President Donald Trump scored a major political win last month when the House of Representatives passed his wide-reaching legislative package. One of the most debated parts of the bill was an increase in the State and Local Tax (SALT) deduction cap—from $10,000 to $40,000—for households earning up to $500,000. The cap will also increase by 1 percent each year through 2033. This change offers significant relief to residents of high-tax states like New York and California, where state and property taxes significantly reduce take-home pay.
To gain support for the bill, President Trump needed to win over Republican lawmakers from Left-leaning states, including Representative Mike Lawler, who represents voters that would benefit from higher SALT deductions. Their votes were crucial for passing Trump’s “One Big Beautiful Bill,” which includes tax cuts, stricter immigration enforcement, energy development, and military investments.
Yes, increasing the SALT cap helps higher earners in blue states—but this was a necessary trade-off. Without the support of representatives from these states, the bill likely would not have passed. And if the price of passing sweeping reforms is giving relief to families crushed by progressive tax policies, then it’s worth it.
Still, it’s understandable why this compromise frustrates taxpayers in low-tax states like Florida and Texas. They now find themselves indirectly supporting wealthier households elsewhere, raising concerns about fairness and whether responsible states are subsidizing reckless spending in others.
Beyond the SALT debate, the bill takes strong and overdue action to reform Medicaid. Originally created to help low-income and disabled Americans, Medicaid has faced growing problems. Over the past ten years, the program has lost about $1.1 trillion due to improper payments. The Centers for Medicare & Medicaid Services reports that around 5 million people who are not eligible for the program still receive benefits, costing taxpayers an estimated $30 billion each year.
Some states take advantage of loopholes by placing taxes on hospitals and insurers and then using that money to get more federal funding—without actually spending their own resources. California, in particular, has used federal funds to cover health care for high-income individuals and undocumented immigrants.
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Adding to the problem, over half of able-bodied adults enrolled in Medicaid are not employed, and only about 16% work 35 hours or more per week. This takes resources away from those who need it most, including children, senior citizens, and people with disabilities.
Trump’s bill includes major reforms aimed at improving the system. Starting in December 2026, able-bodied adults without dependents will be required to work, study, or volunteer at least 80 hours each month to keep their Medicaid benefits.
Other changes include requiring income verification before enrollment and ending automatic re-enrollment, which will help ensure only eligible individuals receive assistance. A ban on new provider taxes will also block states from using funding tricks to gain more federal money.
These changes are designed to return Medicaid to its core purpose: helping people who truly cannot support themselves. Even past presidents such as Joe Biden and Barack Obama criticized some of the state-level funding tactics now being addressed, showing that reform has support across party lines.
The increase in the SALT deduction cap may be a mistake, but the reality is that without it, the entire bill—and its major victories—might have failed. Increasing the cap wasn’t about rewarding poor state governance; it was about ensuring progress.
The Medicaid system is in urgent need of reform to ensure that it serves patients rather than profit margins. A Wall Street Journal analysis of Medicaid data from 2019 to 2021 found that health insurers collected at least $4.3 billion in duplicate payments for patients enrolled in Medicaid in multiple states at the same time. Most patients received care in one state, but insurers were paid by two states to cover them.
President Trump’s bill is a bold attempt to fix some of the nation’s biggest problems. It tackles the long-standing waste in Medicaid while delivering tax relief to many Americans. At the same time, the compromise on the SALT cap shows how politics often involves difficult trade-offs. The key challenge ahead will be making sure that reforms stay focused on fairness, efficiency, and helping those who need it most.
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