Trump’s New Tax Plan Aims to Eliminate Taxes on Tips, Overtime, and Social Security

President Donald Trump’s latest tax proposal could dramatically reshape federal tax policy. His new plan seeks to eliminate federal taxes on tips, overtime pay, and Social Security benefits—a bold move that would mark a major departure from longstanding tax rules.

The House Ways and Means Committee released a draft of the bill Friday evening, signaling how aggressively Trump wants to overhaul the tax code. Though the draft isn’t final, it shows the administration’s willingness to push controversial tax changes.

Fast-Tracking the Bill

Republicans are using reconciliation, a legislative process that allows them to bypass the Senate filibuster and pass the bill with a simple majority. With control of the House, Senate, and White House, they don’t need Democratic support. Still, the road won’t be easy—budget restrictions and internal GOP disagreements over the bill’s cost could slow progress.

Internal GOP Tensions

Some Republicans are voicing concerns about the size and fiscal impact of the bill. Shai Akabas of the Bipartisan Policy Center noted that several GOP lawmakers are demanding a “more fiscally responsible package.” Even a few holdouts could block the bill’s passage.

Key Features of the Bill

The new proposal builds on Trump’s 2017 Tax Cuts and Jobs Act (TCJA), which included tax cuts for individuals and businesses. Most of those cuts are set to expire after 2025, and the new bill aims to extend or expand them:

Indexing tax brackets to inflation

Extending the 20% pass-through business deduction

Raising the Child Tax Credit to $2,500 (2025–2029), up from the current $2,000

SALT Deduction Debate Returns

A renewed debate over the SALT deduction cap is emerging. The 2017 law capped state and local tax deductions at $10,000. High-tax states like California and New York want the cap lifted, and Trump now supports that change—though it’s not included in the draft.

No Taxes on Tips, Overtime, and Social Security?