Washington, D.C. — Former President Donald Trump’s proposed tax reform plan has suffered a significant political setback after being rejected by members of his own party. At the same time, credit ratings agency Moody’s downgraded the United States' last remaining AAA rating, citing rising debt levels and a persistent lack of fiscal discipline.

Republican Dissent Blocks Tax Reform

In a surprise move, five Republicans on the House Budget Committee — Reps. Ralph Norman, Chip Roy, Andrew Clyde, Josh Brecheen, and Lloyd Smucker — joined Democrats in voting down the measure. The proposed legislation sought to extend and expand the 2017 tax cuts, including new provisions to eliminate taxes on tips and overtime pay, increase defense spending, and boost funding for immigration enforcement.

However, fiscal conservatives within the GOP objected to the proposal’s lack of spending reductions, particularly in areas such as Medicaid and renewable energy subsidies.

“We’re writing checks we can’t cash, and our kids will be left to pay the bill,” said Rep. Chip Roy (R-TX), explaining his opposition.

Despite calls from Trump for party unity, the dissenting votes effectively blocked the bill from advancing. Rep. Lloyd Smucker, who initially supported the measure, changed his vote, calling it a procedural move to allow for revisions and reintroduction of the bill.

Moody’s Issues Credit Downgrade

On the same day as the failed vote, Moody’s Investors Service downgraded the U.S. long-term credit rating from AAA to AA+, the last major ratings agency to do so. Moody’s cited the federal government’s unsustainable fiscal trajectory, warning that the national debt could soar to 134% of GDP by 2035 — up from its current level of 98%.

“Successive U.S. administrations and Congress have failed to implement measures to reverse the trend of large annual deficits and rising interest costs,” the agency noted in its report.

The downgrade is expected to raise borrowing costs and heighten pressure on lawmakers to enact meaningful fiscal reforms.

Conservative Demands for Fiscal Restraint

Republican hardliners are demanding more aggressive deficit-reduction measures before supporting any new tax legislation. Their key demands include:

Immediate implementation of work requirements for Medicaid beneficiaries

Full elimination of green energy tax incentives

Stricter budgetary controls and reduced discretionary spending

House Budget Committee Chairman Jodey Arrington (R-TX) indicated the proposal could be re-evaluated during an emergency session, emphasizing its alignment with campaign promises made during Trump’s political resurgence.

Analysts Raise Deficit Concerns

Independent fiscal watchdogs project that Trump’s tax proposal would add approximately $3.7 trillion to the national deficit over the next decade. The plan includes a broad range of tax breaks, including the repeal of taxes on gun silencers and a significant expansion of the 2017 tax cuts.

Democratic lawmakers were quick to criticize the proposal. Ranking committee member Rep. Brendan Boyle (D-PA) warned that cuts to Medicaid could result in the loss of health coverage for 8.6 million Americans.

“No other piece of legislation or historical event has threatened health care access on this scale — not even the Great Depression,” Boyle stated.

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Summary

Donald Trump’s renewed effort to implement sweeping tax reform has been derailed by conservative resistance within the GOP, exposing internal divisions over fiscal priorities. Meanwhile, Moody’s downgrade of the U.S. credit rating highlights deepening concerns about the nation's fiscal sustainability, adding urgency to budget negotiations in Congress.

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