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Home » ‘MAGA Accounts’ and No Tax on Tips: Republicans Plan to Inject Trump Into Tax Code

‘MAGA Accounts’ and No Tax on Tips: Republicans Plan to Inject Trump Into Tax Code

May 12, 20254 Mins Read Business
‘MAGA Accounts’ and No Tax on Tips: Republicans Plan to Inject Trump Into Tax Code
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House Republicans on Monday outlined their plans for an expansive tax bill that would temporarily enact President Trump’s campaign pledges not to tax tips or overtime pay, roll back subsidies for clean energy and create a new type of tax-advantaged investment account for children.

The bill, which the Ways and Means Committee will formally take up on Tuesday, amounts to the first full attempt at detailing Republicans’ plans for cutting taxes this year. But it quickly faced criticism from some House Republicans, nearly all of whom will need to support the legislation in order for it to pass over what is expected to be unified Democratic opposition.

For example, the draft calls for increasing the limit on the state and local tax deduction to $30,000 from $10,000. A group of four Republicans from New York have agitated for a much higher cap and called the $30,000 limit “insulting” last week. Representative Nick LaLota, Republican of New York, wrote on social media on Monday that he was “still a hell no.”

Much of the bill consists of extending provisions from President Trump’s 2017 tax law. Many of the measures in that previous law, including lower marginal income tax rates and a larger standard deduction, are set to expire at the end of the year. That has motivated Republicans to move forward with a tax bill this year, given that not extending the provisions would amount to a tax increase for most Americans.

But Mr. Trump and Republicans on Capitol Hill have sought to go far beyond simply preserving their last tax cut. The legislation includes several new tax breaks that would last through most of Mr. Trump’s term and fulfill the president’s campaign-trail promises not to tax tips, overtime and Social Security. It also temporarily raises the standard deduction by $1,000 for individuals and the child tax credit by $500.

Those tax cuts would come with limitations. The tax exemption for tips, for example, would apply to federal income taxes, and only Americans under an income limit set at $160,000 this year would be eligible. In the bill, Mr. Trump’s plan not to tax Social Security benefits takes the form of a $4,000 bonus deduction for older Americans that shrinks as income rises.

House Republicans are also hoping to create a new type of investment vehicle, called a “MAGA account,” into which Americans could invest up to $5,000 per year on behalf of their children. Earnings on those investments could be withdrawn to cover school expenses and job training, buy a home or start a business. Children born in the next few years would also receive a $1,000 credit to their MAGA account.

All of those tax cuts will be expensive, so Republicans are also planning to raise taxes as part of the package to help make their budget math work.

The legislation ends some of the clean-energy tax credits Democrats passed under President Joseph R. Biden Jr., with a $7,500 consumer subsidy for purchasing an electric vehicle largely eliminated. Other provisions would be phased out over the next several years, and the bill would also add several new rules that are likely to make it harder for companies building solar and wind power to receive tax benefits.

University endowments are also targeted, with a tax on their investment income rising as high as 21 percent from 1.4 percent. People in the United States sending money to their families overseas would also face a 5 percent tax on those remittances.

The tax bill is just one component of the broader legislation Republicans are hoping to enact in the coming weeks. Other pieces of the bill focus on making cuts to Medicaid, the health care program for the poor, and food stamps, all while increasing spending on the military and immigration enforcement.

Child Tax Credits and Stipends Deductions and Exemptions Donald J House of Representatives income tax Law and Legislation Republican Party Social Security (US) Tax Credits Tips and Tipping Trump United States Politics and Government
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Mideast Conflict Imperils a Tiny Waterway Vital to the World Economy

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By News RoomJune 25, 2025

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