Trump tax bill holdouts lured with SALT hike, Medicaid cuts

Steven T. Dennis, Ari Natter, Erik Wasson, Bloomberg News on May 21, 2025

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House Republican leaders released a new version of President Donald Trump’s massive tax and spending bill with a higher limit on the deduction for state and local taxes and other changes in a bid to win over warring GOP factions to support the legislation.

The updated legislation released Wednesday night also would speed up cuts to Medicaid and elimination of Biden-era clean energy tax breaks, a demand of hard-line conservatives.

It wasn’t immediately clear whether the revisions would attract enough support to pass the House, where Republicans hold a slender majority and can only afford to lose a few votes.

House Speaker Mike Johnson is pressing to rush the package through the House before lawmakers leave for their Memorial Day break. The House could vote as soon as Thursday.

The new version of the tax bill would raise the state and local tax deduction cap to $40,000, in an effort win over a group of holdouts from New York, New Jersey and California. The higher limit would begin this year. The amount allowed would gradually phase down for taxpayers with annual incomes greater than $500,000.

The cap and income phase-out would increase 1% annually after this year.

The SALT Republicans have been pressing to raise the limit on the SALT deduction since Republicans imposed a $10,000 limit on the deduction in Trump’s first-term tax legislation. Previously, the deduction had been unlimited.

The revised bill also would accelerate new Medicaid work requirements to December 2026 from 2029 in a bid to satisfy ultraconservatives.

The December 2026 deadline would fall just one month after midterm elections, with Democrats eager to criticize Republicans for restricting health benefits for low-income households.

The new version renames a new tax-advantaged savings vehicle for children “Trump accounts.” The accounts, which in the initial legislation had been dubbed “MAGA accounts,” would be seeded with $1,000 for each American baby born in the next few years.

The bill also includes $12 billion to reimburse states retroactively for expenses they incurred for border security, a big win for Texas Republicans including Senator John Cornyn, who has been lobbying House members to add the provision.

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(With assistance from Chris Cioffi, Maeve Sheehey and Emily Birnbaum.)

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