Washington was on two parallel tracks this past week when discussing President Trump’s “big, beautiful bill.”
On one front: The nation’s capital was transfixed by a seismic fight between Elon Musk and President Trump, centered on the cost of the $3 trillion tax and spending bill.
On another front: Republican leaders steadily advanced the pricey package with only a few changes apparently on offer.
“Pedal to the metal,” Senate Majority Leader John Thune offered in a speech Thursday near the height of the Musk drama — ignoring promises from the world’s richest man to oust lawmakers who didn’t join his effort to kill the bill.
Republicans instead appeared to move closer to passage. They previewed changes that will be of interest to taxpayers and businesses, but with little to fulsomely address the critique from Musk and others around the package’s price tag.
In spite of Musk’s campaign and multiple government and independent analyses that found at least $2.4 trillion in new red ink, Thune dismissed Musk this week by saying “we’re a long ways down this track” and that his party is “rowing in the same direction.”
Thune may be overstating things a touch, with a vocal group of fiscal conservatives emboldened by Musk suggesting they will vote no. But Republican leaders from the president on down echoed Thune’s position throughout the week.
Stifel’s Brian Gardner offered a bottom line in a note this past week, suggesting the fighting “makes for great TV and fodder … but it is unlikely to fundamentally change the composition of the tax bill.”
“Musk’s sway among Republican voters is limited,” he added.
The week saw a flurry of negotiations over changes to the House package, but, perhaps Washington being Washington, even the cost-saving changes appear to have been immediately spoken for.
A meeting on Wednesday with the president, Thune, and members of the Senate Finance Committee ended with a focus on two changes.
The first could save significant money by paring back a $40,000 tax deduction in the House bill for state and local taxes (SALT).
Any changes there will face fierce opposition when the bill returns to the House, but the Washington Post reported this week that Trump has even indicated he is willing to lower the deduction.
Senate Majority Leader John Thune, center, after meeting with President Trump and fellow Republicans at the White House on June 4. (Brendan Smialowski/AFP via Getty Images) ·BRENDAN SMIALOWSKI via Getty Images
But any savings there may be quickly eaten up by the second bit of news this week, which concerns making some business tax incentives permanent.
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These tax deductions to businesses involve property depreciation, interest expenses, and R&D and are currently temporary in the House package. But an array of key Senators are keen to make them permanent (and more expensive).
It’s still a matter of some debate, with some hawks like Sen. Ron Johnson of Wisconsin having told reporters he is looking to keep those tax breaks temporary and that Trump isn’t sold.
Johnson had emerged as a fierce critic of the package over spending and is also threatening to reform or break the package into different parts. He would need at least three Republican senators to join him and stand up to what is expected to be a fierce White House pressure campaign.
Another key business-world change in the offing that emerged this week involves a provision that says no state may make its own law to regulate artificial intelligence in the coming decade.
The need for changes there became evident when Rep. Marjorie Taylor Greene of Georgia acknowledged she hadn’t been aware of the provision when she voted yes in the House, but that she would flip to no if it stayed in place.
That proposed revision — seen this week as part of a larger spectrum package released by the Senate Commerce Committee — would change the House plan for a 10-year outright ban to a system that blocks some federal broadband funding if a state passes certain AI laws.
Tech companies will be watching those developments closely, but they’re not expected to have much impact on the bill’s price tag.
President Trump at the White House on Thursday. (Demetrius Freeman/The Washington Post via Getty Images) ·The Washington Post via Getty Images
Another possible change could actually push up the price tag, with a growing debate around changes in the House bill to Section 899 of the IRS code, focused on what Republicans call “discriminatory foreign countries.” The provision would allow the president to impose new taxes to combat the practices.
Removing that change could cut into future government revenues, allowing the president to levy fewer taxes as a result.
Other changes could also be coming that might increase the price tag, with some senators still concerned that current cost-saving measures go too far.
Sen. Josh Hawley of Missouri has been outspoken on one of the key changes around limiting Medicaid benefits, writing in a recent New York Times op-ed that cuts will hurt the working class and that the core of the issue is “will Republicans be a majority party of working people or a permanent minority speaking only for the C-suite?”
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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