One consistent theme by President Donald Trump on the campaign trail in swing states like Nevada, Arizona, Georgia, Michigan, Wisconsin and Pennsylvania was his tax proposals to not only extend the 2017 Trump tax cuts that are due to expire Dec. 31, 2025, but also his no tax on tips, overtime and Social Security.
This was thought to be pivotal particularly to Trump’s victory in Nevada, where there is a disproportionate number of tips workers — more than 5 percent of Nevada workers are in tipped jobs according to the Tax Policy Center compared to 2 percent nationally, or about 3.3 million — Trump defeated former Vice President Kamala Harris by 46,000 votes, 751,205 to 705,197, or 50.6 percent to 47.5 percent.
Politically, then, Congressional Republicans have a very high incentive to at least get no tax on tips done, for if they fail the 2026 campaign commercials almost write themselves that Trump promised no tax on tips, had majorities in Congress to accomplish it, but then Republicans failed to deliver. They’d be flirting with political disaster in the 2026 Congressional midterms.
But the same could be said of no tax on overtime. There, 15 percent of workers nationwide are eligible for overtime pay under the Fair Labor Standards Act, according to DataForProgress.org. That’s more than 20 million Americans. Nothing to sneeze at.
And then there’s no tax on Social Security. There are 61.3 million Americans 65 years old and older, about 23.4 percent of the 262 million voting age population. So, a proposal to cut taxes for such a significant chunk of the population could be thought to have also been pivotal to Trump’s 2024 win. In the 2024 CNN exit poll, Trump beat narrowly Harris among those 65-years-old-and-older 50 percent to 49 percent.
For the first two, no taxes on tips and overtime, that should be doable under the budget reconciliation bill, although Republicans will still have to find so-called pay-fors — usually offsetting spending cuts or an increase in revenue from something else.
But Social Security cannot be directly impacted by a budget reconciliation bill. There are several points of order on this point in federal law, including section 301(i) that disallows any provision that would take away from the Social Security surplus and section 310(g) bars any provision that makes recommendations to Social Security.
If Social Security were made exempt from taxes, that would almost certainly impact the trust funds by $50.7 billion annually, according to the Congressional Research Service (CRS): “In 2023, the Social Security trust funds were credited with $50.7 billion from the taxation of Social Security benefits, or 3.8% of the trust funds’ total income. Also in 2023, income to the Medicare Hospital Insurance trust fund from the taxation of Social Security benefits was $35.0 billion, or 8.4% of the trust fund’s total income…. Taxation of Social Security benefits began with the Social Security Amendments of 1983.”
The report continued, “There were two primary reasons for taxing Social Security benefits. The first was to improve tax equity by treating Social Security benefits more like other forms of retirement income and other income designed to replace lost wages. The second was to provide revenue to strengthen the financial solvency of the Social Security trust funds.”
So, what to do? If Social Security cannot be impacted directly, that is, the current tax on Social Security being put directly into the trust funds is baked into the cake, does that mean Trump cannot keep his promise?
One alternative Republicans might wish to consider would be a retiree tax credit. Say, to qualify, you simply have to be 65 years old or older. Don’t mention Social Security. $50.7 billion across 61.3 million Americans, would be about $825 per recipient. Further qualifications based on income could be put into place to approximate those who actually paid tax on Social Security without mentioning Social Security, or it could just be a flat $825 tax credit per retiree.
Taxes would still be collected via withholding and deposited into the trust funds, and then retirees would be compensated from the general fund instead and be issued via a tax refund. It would keep the promise Trump made more or less without impacting the Social Security program directly. It would still require more offsets, but that was known when Republicans opted to use reconciliation in the first place.
In any event, besides extending the Trump tax cuts, the tax proposals the American people were most familiar with in 2024 when they voted for President Trump were his campaign promises for no taxes on tips, overtime and Social Security, impacting more than 80 million Americans.
Politically, it’s really simply. It’s no skin off Trump’s nose, he is term-limited and cannot run again. Whereas, if Republicans want credit from those 80 million Americans when they run for reelection in 2026, they’ll keep all of Trump’s promises on taxes, and if they want to be blamed, they won’t. It’s time to deliver.
Robert Romano is the Executive Director of Americans for Limited Government.
Reproduced with permission. Original here: Where’s No Tax On Tips, Overtime And Social Security?
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