In a bold move to capture voter attention and support, former President Donald Trump is rolling out a series of tax cut proposals with significant political appeal.
First, Trump targeted hotel and restaurant workers in Nevada, a crucial swing state, by proposing to exempt tips from taxes. This move was followed by a suggestion to cut the corporate tax rate during a gathering of powerful chief executives in Washington, aiming to alleviate business community concerns about his candidacy.
Now, Trump has set his sights on eliminating taxes on Social Security benefits, a proposal that could significantly benefit retirees, one of the most influential voting blocs in the United States. This latest proposal follows a pattern of Trump and the Republicans introducing new, sometimes unorthodox, tax cuts to solidify support among key constituencies. Through social media posts, political rallies, and informal policy suggestions, Trump has proposed reducing federal revenue by trillions of dollars.
While policy experts raise concerns about the feasibility and fiscal impact of these ideas, the political allure is undeniable. Trump’s proposals often leave Democrats scrambling to respond. For instance, Nevada’s two Democratic senators and its influential culinary union have endorsed the idea of ending taxes on tips. The American Association of Retired Persons (AARP) also supports tax relief for seniors receiving Social Security benefits, though it has not formally backed Trump’s proposal.
Jesse Lee, a Democratic consultant and former Biden White House official, expressed skepticism about Trump’s approach. “You do have to scratch your head a little bit when someone’s going around offering free lunches everywhere,” he said. “We’re all for people having their lunch, but we have to raise taxes on the wealthy to pay for it.”
The proposal to end income taxes on Social Security benefits, the most recent and potentially most expensive of Trump’s plans, could cost the federal government up to $1.8 trillion in revenue over a decade, according to the Committee for a Responsible Federal Budget. This could accelerate the depletion of Social Security’s financial reserves, hastening the time when the government can no longer pay out benefits in full under current law.
Yet, this proposal would offer significant tax relief to millions of Americans. Social Security benefits have been subject to taxation since the 1980s to support the program’s finances, and currently, about 40% of recipients owe taxes on their benefits. Approximately 70 million people receive Social Security benefits, with the taxation formula considering half of the benefits as income. Individuals earning more than $25,000 must pay income taxes on 50% of their Social Security benefits, while those earning over $34,000 are taxed on 85% of their benefits.
Low-income retirees without additional savings or earnings typically do not owe taxes on their Social Security benefits. According to an analysis by the Tax Policy Center, households earning between $60,000 and $200,000 would receive the most significant comparative boost from this proposal.
Romina Boccia, director of budget and entitlement policy at the libertarian Cato Institute, criticized the proposal, arguing it would shift more of the financial burden onto younger workers. “I can see the political calculations behind this proposal, but from a tax fairness perspective and a generational fairness perspective, it is a very bad proposal,” she said.
Despite these criticisms, there is bipartisan support for the concept. Some House Democrats have introduced legislation to stop taxing Social Security benefits while also raising payroll taxes on higher-income Americans to fund the program. As governor of Minnesota, Tim Walz, now Vice President Kamala Harris’s running mate in the 2024 election, signed legislation exempting Social Security payments from state taxes for many seniors. Bill Sweeney, senior vice president for government affairs at AARP, emphasized the importance of protecting Social Security’s finances while acknowledging that his group’s members are vocal about their distaste for taxes on Social Security.
In a recent interview on Fox Business, Trump dismissed concerns about the cost of his proposal, arguing that accelerating the deadline for addressing Social Security’s finances would force Congress to act. “You know that we’re going to take care of Social Security,” he said. “We’re not going to do anything to hurt our seniors.”
Beyond his new proposals, Trump is also seeking to extend many of the tax cuts he signed into law in 2017. Harris has similarly promised to extend many of those tax cuts beyond 2025, when they are set to expire, and pledged not to raise taxes on households earning less than $400,000 a year.
While Democrats have long criticized Republican tax plans for primarily benefiting large corporations and wealthy Americans, they are also advocating for tax cuts for low- and middle-income Americans and seeking to raise taxes on the wealthy and large corporations. In response, some Republicans are emphasizing tax cuts for working-class Americans and small businesses, hoping that Trump focuses on ideas like exempting Social Security from income taxes rather than further reducing the corporate tax rate.
“This feels like an answer to Democratic attacks that Trump is protecting corporate America,” said Ron Bonjean, a Republican consultant. “If there is another debate, he can pull these out of his back pocket to say he’s fighting for seniors and workers who rely on tips every day. It does help politically.”
Trump’s tax cut proposals, while controversial and potentially costly, demonstrate his ongoing commitment to capturing voter support through bold economic promises. As the 2024 election approaches, these proposals will undoubtedly play a significant role in shaping the political landscape and voter sentiment.
