By Jasmine Li

WASHINGTON -- Republicans looking to get their sprawling tax and spending bill to President Trump's desk by July 4 need to quickly resolve a series of longstanding fights over some of their most contentious proposals.

Republicans have a 53-47 majority in the Senate -- and two GOP senators, Thom Tillis of North Carolina and Rand Paul of Kentucky, are already firmly opposed. The House is also narrowly split.

Here are some of the most fiercely debated provisions in the megabill, and the changes some Republicans are still seeking.

SALT

The Senate proposal would raise the state-and-local tax, or SALT, deduction cap to $40,000, up from $10,000 under current law. The maximum deduction would increase by 1% every year through 2029, then revert to $10,000 in 2030. The SALT changes would take effect starting with the current tax year.

The maximum deduction would begin phasing down once income passes $500,000. The income threshold would increase by 1% every year through 2029. Raising the SALT cap would cost roughly $179 billion more through 2029 compared with an earlier Senate proposal to extend the current cap with some workarounds, according to the congressional Joint Committee on Taxation.

Many Republicans are against raising the SALT cap, seeing it as expensive and mostly benefiting high-tax blue states. Sen. Mike Lee (R., Utah) wants to permanently extend the $10,000 SALT cap, but that could mean risking votes in the House. A group of blue-state House Republicans who fought for the higher SALT cap threatened to sink the bill if it didn't meet their demands.

Medicaid

The Senate proposal would reduce more than $1 trillion in spending on healthcare programs -- mostly Medicaid -- over the next decade, according to the Congressional Budget Office.

The bill includes new work requirements of 80 hours a month for adults, with some exceptions including for caregivers of children under 14. Several Senate Republicans have raised the alarm about limiting " provider taxes" charged to hospitals that then enable states to attract matching federal funds. It has been dubbed a scam by some fiscal conservatives, creating a split in the Republican conference.

Starting in 2028, the maximum provider tax rate would gradually decline to 3.5% from 6% in states that expanded Medicaid under the 2010 Affordable Care Act. For the 10 states that didn't expand Medicaid, provider taxes would be frozen in place. The bill would also create a $25 billion stabilization fund for rural hospitals to help offset the effects.

Sen. Susan Collins (R., Maine) is seeking to boost the rural hospitals fund to $50 billion and pay for that by restoring the pre-2018 income-tax rate for individuals earning more than $25 million or couples making more than $50 million to 39.6%, up from the current 37%.

Sen. Rick Scott (R., Fla.) proposed reducing the 9-to-1 Federal Medical Assistance Percentage match for some new enrollees in Medicaid expansion states, starting in 2031. He has the support of Senate GOP leadership and the White House. But Scott's amendment could be a hard sell for senators from states with trigger laws that would automatically scale back or end Medicaid expansion if the federal matching rate drops below a certain percentage.

Deficits

Fiscal hawks in both the Senate and the House were unhappy with the bill's effect on the deficit -- it would add nearly $3.3 trillion to deficits compared with current law and letting tax cuts expire as scheduled, according to the CBO. But Republicans are using an unprecedented maneuver that claims extending expiring tax cuts have no effect on the federal budget.

That assumption rebrands the bill's effect from a $3.3 trillion deficit increase into a $508 billion deficit decrease, Congressional Budget Office estimates show. This enables Republicans to comply with budget reconciliation rules that prohibit increasing deficits beyond the 10-year budget window.

On the Senate floor Sunday, Sen. Lindsey Graham (R., S.C.) brought a handwritten sign reading "507 billion deficit reduction," while Senate Minority Leader Chuck Schumer (D., N.Y.) spoke next to one that said "4.45 trillion deficit explosion" -- the estimate for the bill's tax title, provided by the JCT. Several Republican senators including Ron Johnson of Wisconsin and Paul have loudly complained about the deficit impact.

Energy

The Senate proposed phasing out tax credits for clean-energy projects -- incentives Trump have called a "giant SCAM" -- and adding a new tax for some. It would also end tax credits for buying electric vehicles starting Sept. 30. This proposal has worried some Republican senators who say it puts jobs at risk in their states.

Under the latest Senate version, wind and solar projects would only qualify for tax incentives if they go online by Dec. 31, 2027, and hydrogen projects only qualify if construction begins by Jan. 1, 2028. While fiscal conservatives embraced the wind-downs, some Republicans have warned of job losses in their home states, including Tillis and Sen. Lisa Murkowski of Alaska.

Industry players were surprised late Saturday by the addition of an excise tax for wind and solar projects completed after 2027 that use certain foreign components. Some said it would be challenging to disentangle their supply chains from China.

Republican Sens. Joni Ernst and Chuck Grassley of Iowa, along with Murkowski, proposed repealing the excise-tax proposal and delaying the phaseout of the credits by maintaining them for projects that begin construction by the end of 2027.

This explanatory article may be periodically updated.

Write to Jasmine Li at jasmine.li@wsj.com

(END) Dow Jones Newswires

June 30, 2025 17:07 ET (21:07 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.