President Donald Trump called on Republican congressional leaders Thursday, February 6, to eliminate tax benefits for sports team owners and hedge fund managers to fund his campaign promises of ending taxes on tips, overtime, and Social Security benefits, while also lifting the $10,000 state and local tax (SALT) deduction cap.
“This will be the largest tax cut in history for middle-class, working Americans,” White House Press Secretary Karoline Leavitt told reporters on the White House driveway as Trump met with GOP leaders in the West Wing.
The ambitious tax proposal faces significant hurdles in Congress. House Speaker Mike Johnson (R-La.) favors bundling Trump’s requests into a comprehensive budget reconciliation package, while Senate Republicans prefer a two-track approach.
On Thursday, Trump met with lawmakers for over five hours, running so far behind schedule that House Speaker Mike Johnson (R-La.) was forced to cancel a scheduled meeting with Israeli Prime Minister Benjamin Netanyahu.
“We got into a lot of detail on what we need to do both for the budget and the reconciliation side,” House Majority Leader Steve Scalise (R-La.) told reporters. “We spent a lot of time on a whiteboard, literally putting down different numbers so we could all be on the same page.” Scalise stated that no major breakthroughs had been made but emphasized significant progress and mentioned they are very close to presenting this to the Budget Committee.
The proposed tax cuts would have substantial fiscal implications. Eliminating taxes on tips would cost approximately $118 billion over a decade, according to the Tax Foundation. The overtime tax exemption would reduce Treasury revenue by $1.3 trillion over ten years, based on Yale’s Budget Lab estimates. Abolishing taxes on Social Security benefits would cost up to $1.8 trillion over a decade, the Committee for a Responsible Federal Budget reports.
To offset these costs, Trump is targeting tax advantages enjoyed by sports team owners and hedge fund managers. The carried interest reform, which would treat investment managers’ compensation as regular income rather than capital gains, could generate between $1.4 billion and $18 billion annually, according to Americans for Financial Reform.
Sports team owners currently can deduct their franchise purchase prices over 15 years, a significant tax benefit given recent sales like the Washington Commanders’ $6.05 billion price tag in 2023. They also benefit from tax-exempt municipal bonds for stadium construction, which costs the federal government $4.3 billion in lost revenue, according to a 2020 Brookings Institution report.
Senate Budget Committee Chairman Lindsey Graham (R-SC) has announced plans to pursue a separate budget resolution, highlighting the chamber’s preference for a two-bill approach addressing border, defense, and energy reforms before tackling tax changes.
Trump won the November 5 election partly due to his tax appeals to workers and retirees. He has specifically credited his plan to end taxes on tips with securing victory in Nevada — marking the first Republican victory in that state in 20 years.
The Congressional Budget Office estimates that extending the Trump tax cuts for the next decade would add $4.6 trillion to the deficit, $1.1 trillion more than previously projected. The extension would create a $112.6 billion windfall for the top 5% of income earners in the first year alone.
Trump has also been implementing raising import tariffs to help fund tax cuts.
Trump’s tax reform effort coincides with the administration’s push to reduce federal discretionary spending under the Department of Government Efficiency, headed by Elon Musk. At the same time, they are encouraging federal employees to accept eight-month buyouts and temporarily suspending foreign aid.