By a narrow margin! Trump's tax cut plan narrowly passed in the House, but there are still challenges to overcome in the Senate

After last-minute revisions before the vote, the landmark tax cut bill of Trump's 2.0 term plan finally passed through the U.S. House of Representatives with a narrow margin of just one vote more in favor than against, and has been sent to the Senate.

Following the approval of the bill in the House, Republicans, including President Trump, temporarily celebrated victory. However, given the controversy over the increasing debt of the U.S. government and internal struggles within the Republican Party, it seems challenging for this large-scale tax and spending proposal to pass smoothly in the Senate. Senate Republicans have already promised to make some changes to the version passed by the House, which means there will inevitably be some "tug-of-war" in the Senate.

Market observers are concerned that the measures in this bill could expand the U.S. government's budget deficit, putting greater pressure on the U.S. bond market. After all, starting this Wednesday, the yield on 30-year U.S. Treasury bonds has remained above 5.0%, reaching a new high since October 2023 before falling back on Thursday.

215 votes to 214 votes, the thousand-page tax cut bill faces dozens of amendments before "breaking through"

According to Xinhua News Agency, on Thursday, May 22, local time, the U.S. House of Representatives passed a large-scale tax and spending bill with a vote of 215 in favor and 214 against. All Democratic members and two Republican members voted against it, while one Republican member abstained.

After the bill was approved by the House, it was submitted to the Senate, which will decide whether it can be sent to Trump's desk for signing into law.

Media reports indicate that before the full House vote, Speaker Mike Johnson and other Republican leaders engaged in lengthy consultations. To unite moderates and hardline conservatives, Republicans made dozens of amendments to the bill in the two days leading up to the vote. In addition to the main text of over 1,000 pages, the bill also includes 42 pages of amendments.

These numerous last-minute changes highlight how difficult it is to unite various factions within the Republican Party to support the bill.

Bill Contents: Tax Cuts, SALT, Raising Debt Ceiling, Repealing Biden Administration Clean Energy Tax Credits

The aforementioned bill is named the "One Big Beautiful Bill Act," which includes many important contents, mainly focusing on:

• Extending the corporate and individual tax cuts introduced during Trump's first presidential term in 2017, which were originally set to expire on December 31 of this year;
• Raising the SALT (State and Local Tax) deduction cap from $10,000 to $40,000;
• Temporarily providing new tax cuts for tips, auto loans, and more;
• Restricting safety net programs such as food stamp programs and Medicaid;
• Allocating $150 billion to increase military spending and $175 billion for immigration enforcement;
• Raising the debt ceiling by $4 trillion to prevent the Treasury from potentially defaulting in August or September of this year;
• Accelerate the cancellation of the clean energy tax credits promoted by the Democratic Biden administration;
• Implement work requirements for Medicaid starting at the end of 2026.

Senate Outlook: Republican Senators Commit to Major Amendments to the Bill

Despite the breakthrough in the House of Representatives, the road to the Senate is not smooth.

Wall Street Journal previously mentioned that the tax cut bill could take the "fast track" to a Senate vote, as Republicans unlocked the "budget reconciliation" mechanism last month.

This mechanism allows Republicans to bypass the Senate's "filibuster" rules, enabling them to pass Trump's bill with a simple majority vote without Democratic support, avoiding the usual requirement of 60 votes needed to push a bill through the Senate.

However, even to gather a simple majority, Senate Republican leaders must first unify their internal stance. Media reports indicate that several Republican senators have stated they will demand significant amendments to the bill before agreeing to vote in support.

Conservative figures like Missouri Republican Senator Josh Hawley have warned that they will oppose any package if the bill cuts health benefits under the Medicaid program.

Democrats have previously criticized the bill. Senate Democratic Leader Chuck Schumer issued a statement saying, "This is not a pretty big bill. It is ugly."

Winners and Losers: Who Benefits Most from the Bill?

Winners:

Trump - The bill includes his major campaign promises, such as extending tax cuts, strengthening immigration controls, and promoting domestic energy production. More importantly, the bill demonstrates Trump's strong influence over the most conservative factions within the House Republican Party.

House Speaker Johnson - Initially, there were doubts about whether he could get the bill passed by the House members before Memorial Day next Monday, but with this narrow victory, Johnson showcased his ability to unite various factions of Republicans.

SALT tax cut supporters - Moderate Republicans from high-tax Democratic blue states successfully ensured a significant increase in the SALT deduction cap, raising it from the current $10,000 to $40,000, effective for those earning less than $500,000.

Losers:

Deficit hawks - Although conservative spending hawks had warned they would not support bills that increase deficit spending, they ultimately compromised. The bill is expected to add trillions of dollars to the deficit over the next decade.

Climate change issues - The bill includes significant cuts to the Biden administration's green energy agenda, reducing federal programs aimed at pollution reduction and eliminating tax credits for electric vehicles.

Medicaid beneficiaries - According to the Congressional Budget Office, the new Medicaid eligibility restrictions are expected to result in over 7 million people losing insurance over the next decade.

Bipartisan Political Calculations: Democrats Warn That Supporting the Bill Will Cost Midterm Election Votes

Democrats have pledged to make Republicans pay for this in next year's midterm elections, describing the bill as "robbing the poor to pay the rich."

House Minority Leader Hakeem Jeffries warned, "The Republican tax scam will hurt working families the most while providing massive tax cuts to billionaires like Elon Musk."

Ken Martin, chair of the Democratic National Committee (DNC), stated more directly, "Democrats will do everything possible to oust those responsible for this bill from office. This vote will cost many Republicans their seats in the midterm elections."

Republicans countered that their voters would be encouraged by the realization of Trump's top legislative priority this year and would provide political rewards.

Mike Marinella, spokesperson for the Republican National Committee (RNC), asserted, "House Democrats have just signed their own political death warrant. Voters will not forget how they betrayed working families."

Debt Increase Raises Market Concerns

The deficit driven by the tax cuts in the bill may also exacerbate bond investors' concerns about the ever-expanding U.S. debt, as reflected in Moody's downgrade of the U.S. sovereign credit rating the week before last.

Recent data shows that the U.S. national debt has climbed to $36.2 trillion. According to the Congressional Budget Office's forecast on Tuesday, the tax cut bill will increase U.S. public debt by an additional $2.3 trillion. Overall, by 2033, the bill will reduce resources for the lowest-income households by 4% while increasing resources for the highest-income households by 2%.

The Committee for a Responsible Federal Budget expressed deep concern over the bill. The agency's statement described the House's budget framework as "a blatant disregard for fiscal responsibility," stating that the bill would not only cause the national debt to surge by over $3 trillion but also create the risk of a "fiscal cliff" due to the expiration of massive tax cuts and spending policies, which could potentially cost trillions more if extended.

Undoubtedly, investors are closely monitoring the impact of this development on long-term fiscal health, which may explain why major U.S. stock indices fell before the vote passed.

As the bill moves to the Senate, all eyes will be on the negotiations between different factions within the Republican Party and whether they can deliver the final version to Trump's desk before July 4