Congress
From spaceports to venture capitalists, tailored tax breaks add billions to megabill
Special tax breaks for venture capitalists, Alaskan fisheries, spaceports, private schools, rum makers and others — together costing tens of billions of dollars — quietly caught a ride on Republicans’ sprawling domestic policy megabill.
The legislation is primarily designed to prevent $4 trillion in looming tax increases set to hit at the end of this year. But, shortly before approving the plan, Senate Republicans added a new crop of unrelated, bespoke tax breaks. House GOP lawmakers got in their share, too.
Many are the sort of narrowly targeted breaks Republicans have long complained are unfair, reward influential special interests and unnecessarily complicate the tax code.
There’s a new supersized deduction for business meals — though only for employees at certain Alaskan fishing boats and processing plants, with the measure stipulating the facilities must be “located in the United States north of 50 degrees north latitude” though not in a “metropolitan statistical area.”
There’s a $17 billion expansion of a little-known provision that enables venture capitalists to make a fortune tax-free.
Sen. James Lankford (R-Okla.) won a carve-out for the oil and gas industry from a minimum tax on big corporations that was created during the Biden administration.
There’s a $2 billion break important to the rum industry and, tangentially, Louisiana, said Sen. Bill Cassidy (R-La.), a tax writer.
“We have the highest per capita intake of alcohol in the nation,” he said.
The targeted tax breaks have been overshadowed by the main purpose of the legislation: preventing a whole slate of tax cuts from expiring at the end of this year, and enacting a handful of breaks for things like tips and overtime pay that President Donald Trump had promised.
But they nevertheless got the same fast-track-into-law treatment, despite some seeming to come out of nowhere with little public vetting.
Some House Republicans grumbled about the provisions — “loaded with pork to buy key Senate votes,” the chamber’s hard-right Freedom Caucus said in a memo to colleagues. But House lawmakers backed down from threats to sink the plan over fiscal concerns and other complaints, and approved it Thursday on a 218-214 vote that sends it to Trump for his signature into law.
Even as Senate Republicans added their own provisions to the legislation, they deleted some earmarks that had been approved by the House.
Though some of the add-ons are small — like an increase in a special deduction for certain Alaskan whaling captains to buy weapons and maintain their boats — others have price tags that run in the billions.
The bill includes an expansion of a little-known break that Silicon Valley investors have used to nix tax bills on tens and even hundreds of millions of dollars in earnings from Internet startups. Another spends $26 billion to create a new $1,700 credit for people who give to groups providing scholarships for children to attend private school.
Sen. Mitch McConnell (R-Ky.) secured a $7 billion tax cut for farmers that allows them to postpone paying some of the capital gains taxes they owe when selling off farmland.
There’s also a $1 billion provision allowing “spaceports” — which the legislation defines as “any facility located at or in close proximity to a launch site or reentry site” — to sell tax-exempt bonds, like airports. Sen. Ron Wyden, the chamber’s top Democratic tax writer, said in an X post that “Trump’s wedding gift to [Jeff] Bezos and birthday gift to [Elon] Musk were tucked in the new budget bill.”
Finance Chair Mike Crapo (R-Idaho) chafed at suggestions the various tax breaks are earmarks.
“I wouldn’t describe them that way,” he said. “You can go through there and find 100 specific issues, and if you want to call them earmarks, that’s your choice, but I don’t think they are.”
“Would you say that if we build a highway, would you say we’re doing an earmark for roads?” he said. “It’s infrastructure policy.”
His colleagues are likewise defending their provisions.
Lankford says the special break for oil and gas companies is needed because the arcane calculations that go into determining when a company is subject to a 15 percent minimum tax are biased against the industry.
The provision reverses the “tax penalty Democrats placed on America’s energy producers and allows our producers to deduct essential capital costs just like any other manufacturer,” he said.
Cassidy said the rum item is a permanent version of a temporary break lawmakers have approved many times before. The Treasury has long transferred federal excise taxes imposed on rum made in Puerto Rico and the Virgin Islands and sold in the U.S. back to those governments.
“We’re attempting to provide certainty for businesses, and that includes distillers,” said Cassidy, whose sugarcane-producing state is part of their supply chain.
Democrats tried, unsuccessfully, to kill some of the proposals.
During Senate deliberations, Sen. Mazie Hirono (D-Hawaii) watched her amendment targeting the private-school tax break win bipartisan support but nevertheless go down on a 50-50 vote.
“Nearly 90 percent of K through 12 students attend public schools, yet Republicans are pushing a plan in this bill to undermine support for public schools,” she said. Sen. Ted Cruz (R-Texas) retorted that Democrats “are more beholden to teacher union bosses than they are dedicated to fighting for kids.”
Even as they added their own pet projects, Senate Republicans jettisoned earmarks that had been approved by their colleagues in the House. Out is an $800 million tax cut for corporations that have income in the Virgin Islands.
They also dumped plans to spend $10 billion on a provision pushed by the fitness industry, including the YMCA, that would have allowed people to count gym-membership fees as a medical expense in Health Savings Accounts. A provision boosting the Earned Income Tax Credit for some Purple Heart winners was similarly axed.
It wasn’t all bad news for House members, though.
Rep. Mike Kelly (R-Pa.) was pleased to see Senate Republicans reinserted his plan sending a $3 billion tax break to real estate investment trusts, after lawmakers had initially deleted it from their draft.
“It was a little questionable about what was going to go and what wasn’t,” he said.
And Senate Republicans not only kept a House-approved provision exempting gun silencers from a long-standing $200 tax on firearms — they dumped the tax on all guns it applied to, except machine guns and what the legislation terms “a destructive device.” That cost: $1.7 billion.
Rep. David Kustoff (R-Tenn.) hailed the plan, calling the charge “an illegal poll tax used as a piggy bank for the federal government.”
Congress
Republicans worry shutdown will overshadow Trump’s State of the Union
President Donald Trump is barreling ahead with the first State of the Union address of his second term, despite concerns among Republicans that it’s set to hit during a partial government shutdown.
The speech, set for 11 days from now, is poised to land in the middle of a funding lapse at the Department of Homeland Security – the product of a standoff with Democrats over immigration enforcement that the White House had hoped to avoid. Behind the scenes, some administration officials and senior Capitol Hill Republicans are quietly fretting about the optics, according to six people granted anonymity to describe private conversations.
The concerned Republicans believe it would be less than ideal for Trump to stand in the well of the House and declare that the state of the union is strong when a critical part of the federal government remains shuttered.
“It doesn’t exactly scream ‘a functioning GOP trifecta,’” said one House Republican granted anonymity to speak candidly.
Asked whether postponing the address was under discussion, a senior White House official said Friday, “Not as of yet.” Senior Hill Republicans believe the president is full steam ahead as well. In 2019, Trump publicly battled with then-Speaker Nancy Pelosi for more than a week over whether to delay his State of the Union address during an earlier government shutdown. He eventually relented.
Republicans expect Speaker Mike Johnson, who is responsible for extending the formal invitation to the president to address a joint session of Congress, not to delay the speech unless the White House specifically asks.
The latest shutdown, which will begin when DHS funding lapses overnight, is expected to drag on until at least the week of Trump’s Feb. 24 State of the Union speech because the White House and Senate Democrats appear to be far apart on how far to rein in Trump’s immigration enforcement activities as part of a funding agreement.
Both sides are continuing to negotiate, but lawmakers left Washington Thursday for a week-long recess with little expectation they would be called back early. The address is scheduled for one day after lawmakers return to Capitol Hill.
White House officials and senior Hill Republicans have been eager for Trump to use the prime time address to tamp down a swirl of negative headlines over the past few weeks, from the fatal shootings by federal immigration agents in Minnesota to the release of the files of the late convicted sex offender Jeffrey Epstein. They instead want to focus on the GOP’s economic messaging heading into the midterms.
Some Republicans also see it as an opportunity to blame Democrats for the DHS funding lapse, which impacts TSA baggage screeners, who will work without pay, FEMA and the Coast Guard.
“President Trump has been, and always will be, on the side of the American people,” White House press secretary Karoline Leavitt said in a Fox News interview Friday. “He wants our government to remain open, and unfortunately, it appears that Democrats are barreling our government towards another shutdown for political and partisan reasons.”
Among the considerations for Republicans is how difficult Democrats plan to make things for Trump during the speech itself. Senate Democrats are having discussions about whether to boycott the event and talked it over during a closed-door lunch this week, according to two people granted anonymity to share details of the private conversations. Some members of the caucus are currently expected to attend, though a swath is undecided.
House Minority Leader Hakeem Jeffries on Friday declined to say whether he believed the speech should go forward during a DHS shutdown.
“That’s an open question,” he told reporters. “We’ll have more to say about that next week.”
Jeffries advised Democrats during a private leadership meeting earlier this week that his members should either sit in “silent defiance” or attend alternative programming, according to two people granted anonymity to describe his comments.
Heckling has become increasingly common from a president’s political opponents during State of the Union speeches.
Johnson pleaded with his own members to maintain decorum during former President Joe Biden’s 2024 State of the Union appearance, only for several House GOP hard-liners to openly taunt him. During Trump’s address to Congress last year, Democrats showed up with signage and jeers, with multiple members walking out either on their own accord or at the insistence of Capitol Police.
Rep. Al Green (D-Texas), who stood up to yell at the president at the very beginning of Trump’s speech last year, was later censured by the House for his actions.
Asked Thursday whether he would attend this year’s State of the Union address, Green said, “I’m not making an announcement right now.”
Eli Stokols and Diana Nerozzi contributed to this report.
Congress
Meet the YOLO Republicans: Lawmakers with nothing to lose are threatening Trump’s grip on Congress
President Donald Trump spent the past year using fear and intimidation to keep Hill Republicans in line, with considerable success. Now those tactics are starting to lose their bite — thanks to a small group of Republicans with nothing to lose.
The reasons why this handful of GOP lawmakers feel empowered to spurn their president and their party vary. But they are launching mini-rebellions with increasing frequency. It’s causing headaches for party leaders who want to keep tight control of the legislative agenda in an election year and anxiety among rank-and-file Republicans who are facing intense pressure to stick with Trump.
“Some people live in fear,” said Rep. Don Bacon, a retiring Nebraska Republican who was at the center of a crucial episode this past week, where he and two colleagues joined with Democrats to force House votes on Trump’s controversial tariffs.
When a vote to overturn his Canada levies came to the floor Wednesday, “I was in the cloakroom, and I heard people say, ‘I hate tariffs,’ and then voted” to leave them in place, Bacon recalled. Were it not for threats of retaliation from Trump and a heavy White House lobbying campaign, he estimated “30 or 40” Republicans would have broken ranks.
In the end, only six did. But thanks to the thin margins in both chambers — especially the House — a few steel-spined lawmakers can have an outsized impact. That’s a change from the dynamics in Trump’s first term, when many House Republicans weren’t fully on board with the president’s MAGA agenda, but the GOP had a much larger majority to work with.
Just ask Rep. Thomas Massie of Kentucky, who has gone from an occasional annoyance to Republican leaders to a persistent problem in the 119th Congress.
“The margin is razor-thin, so on any given day, I would just need one or two of my own co-conspirators to get something done,” Massie said in an interview before predicting the situation will only get worse for Trump.
“The retirement caucus is growing,” he said, referring to the dozens of members not seeking reelection to the House. “Once we get past March, April, and May, which contain a large portion of their Republican primaries, I think you’re going to see more defections.”
Those who have not defected are losing patience with their colleagues, with many arguing it is only hurting the GOP’s chances in the upcoming midterms.
“Certainly, I respect their right to be independent,” said Republican Rep. Buddy Carter, who is running for Senate in Georgia. “But you know, this is a team game. We got to remember that.”
One House Republican who was granted anonymity to speak candidly complained about a faction that “just wants to go rogue” while putting colleagues in a politically difficult spot — such as with the tariff vote this week.
“Those guys might lose now,” the lawmaker said of the House GOP’s most vulnerable members.
As voting was underway on the tariff measure this week, Trump publicly threatened to support primary challengers and enact other “consequences” against the members who didn’t fall in line. To some degree it worked — predictions of a mass GOP jailbreak didn’t materialize.
But enough members with some political insulation defected, allowing the measure to advance through the House and onto the Senate, which is likely to approve it and set up a Trump veto. Bacon and Rep. Dan Newhouse of Washington are retiring, freeing them from concerns about primary threats.
Meanwhile, Reps. Brian Fitzpatrick of Pennsylvania and Jeff Hurd of Colorado are in competitive districts that Republicans can’t afford to lose, putting pressure on the duo to show independence from their party. Rep. Kevin Kiley’s California district got blown up as part of Trump’s redistricting war. And Massie has long been accustomed to being at odds with party leaders, with his campaign to pry open the Jeffrey Epstein files sparking open warfare with the White House.
Some have doubts that a larger group of Republicans will ever break dramatically with Trump, given his durable popularity with the party base and the need for GOP candidates even in purple districts to appeal to the president’s loyalists.
One test will come later this year when Trump hits the midterm campaign trail, said Sam Geduldig, a lobbyist at CGCN Group and former House leadership aide.
“I would be surprised if a candidate didn’t want him at a rally, and that speaks to Trump’s strength,” he said. “If he can do that, it says a lot. In 2006, no one wanted [former President] George W. Bush in their district — not in conservative districts, not in moderate ones. If you’re measuring him against modern Republican presidents, he looks strong by comparison.”
Over in the Senate, Trump already has a fraught relationship with some GOP senators, like Maine’s Susan Collins and Alaska’s Lisa Murkowski, and there is generally a stronger culture of lawmaker independence. But Trump’s decision to essentially send Sen. Thom Tillis of North Carolina into retirement has introduced a new wild card in the chamber’s dynamics.
Tillis announced he would not seek reelection after voting to oppose Trump’s signature “big, beautiful bill” and warning the Medicaid cuts in the party-line policy package would be a political death knell for the GOP. Now Tillis is frequently speaking out against Trump and is single-handedly blocking his Federal Reserve nominees until a Justice Department investigation into Fed Chair Jerome Powell is resolved.
Some members are also eyeing GOP Sen. Bill Cassidy of Louisiana as a freer agent after Trump went ahead and endorsed an opponent in the May 16 primary. Asked about Trump’s threats to lawmakers, Tillis suggested they could easily backfire.
“I still maintain a good relationship with him … but I think we need to check our passions at the door,” he said this week.
Hurd, the Colorado moderate who voted to cancel the Canada tariffs and is facing a more conservative primary challenger, said he would “let the president’s statement speak for itself.”
But Hurd prevailed in 2024 without Trump’s endorsement and is in a competitive enough district that Trump can’t afford to meddle too much. The district was decided by 546 votes in 2022, when GOP Rep. Lauren Boebert narrowly held onto the seat.
“If they want to come to a district where Trump is underwater and push for tariffs in an agriculture- and manufacturing-heavy area, fine — that’s not going to work,” said a person granted anonymity to candidly discuss party strategy. “If they want to lose the majority and play in these primaries, then go ahead.”
Speaker Mike Johnson, meanwhile, has his hands full just keeping his majority intact. He currently can afford to lose only a single GOP member on party-line votes, and while upcoming special elections could boost that margin slightly, things are likely to remain super tight.
Johnson this week said he had urged one Republican battling health issues, Rep. Neal Dunn of Florida, to stick it out and finish his term amid concerns he might resign early.
Dunn declined to comment on his plans, but a close friend of his, Rep. Joe Wilson (R-S.C.), said he had jokingly told Dunn he would like to be helpful amid all the floor unrest.
“I did offer to carry him into the chamber,” Wilson said.
Jordain Carney, Mia McCarthy and Alex Gangitano contributed to this report.
Congress
Congress battens down the hatches for long DHS shutdown
Lawmakers left Washington for a week-long recess Thursday, showing no urgency to avert a shutdown at the Department of Homeland Security that will take effect Saturday morning.
The overwhelming sense of resignation reflected the reality that neither Republicans nor Democrats saw an obvious path forward to resolving their differences over President Donald Trump’s immigration crackdown and whether to rein it in as part of legislation to fund DHS.
Though negotiations between the White House and Senate Democrats continue, the trajectory of talks suggest DHS funding will be lapsed for at least 10 days — meaning the soonest any resolution would be reached is in the political hothouse around Trump’s State of the Union address on Feb. 24. The lack of progress has even raised the prospect that Trump’s speech to Congress might be postponed, and some Democrats are mulling a boycott.
“This ‘nyah nyah’ is going to go on for a while,” Sen. John Kennedy (R-La.) said Thursday.
Even if a deal were struck, Kennedy added, “I’m not entirely convinced that anybody would vote for it. I can’t see the Dems voting for anything because they’re not going to get pounded for funding ICE. And the Republicans on my side are not going to get pounded for hurting ICE.”
Negotiations between Democrats and White House officials were ongoing as of Thursday evening. Democrats, who have floated a series of guardrails on immigration enforcement agencies in exchange for funding DHS, were expected to formally respond to the latest White House offer over the weekend after Senate Minority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries bashed it Thursday without disclosing specifics on what was contained within.
The absence of leaked bill text in the exchanges between Democrats and the White House was one subtle sign of encouragement for those watching the negotiations that both sides were taking the talks seriously.
As they prepared to leave Washington, Republicans continued to knock key demands from Democrats, including a proposal that immigration enforcement agents seek judicial warrants before entering private property.
Senate Majority Leader John Thune said that Republicans and Democrats were “not close.” A senior White House official granted anonymity during a call with reporters warned that the administration wouldn’t “accept concessions that meaningfully affect its ability to carry out its immigration enforcement agenda.”
Even if a compromise emerges, some Democrats worry that Republicans will insist on so many qualifications that any of their proposed guardrails would be rendered toothless.
“We can’t pass reform that has exceptions and caveats — ‘you can’t wear masks, except for seven different situations where you can. You can’t bust into people’s homes, except 20 different situations where you can,’” said Sen. Chris Murphy of Connecticut, the top Democrat on the subcommittee overseeing DHS appropriations. “The offers we’ve gotten are just not serious.”
Sen. Jeanne Shaheen (D-N.H.) said it was paramount that both sides “sit down with each other face to face and talk about what you’re doing.” But there were no plans for an in-person meeting.
It will likely take weeks for the public to start feeling pain from a lapse in DHS funding, meaning each side will feel limited political pressure to give in right away. TSA screeners are not set to miss paychecks until March, and FEMA coffers are likely full enough to respond to natural disasters for the near future.
After the Senate failed to pass DHS funding legislation Thursday, lawmakers in both chambers left Washington with guidance to be ready to come back in a matter of days if Democrats and the White House were able to strike a deal – something that members didn’t see as a realistic possibility before the end of next week.
“Both sides could dig in and just let this thing drag on,” Thune said. “I don’t think that’s in anybody’s best interest.”
Jennifer Scholtes, Mia McCarthy, Myah Ward contributed to this report.
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