Trump’s Tax Priorities: Major Cuts and Loophole Closures

By Doug Young – 28 February 2025

Introduction

President Trump has unveiled his tax priorities, aiming to implement significant cuts and close tax loopholes. These proposals have the potential to reshape the American tax landscape.

Tax Priority 1: No Tax on Tips

President Trump’s first tax priority is to exempt tip income from taxation.

Currently, tips are treated as taxable income, subject to income tax, Social Security tax, and Medicare tax. The proposed exemption would benefit over 4 million tipped workers in the United States, such as bartenders, waitresses, servers, and drivers.

This tax cut aims to incentivize reporting and transparency in the industry.

Tax Priority 2: No Tax on Social Security Benefits

Another key tax priority for President Trump is the elimination of taxes on Social Security benefits.

Currently, retirees, disabled workers, and survivors who earn over certain income thresholds face taxation on their benefits. Trump’s plan seeks to provide relief to the approximately 65 million Americans receiving Social Security benefits, potentially resulting in substantial tax savings.

Tax Priority 3: No Tax on Overtime Pay

President Trump aims to eliminate taxes on overtime pay as a way to incentivize hardworking individuals and support businesses.

Currently, overtime income is included in taxable income, leading to higher tax liabilities for those who work additional hours. The proposed tax cut would allow millions of overtime workers to keep more of their hard-earned money.

Tax Priority 4: Renewing the 2017 Tax Cuts

While attention focuses on new tax cuts, it is relevant to note that the existing tax cuts from 2017 are temporary and set to expire by the end of 2025.

These cuts include adjustments to tax brackets, standard deductions, and the Qualified Business Income (QBI) deduction. If Congress does not pass further legislation, tax rates will revert to previous levels.

President Trump emphasizes the importance of extending and maintaining these tax cuts to provide continued relief for individuals and businesses.

Tax Priority 5: Adjusting the SALT Cap

The SALT (State and Local Taxes) deduction cap has been a contentious issue since the 2017 tax cuts.

Currently, taxpayers can only deduct up to $10,000 in state and local taxes, impacting residents of high-tax states such as New York, New Jersey, and California. President Trump acknowledges the concerns and proposes adjusting or eliminating the SALT cap.

Tax Priority 6: Tax Cuts for Made in America Products

President Trump seeks to further decrease the corporate income tax rate, particularly for corporations that manufacture products in America.

The aim is to promote domestic production and discourage imports, aligning with Trump’s economic plan and tariff policies. By reducing tax rates for qualifying corporations, Trump hopes to incentivize investment and job creation within the country.

Tax Priority 7: Closing the Carried Interest Loophole

The carried interest loophole has long been a topic of debate.

It allows certain investment fund managers to have their profits taxed at the lower long-term capital gains rate, rather than ordinary income tax rates. President Trump aims to close this loophole by taxing carried interest as ordinary income.

This proposed change directly affects private equity firms, hedge funds, venture capital firms, and investors.

Tax Priority 8: Eliminating Tax Breaks for Billionaire Sports Teams

President Trump targets tax breaks that benefit billionaire sports team owners.

Currently, these owners can take significant tax write-offs against their purchases, which has raised questions about fairness. Closing this loophole would likely result in increased tax liabilities for sports team owners.

The proposal has gained attention as it seeks to level the playing field and address disparities in tax treatment.

What to Expect Next

With Republican control over the House, Senate, and the presidency, the likelihood of significant tax cuts this year is high. The exact timing, details, and scope of the legislation remain uncertain, however.

Ongoing negotiations, budget considerations, and potential amendments will shape the final outcome. It is recommended to closely monitor developments as they unfold.

Conclusion

President Trump’s tax priorities outline a comprehensive agenda for tax cuts and loophole closures.

These measures have the potential to impact millions of Americans and reshape the tax landscape. While the specifics are subject to ongoing debates and negotiations, the proposed changes could provide relief for workers, businesses, and taxpayers.