US Senate passes Trump's sweeping tax-cut and spending bill, setting up House battle

By Richard Cowan, David Morgan and Bo Erickson

WASHINGTON, July 1 (Reuters) - U.S. Senate Republicans passed President Donald Trump's massive tax-cut and spending bill on Tuesday by the narrowest of margins, advancing a package that would slash taxes, reduce social safety net programs and boost military and immigration enforcement spending while adding $3.3 trillion to the national debt.

The legislation now heads to the House of Representatives for possible final approval, though a handful of Republicans there have already voiced opposition to some of the Senate provisions.

Trump wants to sign it into law by the July 4 Independence Day holiday, and House Speaker Mike Johnson said he aimed to meet that deadline.

The measure would extend Trump's 2017 tax cuts, give new tax breaks for income from tips and overtime pay and increase spending on the military and immigration enforcement. It also would cut about $930 billion of spending on the Medicaid health program and food aid for low-income Americans and repeal many of Democratic former President Joe Biden's green-energy incentives.

The legislation, which has exposed Republican divides over the nation's fast-growing $36.2 trillion debt, would raise the federal government's self-imposed debt ceiling by $5 trillion. Congress must raise the cap in the coming months or risk a devastating default.

The Senate passed the measure in a 51-50 vote with Vice President JD Vance breaking a tie after three Republicans - Thom Tillis of North Carolina, Susan Collins of Maine and Rand Paul of Kentucky - joined all 47 Democrats in voting against the bill.

The vote followed an all-night debate in which Republicans grappled with the bill's price tag and its impact on the U.S. healthcare system.

Much of the late horse-trading was aimed at winning over Republican Senator Lisa Murkowski of Alaska, who had signaled she would vote against the bill without significant alterations.

The final Senate bill included two provisions that helped secure her vote: one that sends more food-aid funding to Alaska and several other states, and another providing $50 billion to help rural hospitals cope with the sweeping cuts to Medicaid.

'NOT FISCAL RESPONSIBILITY'

The vote in the House, where Republicans hold a 220-212 majority, is likely to be close.

Johnson, the House speaker, said during an interview with Fox News' Sean Hannity that Republican leadership would seek to move the legislation through the Rules Committee on Wednesday morning and get it before the entire House before Friday's holiday, unless travel plans were upset by thunderstorms that have menaced the Washington area.

"Hopefully we're voting on this by tomorrow or Thursday at latest, depending on the weather delays and travel and all the rest - that's the wild card that we can't control," Johnson said.

A White House official told reporters that Trump would be "deeply involved" in pushing House Republicans to approve the bill.

"It's a great bill. There is something for everyone," Trump said at an event in Florida on Tuesday. "And I think it's going to go very nicely in the House."

An initial version passed with only two votes to spare in May, and several House Republicans have said they do not support the Senate version, which the nonpartisan Congressional Budget Office estimates will add $800 billion more to the national debt than the House version.

Republicans have struggled to balance conservatives' demands for deeper spending cuts to reduce the impact on the deficit with moderate lawmakers' concerns that the Medicaid cuts could hurt their constituents, including service cutbacks in rural areas.

The House Freedom Caucus, a group of hardline conservatives who repeatedly threatened to withhold their support for the tax bill, has criticized the Senate version's price tag.

"There's a significant number who are concerned," Republican Representative Chip Roy, a member of the Freedom Caucus, said of the Senate bill.

A group of more moderate House Republicans, especially those who represent lower-income areas, have objected to the steeper Medicaid cuts in the Senate’s plan.

Meanwhile, Republicans have faced separate concerns from a handful of House Republicans from high-tax states, including New York, New Jersey and California, who have demanded a larger tax break for state and local tax payments.

The legislation has also drawn criticism from billionaire Elon Musk, the former Trump ally who has railed against the bill's enormous cost and vowed to back challengers to Republican lawmakers in next year's midterm elections.

House Democrats are expected to remain unanimously opposed to the bill.

"This is the largest assault on American healthcare in history," House Democratic Leader Hakeem Jeffries told reporters. "It's the largest assault on nutrition in American history."

TAX BREAKS, IMMIGRATION CRACKDOWN, TIGHTER BENEFITS

The Senate bill would deliver some of its biggest benefits to the top 1% of U.S. households, earning $663,000 or more in 2025, according to the Tax Foundation. These high earners would gain the most from the bill’s tax cuts, the CBO has said.

Independent analysts have said the bill's tightening of eligibility for food and health safety net programs would effectively reduce poor Americans' incomes and increase their costs for food and healthcare. The nonpartisan Congressional Budget Office forecast that nearly 12 million more people would become uninsured under the Senate plan.

The bill's increase in the national debt effectively serves as a wealth transfer from younger to older Americans, nonpartisan analysts have said.

Senate Democratic Leader Chuck Schumer said the vote "covered this chamber in shame," adding that the bill would be "ripping health care away from millions of Americans, taking the food out of the mouths of hungry kids."

Republicans rejected the cost estimate generated by the CBO's longstanding methodology and have argued the Medicaid cuts would only root out "waste, fraud and abuse" from the system.