Trump’s tax promises come with a catch
By Michael Jones
While Congress was on recess last week, key House Republican leaders and aides began drafting a sweeping legislative package that slashes the social safety net, boosts defense and border security, overhauls energy policy, and extends the 2017 Trump tax cuts—while raising the debt limit by up to $5 trillion.
Former President Trump’s reelection added another item to their to-do list: Eliminate federal taxes on Social Security benefits, overtime pay, and tips—three marquee campaign promises he made in 2024.
The proposals would allow Republicans to brand their tax bill as more populist than elite. But without offsets, they risk blowing a gaping hole in the deficit and putting critical programs like Medicaid, SNAP, and the Pell Grant on the chopping block.
The GOP’s behind-the-scenes work comes as House Democrats kick off a week of action on affordability, spotlighting the rising costs of housing, groceries, child care, insurance, and utilities.
“America is too expensive,” House Minority Leader Hakeem Jeffries (D-N.Y.) said Monday. “We need to build an affordable economy for you—hardworking American taxpayers.”
It’s a coordinated attempt to flip the script, casting Trump and Hill Republicans as the ones who failed to deliver on promises to lower costs.
“They have failed. Costs aren’t going down. They’re going up,” Jeffries added. “Enough. We are better than this.”
Republicans argue that restoring pre-COVID economic policies—Trump-era tax cuts, tariffs, and deregulation—is the fastest way to bring relief. As I wrote in last week’s column, the president’s revived trade war has rattled markets, but his administration insists it’s part of a broader formula to usher in a “new American golden age.”
Yet the numbers on his latest tax proposals are staggering and a stark reminder that what sounds good on the stump can be disastrous as policy.
Eliminating the federal tax on Social Security benefits would cost between $1.4 trillion and $1.6 trillion over the next decade, according to estimates from the Penn Wharton Budget Model and the Tax Foundation.
The benefits would be uneven. Higher-income retirees could save more than $2,000 per year, while middle-income retirees might save a few hundred. Low-income retirees—who already don’t pay taxes on their benefits—would see little to no change.
That tax revenue currently helps fund the Social Security and Medicare trust funds. Without a replacement source, analysts warn, the cut could accelerate the timeline for trust fund insolvency—potentially leading to future benefit reductions.
The other two tax promises aren’t cheap either.
Scrapping taxes on overtime pay is projected to cost between $600 billion and $1.7 trillion over 10 years, depending on how it’s implemented. Some experts warn that the exemption could incentivize workers or employers to reclassify income as overtime, driving the cost even higher.
Eliminating taxes on tips could cost another $70 billion to $250 billion over the same period. It could also encourage more workers to shift income into tipped wages to take advantage of the exemption, adding to concerns about underreporting and enforcement, especially given the already wide tax gap.
To be clear, there have been multiple legislative proposals—both at the federal and state levels—to eliminate taxes on Social Security benefits, overtime pay, and tips.
The You Earned It, You Keep It Act, sponsored by Rep. Angie Craig (D-Minn.), would end taxation on Social Security benefits starting this year and offset the lost revenue by raising taxes on high-income earners—an approach projected to extend the program’s solvency through 2054. Rep. Thomas Massie (R-Ky.) has introduced his own bill to amend the tax code and exclude benefits from gross income calculations, calling the current structure a form of double taxation. Sen. Pete Ricketts (R-Neb.) has taken a more gradual approach: His Social Security Check Tax Cut Act would phase out the tax over a decade, beginning with a 10 percent reduction and ending in full elimination by 2035.
Several Republican lawmakers have also introduced bills to eliminate or reduce taxes on overtime pay. Nebraska Rep. Don Bacon’s Overtime Pay Tax Relief Act of 2025 would allow workers to deduct up to 20 percent of regular wages from their overtime compensation, capped at $100,000 in income ($200,000 for joint filers). Sen. Josh Hawley’s No Tax on Overtime Act and Rep. Russ Fulcher’s Keep Every Extra Penny (KEEP) Act go further, proposing to exempt overtime pay from federal income taxes entirely—an effort that dovetails with Trump’s campaign promise to deliver tax relief for working families.
And in February, Rep. Steven Horsford (D-Nev.) reintroduced the Tipped Income Protection and Support (TIPS) Act, which would eliminate federal income taxes on tips while also abolishing the subminimum wage of $2.13 per hour. The bill ensures tipped workers earn at least the standard minimum wage before tips and includes safeguards—such as capping eligibility at $112,500 in income, clearly defining qualifying occupations, and blocking loopholes that could allow high earners to reclassify income as tips.
Many Democrats I spoke to told me they support the idea of tax relief for workers and retirees—but not at the expense of the programs their party fought to expand, or as part of a partisan megabill.
“It’s a reasonable proposal to consider,” Jeffries told me in Brooklyn last week during House Democrats’ Social Security Day of Action when I asked whether he backed eliminating taxes on retirement benefits. “But it’s got to be done in a bipartisan way.”
Democratic skepticism, however, might be the least of GOP leadership’s problems.
Deficit hawks like Rep. Chip Roy (R-Texas) have made clear they won’t support any new tax cuts without equivalent spending reductions—a stance that could cost Republican votes at a time when House and Senate GOP negotiators are already hundreds of billions of dollars apart on how deep to cut.
“Some people are proposing additional tax cuts without commensurate spending cuts. That would be madness and would defeat the bill,” Roy wrote on X last week. “Remember: every single House [and] Senate Republican has campaigned on balancing budgets. They must keep their word and kill any bill that fails to significantly cut spending.”
We’ll soon find out if Roy and other fiscal hawks are willing to practice what they preach—even if it means tanking the GOP’s megabill and the campaign promises tucked inside.
Michael Jones is an independent Capitol Hill correspondent and contributor for COURIER. He is the author of Once Upon a Hill, a newsletter about Congressional politics.
