts to Medicaid exists in the Senate.

Without a consensus on addressing the government healthcare program, some lawmakers are pushing for new revenue-raising measures, such as increasing federal income taxes on top earners or upping the capital gains tax. The first idea has gained some steam among influential Republicans, though House leadership insists tax increases are a non-starter.

FEDERAL LAND SALES. 

The newest hurdle facing the reconciliation bill is a provision approved by the House Natural Resources Committee that would authorize an expansion of oil, gas, coal, and mineral leases on public lands and waters. Additionally, the committee passed a provision allowing the sale of some tracts of federal lands in Nevada and Utah. The leasing changes and federal land sales would raise an estimated $18 billion in new revenue—a small but noteworthy offset to the overall legislation’s cost.

While the leasing and land sales provisions help reduce the total cuts or revenue increases needed to keep the reconciliation bill budget-neutral, they have opened the bill to new avenues of opposition, with several lawmakers declaring them non-starters. Rep. Ryan Zinke (R-MT) has previously said that new federal land sales are a non-starter for him and that he’d oppose any bill that includes the provision. Additionally, Western state Senators in the upper chamber are drawing similar red lines to the land sales measure.

WHAT’S NEXT?

Republican House leaders say they intend to unveil a finalized reconciliation bill this coming week and aim to pass it on to the Senate by the end of the month. However, with only a narrow majority and likely uniform Democratic Party opposition, Speaker Johnson cannot afford to lose more than a handful of Republican votes. This means the significant divides over SALT, Medicaid, and federal land sales must be resolved far ahead of any final votes on passage for the reconciliation bill.

If the House negotiations continue to break down, Republican leaders may be forced to turn to President Trump to put political pressure on holdouts. However, even on that front, Trump has clarified that he will not back cuts to Medicaid. Should House conservatives succeed in slashing funding for the government healthcare program, Trump could find himself opposing his own “Big, Beautiful Budget Bill.”