WALL STREET JOURNAL: Some Democrats Want to Upsize Trump’s New Tax Cuts

Under one proposal, “no tax on tips” would cover automatic gratuities, which now don’t qualify. Another bill would extend the “no tax on overtime” deduction to union workers, airline employees and others excluded by the current definition. A different piece of legislation would remove income taxes from Social Security benefits, effectively enlarging the new deduction for seniors that Republicans created and capped at $6,000 per person.

Democrats are seeking their tax-policy footing after Trump turned versions of his “no tax on—” campaign slogans into the “one big, beautiful bill” that is likely to deliver many Americans bigger refunds early next year.

“I disagree with all the policies, but he does tend to tap in to a feeling among voters,” said Rep. Angie Craig (D., Minn.). “Sometimes, the top-line feelings are real even if his solutions are going to make things worse.”

Even before this year, Craig had introduced a bill to eliminate income taxes on Social Security benefits after hearing concerns from older constituents. She picked up support this summer from Sen. Ruben Gallego (D., Ariz.), who introduced a companion bill. Their plan would also expand payroll taxes that fund Social Security by applying them to wages above $250,000; this year, that tax stops at $176,100. That combination would extend the program’s solvency.

“It’s a space where Democrats can start to really hit home the message that it’s not Republicans who are being fiscally responsible,” said Craig, who is running for her state’s open Senate seat.

Congressional Democrats united against the GOP tax-and-spending law, and they haven’t softened that stance. They criticized Republicans’ reductions to spending on Medicaid and nutrition assistance and their extension of expiring tax cuts for high-income households. On the whole, the law isn’t polling favorably, and Republicans have been trying to rebrand it as the “working families tax cut.”

Underneath the Democratic opposition, however, many in the party favored extending most expiring tax cuts and supported some of the Trump ideas. The latest bills are unlikely to become law and would increase budget deficits unless paired with other policies. Democratic Party leaders haven’t co-sponsored the legislation, but the new measures put down markers for future debate.

“There are Democrats who have to go home and explain why they voted against it,” said Mike Palicz, director of tax policy at Americans for Tax Reform, an antitax group that rallied support for the law. “They’re trying to claim some type of credit for the policy.”

Lawmakers should be wary of accepting the Trump policies’ structure, particularly the tips and overtime provisions that draw arbitrary lines between different types of workers, said Brendan Duke of the progressive Center on Budget and Policy Priorities. These provisions, he added, were roughly 3% of the law’s tax cuts and far more than 3% of the administration’s talking points. They are also temporary, scheduled to expire after 2028.

“It’s important to not lose sight of the major moving pieces, which are things like rate cuts heavily tilted to the wealthy,” Duke said. 

On overtime, Democrats including Reps. Tom Suozzi (D., N.Y.) and Emilia Sykes (D., Ohio) joined recently with Republicans such as Nicole Malliotakis (R., N.Y.) and Brian Fitzpatrick (R., Pa.) on a new bill that would expand eligibility.

The new law created a deduction only for overtime pay required under the Fair Labor Standards Act. That left out some union employees with negotiated overtime pay and certain airline and railroad workers covered by other labor laws.

“Some people are surprised and shocked and quite frankly some of them are angry because they feel like they’ve been lied to,” Sykes said. Trump supporters, she said, often don’t believe her when she describes the limits on the tax breaks.

Sykes said Democrats must offer alternatives. Those can include standard party fare such as expansions of the child tax credit and earned-income tax credit and higher rates on the wealthiest Americans. And, she said, it can include changes to ensure that more workers’ overtime pay qualifies for the new break.

Democrats also have proposed some changes to “no tax on tips.” A Gallego bill would expand the deduction to include tips that are automatically added to customers’ bills, such as those for large parties at restaurants. Nevada Democrats, including Rep. Steven Horsford, back a bill that links tax breaks for tipped workers to elimination of their subminimum wages.

Trying to match Republicans tax-cut-for-tax-cut might not necessarily work, said Vanessa Williamson, senior fellow at the left-leaning Brookings Institution.

“The basic case in favor of government needs to be made,” she said. “The strategy the Democrats have consistently adopted over time of offering ‘tax cuts, but different’ has not been an electoral winner.”

Suozzi represents a district on Long Island, in the New York City suburbs, that Trump won in 2024. He said his party can use the tax law to talk about lowering households’ costs while pushing back against the perception that Democrats are mostly focused on climate, abortion, democracy and LGBT policies. Those issues are all important, he said, but they aren’t necessarily voters’ priorities.

“There are certain things that I liked in the big, ugly bill,” Suozzi said, including the overtime tax break that he is trying to expand. “If you want to win elections, you better talk about what people care about.”